New Research Finds 48% of UK companies outsource work in 2023, with an increase of 41% since the pandemic
Analysing datasets from Deloitte, IBISWorld and YouGov, SpareMyTime reveals that global spending on outsourcing could hit £571 billion by the end of the year, with nearly half (48%) of UK companies now outsourcing their work. These figures show a huge acceleration since the pandemic, growing 41% since 2019. Where, according to the data, in 2020 only a third of UK businesses expected to outsource more, then and in the future.
UK businesses allocated £500 billion to outsourcing in 2022.
This trend spanned across sectors, with IT outsourcing increasing 22% from 2019. Similarly, Business Process Outsourcing is expected to see substantial investment, with a forecasted £212 billion spending in 2023, reflecting a significant 19% rise from 2019.
SpareMyTime predicts that outsourcing will become commonplace for businesses looking to reduce costs
As inflation continues to rise, SpareMyTime predicts that outsourcing will become commonplace for businesses looking to reduce costs on recruitment and other areas.
Melisssa Gauge, Founder of SpareMyTime, explains that: “Inflationary pressures can prompt UK businesses to consider outsourcing as a strategic response to manage rising costs and maintain competitiveness. When inflation drives up operational expenses, businesses often face the challenge of containing costs while sustaining quality and productivity. By leveraging outsourcing, businesses can gain the flexibility to adapt to changing economic conditions without financial constraints”.
Global Outsourcing Spending could reach £574 billion by the end of the year
Analysing YouGov data, SpareMyTime finds that over 70% of B2B decision-makers say their company has outsourced some part of their business, with IT support (34%) being the most likely function to be performed by an outside supplier. However, the data shows that smaller firms are much more likely to hire a supplier to keep on top of their finances, with 37% of small businesses selecting this, compared to 12% of large businesses.
According to IBISWorld, there are now 155,564 Business Process Outsourcing Services in the UK, growing 2.5% per year on average over the last five years (2018 – 2023). However, SpareMyTime finds that the last three years have seen the most growth, with a 7.7% increase in services since the pandemic.
What is Business Process Outsourcing?
Companies implement Business Process Outsourcing (BPO) practices in two primary domains: back-office and front-office operations. Back-office BPO entails a company outsourcing its fundamental business support functions, encompassing activities like accounting, payment processing, IT services, human resources, regulatory compliance, and quality assurance, to external professionals who are dedicated to ensuring the seamless operation of the business. In contrast, front-office BPO tasks predominantly encompass customer-centric services such as technical support, sales, and marketing.
This growth can be largely attributed to a surge in startups who are most in need of Business Process support such as IT and bookkeeping. Between March 2021 and March 2022, there were 753,168 new startups founded in the UK. This is the second-highest number of startups registered in one year in the country, only topped by the 810,316 startups founded during the height of the pandemic (2020-21).
The most common tasks a virtual assistant completes
Virtual assistants spend one-fifth (22.62%) of their time on diary management, followed by expense support (14.86%) and inbox management (11.4%). Less common tasks include business development research (1.13%).
Melissa Gauge, Founder of SpareMyTime comments: “As businesses embark on the journey of scaling up, their needs inevitably shift, demanding increased capacity in different areas. The transition isn’t solely centred around unfamiliarity with processes; rather, it revolves around the quest for high-quality support. Attracting exceptional talent becomes a steep hill to climb during this phase and clients seek our assistance due to recruitment challenges. Our fortunate advantage lies in our ability to effortlessly draw in top-tier professionals, owing to our scale and the opportunities we offer”.
IT named the fastest-growing outsourcing service in the UK
A recent report by Information Services Group (ISG), sheds light on the evolving landscape of global outsourcing, showcasing that IT services hold an impressive 72% of all outsourcing contract values worldwide. The study further highlights the embrace of IT outsourcing within the corporate realm, as over 90% of the world’s top 2000 companies engaged in contracts during 2019. While IT reigns supreme, Business Process Outsourcing emerged as a compelling avenue, garnering contracts from 59% of G2000 companies.
Meanwhile, in the UK, a remarkable 34% of B2B organisations choose to outsource their IT support, effectively positioning it as the nation’s most sought-after outsourced service. The motivation for this shift is highlighted in recent YouGov findings, where an overwhelming 48% pointed to the lack of essential IT staff as a primary driver. Additionally, a substantial 30% say it yields better results and is more cost-effective, while 29% celebrated the reduction in staff expenditures, and 28% endorsed the enhanced operational efficiency.
Delving into digital transformation, a recent Deloitte report reveals that an astounding 90% of companies cite Cloud Computing as a pivotal enabler in their outsourcing initiatives. The emergence of a “cloud-first” ethos has been gathering momentum in the wake of the COVID-19 pandemic. While the advantages are widely acknowledged, the journey towards a cloud-centric future is not without its challenges, including concerns pertaining to data security and other associated risks.