A global study of almost 2,100 contracts covering deals worth £7.8 billion suggests that Cloud-based services are failing to capture the popular imagination of UK businesses. It also suggests that organisations are increasing the level of IT services they outsource to improve service delivery, with many investing budgets saved over the past few years on Human Resources, sales and finance support.
Published by KPMG, the eighth annual ‘Service Provider and Performance Satisfaction’ study includes a detailed analysis of current corporate IT spend in Britain based on examinations of more than 330 UK-based contracts.
The study reveals that 71% of UK organisations are spending a mere 10% or less of their IT budget on Cloud services. Many organisations are also continuing to rely on ‘tried-and-tested’ outsourcing models, with the survey showing that favoured destinations for IT support services are India (51%), Poland (8%) and South Africa (also 8%).
Quizzed as to why they’re reticent about employing Cloud services, the Top 3 reasons cited by UK C-Suite respondents centred on data location, security and privacy risks (26%), concerns over regulation and compliance (16%) and cynicism around the ease with which Cloud services can integrate with legacy IT systems (15%).
“Despite widespread acceptance that Cloud services offer access to the latest technologies, and make IT more accessible, adoption remains relatively sluggish,” commented Jason Sahota, director in KPMG’s Shared Services and Outsourcing advisory team.
“While concern about the security risks surrounding new technology is understandable it may also be disproportionate. In truth, Cloud options are just as safe as other outsourcing solutions. Of course, investors and stakeholders will welcome caution on the part of the buyers, but they also want to see innovation. This inevitably means that UK plc will need to strike the right balance in order to remain competitive.”
Commitment to long-term investments
The KPMG survey goes on to reveal that, despite the economy picking up, some companies across the UK are still nervous when it comes to commitments around long-term investments.
Asked about their IT outsourcing plans for the next two-to-three years, just 43% said they plan to increase spending. This figure contrasts with 77% this time last year.
However, where budget has been set aside for outsourcing, it’s clear that organisational thinking is maturing. When the KPMG survey was first undertaken, respondents focused primarily on cost savings as their reason to outsource, but this year’s survey shows that the search for quality improvement (20%), access to skills (16%) and a desire to reduce the time it takes to ‘get things to market’ (6%) are driving the rationale behind IT outsourcing decisions.
The study findings also suggest that satisfaction levels remain high in the UK, with 77% of respondents reporting they’re comfortable with the support they presently receive.
Worryingly, however, the research highlights inconsistencies in how businesses are approaching integration and governance of the services they outsource.
The majority of respondents (70%) said that their IT function currently performs the role of service integrator, while only 50% have partially met the expected benefits of service integration and management.
“As IT forms an inseparable part of the wider business strategy in many organisations, technology decisions are now rarely left to the Chief Information Officer alone,” asserted Sahota. “With the potential for conflict over the choices being made, this means that organisations should dedicate a greater level of investment towards governance than they may have done in the past.”
Importantly, Sahota concluded by offering a warning. “If companies fail to change their investment strategy as they move towards more complex delivery models, poor governance can impact their ability to provide quality services. That will increase risks around cost, service quality and delivery.”