Why public sector is outsourcing more IT than private sector

IT Services

by Joe Curtis| 08 July 2014

But is it large or small suppliers that are benefitting?

The UK public sector is outsourcing IT services at nearly twice the rate of the private sector, new figures suggest.

Public outsourcing netted suppliers £51bn over the past two years, compared to £30bn spent by private entities, a recent study conducted by Information Services Group (ISG) found.

Over the past 24 months seven public sector deals worth more than £600m were inked, while another three cost £300m to £599m.

Capita landed a £600m-plus contract with Staffordshire Council, as did Carillion with Birmingham Council, though mid-sized deals worth between £15m and £30m contributed to 22% of overall public sector IT expenditure, found ISG.

The Government is turning to outsourcing as it tries to get services at lower costs through its stated commitment to replacing monolithic contracts with the big six systems integrators.

But recent figures from think tank Institute for Government found that the traditional 'Big Six', led by HP, still netted a total £4.3bn from the public sector last year - thought the numbers are disputed.

ISG partner Luke Mansell said: "The recession and the subsequent focus by the public sector on cost reduction and value for money has driven a renewed interest in outsourcing.

"While the commercial sector has moved to smaller contracts over the past two years, the public sector has seen a rise in mid-market contracts, mainly as a result of the complexity of the services required and the lack of appetite to utilise cheaper, offshore resources.

"It will be interesting to see, over the next two years, whether the drive to procure services from small to medium enterprises via the G-Cloud will cause a shift to smaller contracts."

The Home Office announced last week that it would become the latest department to head to the G-Cloud to overhaul its IT infrastructure, as it runs down two large supplier contracts that expire in 2016.

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