Big changes forecast for UK outsourcing

January 10th, 2007

15UK companies will turn to outsourcing their business processes this year as much as they use suppliers to run their IT infrastructure, according to predictions by the National Outsourcing Association (NOA).

The industry group says that business process outsourcing (BPO) deals based on the use of recognised industry standards is driving the growth of the market. The move to service delivery based on ITIL (IT infrastructure library) and programme and project management standardisation reduces risk for users, says the NOA.
‘The huge growth in the UK BPO market is the factor that will have the greatest impact in 2007,’ said NOA chairman Martyn Hart.
He says that supplier standardisation will encourage companies previously concerned about outsourcing to embrace it, particularly for non-core, easily-standardised processes such as payroll.

‘Users tend to feel that suppliers know all the wrinkles as they have done it a lot, but in trying to protect themselves they will use suppliers who follow best practice and standardise,’ said Hart.
The NOA also predicts that more outsourcing contracts will be judged by the strength of the buyer-supplier relationship, with a greater focus on the outcomes of the contract and less focus on the process.
‘A good relationship is the soft side of a contract and hard to measure, but vendors that manage to become partners will do better, and practices such as “gain-shareâ€? where rewards as the result of outsourcing are split will increase in popularity,’ said Hart.

The NOA also says that greater regulatory pressures on firms is driving outsourcing contracts, especially in the financial services sector with rules such as the Markets in Financial Instruments Directive (MiFiD) which comes into force in November.
‘Regulations are coming in thick and fast and organisations that find they haven’t got the skills to respond, particularly if they have legacy systems that can’t meet the regulations, may turn to outsourcing,’ said Hart.

09 Jan 2007

Source: vnunet.com

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