New research has found that, for the first time, cost reduction is no longer the number one driver of increased business outsourcing.

Data collected from the 2022 UK IT Sourcing Study revealed that instead, business outsourcing is now focussing on core business (57%) and gaining access to resources/talent (56%).

Research also found that 91% of participants rated their IT service providers as ‘satisfactory’ and the average satisfaction has increased by one percentage point to 73%, the highest score to date.

Two-thirds of respondents said they plan business outsourcing at the same rate or more in the next two years, with 32% confirming they will outsource more.

Around 18% of UK respondents also said they plan to outsource less (one of the highest percentages in Europe), driven predominantly by the need to build and retain their own intellectual property to drive the business.

Overall, respondents agreed that they were satisfied with their IT service providers, with 91% of all 663 IT sourcing relationships rated satisfactory.

Clients consider transition and change management as one of their weakest governance capabilities, the data suggested, with more than a quarter (29%) stating that significant improvements are required. Around 62% said that in-house capability is the principal challenge to deliver complex transitions.

More than half (52%) predicted that 50% or more of their application portfolio will be in the cloud in two years, with 86% moving to the public cloud to achieve more agility and scalability.

One in two clients said that it is difficult to change cloud providers, while one in five would consider moving their cloud load to a European provider.

Commenting on the data, Manish Khandelwal, IT Transformation specialist at PA Consulting, said: “The pandemic years have accelerated the pace of digital transformation across sectors, and organisations have no choice but to be agile, innovative and ingenious.

“Businesses are aggressively using opportunities presented by digital transformation to drive growth which is resulting in significant demand for technology services. The market has matured, and clients are focused more on value rather than costs.

“The outsourcing industry has used the pandemic years as an opportunity to transform its operating model and has emerged stronger.”

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Amazon Web Services (AWS) remains number one in the ranking for infrastructure cloud platforms with a score of 80%, with providers performing best on the security and compliance KPI with an 81% average.

Microsoft Office 365 is number one for software cloud with 81%, while providers score best on pricing transparency with 81%.

Khandelwal added: “The war for talent has reached unprecedented levels and will only intensify in the short term, however the industry has the unique opportunity to drive global workforce transformation.

“As the world economy enters a potentially turbulent period, winners will be those that are able to meaningfully co-create with clients, help them reduce time to market and contribute to both the top line and the bottom line.”

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