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With 10 per cent of its IT and business processes outsourced, the UK is the most mature country in Europe in terms of outsourcing. However, it remains ripe for outsourcers looking to pick up trade, with a report released today estimating that outsourcing from the UK could increase 600 per cent by 2020.
The report, called Europe’s Global Sourcing Market: Trends Growth and Prospects, was produced by research firm Everest in collaboration with Egypt’s IT development agency ITIDA.
It argues that the drivers for this growth, as well as predicted growth of 1,000 per cent for most other European countries, are increasing cost and competitive pressures, an aging population leading to a shortage of skills, the global expansion of firms and an increasing ‘proof of concept’ of global sourcing combined with a growing acceptance within the public sector and government.
Outsourcing activity is divided into IT work at 61 per cent, with the remaining 39 per cent being made up of business process outsourcing (BPO).
However, lingering economic uncertainty means this growth may be slow to start, according to Eric Simonson, managing partner, Everest Group.
“Volumes of work are currently static and companies remain reluctant to launch transformation programmes when they are nervous,” he said.
Simonson added that the sovereign debt crisis and confusion over data protection laws were also holding back growth.
European countries such as France, Germany and Spain have a steeper potential growth trajectory of about 1,000 per cent because their markets are less mature than that of the UK.
The areas most likely to pick up trade from the UK and Europe currently are Central and Eastern Europe, Africa, India and South East Asia and Spanish-speaking countries in Latin and Central America.
Central and Eastern European countries such as Poland and Hungary offer multi-lingual European language skills but are relatively expensive.
West and South Africa also offer French and Dutch language speaking skills, while Egypt offers a sizable pool of French speakers as well as other languages. It’s cost base is low and it is able to scale competitively, according to the report.
India also has a low cost base and is one of the three largest countries in terms of language and skills talent pool (with Egypt and Poland).
There are other concerns with outsourcing to countries outside the EU however, in that they may not be as politically stable as countries inside Europe.
Another consideration for companies considering outsourcing might be a host company’s country infrastructure – this is a problem for low cost locations such as India and Egypt, the report said.