Outsourcing in the UK on the rise, despite Brexit

Outsourcing in the UK has seen a significant rise in the first half of this year, compared to the same time last year, which is interesting knowing how Brexit vote turned out.

 The information came from customer service provider Arvato UK. Its recently released Outsourcing Index says that £3.91 billion worth of contracts were signed in the first half of 2016. That equals to 19 per cent year-on-year increase.

The majority, £2.20bn, came from the private sector.

“The UK market remained buoyant in the first half of the year despite the political and economic uncertainty in the run up to the EU referendum,” said Bryan Mouat, CEO, Arvato Financial Solutions UK & Ireland.

“This supports the view that organisations continue to see outsourcing as an effective strategy to tackle key challenges and fluctuation in demand, but it remains to be seen if the prolonged uncertainty following the vote to leave will dampen spending in the second half of the year.”

Value of the average contract increased 16 per cent in the first half of 2016, compared to the same period last year. Total value hit £47.5 million. Length also increased 14 per cent, to 59 months’ time, average.

When it comes to outsourced customer service, total spend hit £706 million in H1 2016. This is a ‘sharp rise’, compared to the £62 million worth of deals agreed in the first half of 2015.

 A vast majority (83 per cent) covered multi-channel services, compared to 50 per cent last year.

Source: itproportal.com-Outsourcing in the UK on the rise, despite Brexit

China’s service outsourcing continues to grow

China’s service outsourcing industry continues to grow, with a faster increase in the value of contracts signed in the first 10 months of the year, official data showed on Wednesday.

Chinese companies inked service outsourcing contracts worth $96.75 billion during the Jan-Oct period, up 18.2 percent year on year, accelerating from a 16.4-percent increase in the first nine months, the Ministry of Commerce (MOC) said.

Among the deals were offshore service outsourcing contracts valued at $63.48 billion, rising 18.8 percent from a year earlier.

Contracts fulfilled with businesses in the United States and the EU posted rapid growth, up 18.1 percent and 12.8 percent respectively in their value.

Outsourcing of information technology-related services accounted for more than half of the contracts, according to the MOC.

China is the world’s second-largest service outsourcing provider after India. The State Council has said outsourcing will be a new engine for tertiary industry and a boon to employment.

In the first 10 months, nearly 5,000 new firms in service outsourcing were established, creating 926,000 jobs, up 92 percent and 59.8 percent year on year, the MOC data showed.

Source: ChinaDaily-China’s service outsourcing continues to grow

HP reports big fall as services revenue dips – is cloud starting to take its toll?

HP has reported a five per cent dip in revenues in its first quarter of fiscal 2015 – led by a worrying double-digit fall in sales in its services division.

Total revenues weighed in at $26.84bn, a decline of five per cent in dollars, or two per cent on a constant currency basis, but the company’s services business saw revenues fall by 11 per cent to $4.99bn.

HP saw revenues fall across the board, with only one major division avoiding the pinch.

It’s Printing and Personal System Group, which accounts for more than half of HP by revenue and incorporates its most profitable line – printers – was also squeezed by two per cent. Only the Enterprise Group, which sells servers, storage systems and other high-end hardware escaped the revenue squeeze, with sales that were flat at $6.98bn.

Services account for 18 per cent of the company’s revenues, but just five per cent – $148m – of its $2.4bn operating profit. “This follows an almost seven per cent decline in full-year 2014, with the same reasons being cited: key account run off and weakness in EMEA. The two component parts of Enterprise Services (Application and Business Services, and IT outsourcing) each saw deep declines,” said TechMarketView analyst Kate Hannaghan.

Hannaghan believes that while HP is managing to win a fair number of the major outsourcing and services deals going, it is losing out to IBM.

“Whitman’s turnaround programme is helping profits edge forward. However, the colossal challenge HP faces in growing the Enterprise Services top line is apparent. Furthermore, progress made selling SMAC [social, mobile, analytics and cloud] services just seems to get wiped out by the steep declines in its traditional business.

“In this regard it faces a similar challenge to IBM, its largest competitor in infrastructure outsourcing. However, while legacy revenue is the source of top-line shrinkage, it remains crucial to these firms, and they must continue to ink these types of deals. Credit to HP for its recent Deutsche Bank win [other recent wins include Department for Work & Pensions, and Sheffield NHS Trust, but it lost out to Computacenter on the large Post Office deal] – but our analysis would suggest IBM is currently winning a greater share of the megadeals,” said Hannaghan.

The dip in revenues at HP’s services division is especially worrying. The main concern is that organisations’ attitudes to implementing packaged applications has changed, with CIOs more willing to consider cloud platforms and services, on the one hand, while bringing development in-house, which is increasingly regarded as pivotal to organisational success.

HP’s struggles are mirrored at major packaged application software vendors, such as Oracle and SAP, who are moving towards cloud applications, on the one hand, but will take a big revenue hit if customers move in large numbers from big implementations to subscriptions to cloud services, which can be cancelled.

HP CEO Meg Whitman, though, claimed that the company’s turnaround “remains on track”. She said: “We grew operating profit margins across all of our major business segments, increased investment in innovation, and executed well across key areas of our portfolio and in our separation activities.”

HP is currently in the process of splitting in two, with the PC and printer business being spun-off, and the rest of the business focused on enterprise. Shareholders will receive shares in both parts of the company.

However, HP remains squeezed in all its main markets, and the long-term trend is declining revenues – down by 10 per cent between 2012 and 2015. Even in printing, which remains highly profitable, the outlook has become more difficult as much cheaper generic alternatives and re-fills gain ground against expensive “official” ink and laser cartridges.

Unit sales of printer hardware fell by four per cent, while printer supplies were down by five per cent. In response to the increasingly challenging environment in printing, HP has launched subscription schemes to convert consumers to monthly payments in exchange for a regular stream of official, discounted refills, but these have not caught on.

Source – Computing.co.uk-HP reports big fall as services revenue dips – is cloud starting to take its toll? By Graeme Burton