Two thirds of contracts signed between January and March involve delivering multi-channel services
More retailers outsource to boost multi-channel capabilities, research finds
Outsourcing spend among UK retailers more than doubled year-on-year in the first quarter of 2016, according to the Arvato UK Outsourcing Index.
Outsourcing activity in the retail sector surged in the first quarter of 2016 as retailers invested in their multi-channel capabilities, according to the Arvato UK Quarterly Outsourcing Index.
The research found that outsourcing spend in the sector more than doubled year-on-year to £155.3 million in Q1 2016, with analysis of the deals revealing that delivering an improved multi-channel shopping experience was a driver behind 60 per cent of agreements.
The Arvato UK Outsourcing Index is compiled by business process outsourcing (BPO) provider Arvato in partnership with industry analyst NelsonHall. The data shows that the surge is part of a longer term trend, following a 45 per cent increase in retail outsourcing during 2015 (2015: £378 million; 2014: £260m).
Arvato says this increase is driven by retailers looking to adapt to changing consumer behaviour. According to UK online retail industry association, IMRG, e-commerce spending in the UK is expected to grow by 11 per cent in 2016 reaching £126 billion, with over a third (34 per cent) of consumers saying mobile will become their main shopping channel this year.
Debra Maxwell, CEO, CRM & Public Sector, UK & Ireland, Arvato, commented: “UK retailers are keen to reach customers through a broad range of channels. However, delivering a seamless, multi-channel shopping experience requires major transformation.
“Our research shows that retailers are increasingly looking to outsourcing partners to access the technology and expertise they need to get ahead in a rapidly growing market.”
UK outsourcing enjoys strong start to 2016
Growth in the retail market contributed to a strong first quarter for UK outsourcing, with contracts worth £2.08 billion signed across the UK public and private sectors between January and March, a sharp rise from the £414 million agreed in the final quarter of 2015.
The new data found that businesses signed larger agreements in the period January to March compared to the fourth quarter of 2015, with average contract value more than tripling to £51.8 million and contract lengths rising by 27 per cent.
The public sector accounted for 65 per cent of the total contract value agreed in the first three months of 2016, with deals worth £1.35 billion. ITO agreements dominated spending as government departments procured contracts worth £1.14 billion, a rise of 47 per cent year-on-year.
According to the research, local government clients signed double the number of deals in the first quarter compared to the same period last year, with a contract value worth £348.6 million. First generation outsourcing agreements represented 90 per cent of all contracts signed in the first quarter, up from two thirds in the same period last year.
Growth in financial services
The financial services industry was the most active outsourcer outside the public sector in the first quarter, with contracts worth £324 million. The figure represents year-on-year growth of 6 per cent with the average value of contracts more than doubling to £64.8 million.
According to the new data, financial service departments focused on procuring a mixture of BPO and ITO deals for HR, network management and cloud computing.
Bryan Mouat, CEO, Arvato Financial Solutions UK & Ireland, commented: “Financial Services dominated outsourcing activity in the private sector, as the banking and insurance sector turns to outsourcing partners to help companies adapt their businesses to changing consumer habits and regulatory requirements.”
The Arvato UK Outsourcing Index is compiled by leading BPO and IT outsourcing research and analysis firm Nelson Hall, in partnership with Arvato UK. The research is based on an analysis of all outsourcing contracts secured in the UK market during the first quarter of 2016.
Other headlines from the Q1 2016 Index include:
£346 million was spent on business process outsourcing (BPO) deals with agreements for ITO accounting for £1.6 billion