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Insourcing is on the rise: is the outsourcing boom over?

Clare Elliott, 16th May 2017

After more than a decade of rapid annual growth, this year has the global IT outsourcing market suddenly hit the buffers. With one in five UK organisations now saying they’re planning to outsource less and insource more, what has happened to inspire such a dramatic change of attitude?

Peter Elliott, a Senior CIO/CTO consultant, writes about the rise of insourcing and questions if the outsourcing boom over?

Global IT outsourcing grew to a $105bn market in 2014, more than doubling from 2004 when it was $45bn and growing almost every year in that decade. Fast forward to 2017 and the picture is very different with global outsourcing declining almost 30% ($77bn). (Source: Statistica 2017)

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Outsourcing: The pace is slowing and deal scope is shrinking

•     UK outsourcing is slowing in 2016 as 31% would outsource more; in 2015, it was 40%. (Source: PA Consulting UK IT Outsourcing survey 2016)

•     More smaller deals, more focussed scope, RFS replacing RFP in >85%, the end of the mega deals. (Source: ISG   Sourcing Trends 2016)

•     Insourcing trend accelerating with 21% of UK organisations planning to outsource less and insource more, up 6% on 2015. (Source: PA Consulting UK IT  Outsourcing survey 2016)

 

Companies need for agility and speed is driving trend for insourcing

CEO’s, CFO’s and CIO’s are still looking for cost savings, but the transformation to digital technologies and agile development approaches is driving the need for speed and agility. These have proved difficult to achieve in complex, multi-year outsourcing deals.

 

It’s about enabling IT to support digital transformation. If you are going to transform an organisation digitally you have to own the IT.”  DVLA CEO, Oliver Morley

AstraZeneca’s IT insourcing is saving $350m (£243m) a year, whilst the DVLA’s two-year insourcing project will save over £225m and £70m procurement cost. (ComputerWeekly 2016)

IT organisations have also found themselves lacking the key skills and deep domain experience essential for successful digital transformations.

 

“We had become good at supplier management, but lost the individuals who really understood technology, could make informed choices and get quality work done quickly.”   David Smoley, CIO AstraZeneca

Whilst the global outsourcing market won’t disappear overnight, suppliers need to review and align their service offerings to their clients’ needs in the age of digital transformation.

Peter Elliott is a Senior CIO/CTO consultant and part of the WBMS Network.

About WBMS

WBMS has a record of delivering digital transformation and improvement programmes across the retail, consumer, travel and leisure, TMT, energy, utilities, retail FS and insurance industries. Our invitation-only network of professionals, represent the best interim talent in the market. We can provide talent and capability to meet your resourcing needs and deliver business objectives.

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To discuss how WBMS can help you contact:

E: stuart.jansze@WBMSglobal.com

T: +44 20 7621 3592

 

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