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arvato UK: UK Manufacturing Sector Spends 132% More on Business and IT Outsourcing in 2014
|By Business Wire
|August 8, 2014 05:24 AM EDT
66% of all outsourcing contracts in the manufacturing sector were
first time agreements
In local government, the outsourcing market continues to mature as 75%
of all agreements were renewals, extensions or supplier changes
Nearly 95% of the volume of deals in Q2 came from the private sector
with telecoms & media, financial services and energy & utilities
totalling 70% of Q2 spend (£513m)
Business Process Outsourcing (BPO) deals were most in demand (52%)
with HR outsourcing remaining the most popular BPO service line,
clocking up eight deals in Q2
Overall, the value of outsourcing deals in Q2 totalled £734m from 34
The UK manufacturing sector spent £130m on outsourcing services
during the first half of 2014, representing a 132% year-on-year
increase, according to the latest arvato UK Outsourcing Index.
The total volume of deals in the manufacturing sector was also up,
rising by 50%, along with first time outsourcing which increased from
33% in the first half of 2013 to 66% between January and June of this
The data was compiled by business process outsourcing (BPO) provider
arvato, in partnership with industry analyst, NelsonHall.
arvato says the increase in outsourcing activity is being driven by
broader growth in the manufacturing sector. Figures from the British
Chamber of Commerce released in July, based on a survey of almost 7,000
companies in the manufacturing and services sectors, found that 42% of
manufacturers reported a rise in domestic sales in Q2 2014. This
represents the highest reading since the survey began in 1989.
Commenting on the strength of the manufacturing sector, Debra Maxwell,
Managing Director of arvato UK, said: “While not seen as a traditional
market for business process and IT outsourcing, manufacturers under
increasing growth pressure are turning to outsourcers to help support
non-core functions, allowing them to focus on their expansion strategies
and product innovation. The flexibility and efficiency savings
outsourcing provides is the ideal tonic for their growing pains.”
Local government outsourcing continues to mature
The findings from the latest arvato Quarterly Outsourcing Index also
served to highlight the maturity of the local government market. Three
quarters (75%) of all contracts during the first six months of 2014 were
extensions, renewals or the replacement of incumbents, up from 43% in
the first half of 2013. During the same period, the average deal value
in local government increased by 67% year-on-year.
“UK local government has been at the vanguard of public sector
outsourcing globally for many years,” continued Debra, “and our findings
show that outsourcing strategies are continuing to deliver value for
local authorities with experienced clients using partnerships to do more
with less against a backdrop of continuing austerity.”
Quarter on quarter performance of UK outsourcing
The private sector dominated the volume of outsourcing deals in Q2 2014
with a 95% share of the total number of agreements secured. Telecoms &
media, financial services and energy & utilities were particularly
active industries, which together accounted for 70% of total spend
arvato's latest Quarterly Outsourcing Index once again found that BPO
deals were most in demand, accounting for over half (52%) of all
agreements. HR outsourcing - which includes services such as payroll,
benefits administration and recruitment process outsourcing - was the
dominant service line, as it was during the first three months of the
year. Eight deals – 23% of total volume - worth £17m were agreed.
The outsourcing industry had a quieter second quarter than at the start
of the year, with values falling by 67% to £134m, although the Index
reports only a slight dip in the total number of deals, from 39 to 24.
It also reported the number of first time agreements remains significant
showing that the outsourcing industry continues to grow – rising from
59% to 62% of all contracts.
Debra concluded: “A number of large individual deals meant that our
Index showed a bumper first quarter for the industry in terms of overall
value, but the volume of new outsourcing activity has remained
relatively constant. Encouragingly, the number of first time contracts
remained significant, which shows the continued popularity of
outsourcing as a strategic solution, particularly in the private sector.
As UK economic growth continues to gather pace, we expect outsourcing to
do the same.”
The arvato UK Quarterly Outsourcing Index was compiled by leading BPO
and IT outsourcing research and analysis firm NelsonHall, in partnership
with arvato. The research is based on an analysis of contracts completed
in the first half of 2014.
For more information, please go to: www.arvato.co.uk/outsourcing-index
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