Big brands stay steady in outsourcing market

IT outsourcing could see new opportunities as companies cut back on in-house spending

Business at the biggest outsourcing firms in the UK is holding steady, while smaller firms are feeling the pinch of the economic crisis, according to the latest research.

Analyst firm Ovum said that larger firms have begun to scoop up more deals that would otherwise have gone to the smaller companies.

The report found that the 10 biggest outsourcing companies in the UK experienced a 31 per cent increase in business over the first half of 2009. Meanwhile, smaller firms continued to struggle as the outsourcing market consolidated.

Analysts suggest that the numbers reflect a combination of larger 'mega deals' awarded early in the year, and the effects of consolidation as larger firms expand their operations into what once were niche markets.

"The UK public sector in particular continues to [award] significant contracts such as for ID cards, with others such as the Environment Agency still to come," said Ovum senior analyst John O'Brien. "However, this is more a culmination of existing procurements than new initiatives."

The market for IT outsourcing could see new opportunities as the recession forces companies to cut back on in-house spending, but analysts warn that smaller firms may not see many of the benefits as the larger providers continue to expand.

Ovum suggested that smaller companies should re-work contracts to keep existing customers, while looking to new service areas such as cloud computing in which larger providers have not yet come to dominate.