Big brands stay steady in outsourcing market

The biggest outsourcing firms in the UK are seeing their business hold steady while smaller firms are feeling the pinch of the economic crisis, say analysts.

According to a recent report from analyst firm Ovum, larger firms have begun scoop up more deals that would have otherwise fallen down to the smaller companies.

The report found that over the first half of 2009 the ten biggest outsourcing companies in the UK experienced a 31 per cent increase in business. Meanwhile, smaller firms continued to struggle as the outsourcing market has continued to consolidate itself.

Analysts suggest that the numbers reflect a combination of larger 'mega deals' awarded early in the year as well as the effects of consolidation as larger firms expand their operations into what once were niche markets.

“The UK public sector in particular continues to let significant contracts such as for ID cards, with others such as the Environment Agency still to come, " said Ovum senior analyst John O'Brien.

"However this is more a culmination of existing procurements than new initiatives.”

Though the market for IT outsourcing could see new opportunities as the recession forces companies to cut back on in-house spending, analysts suggest that smaller firms may not see many of the benefits as the larger providers continue to expand.

To survive, the analysts suggest that smaller companies re-work contracts to keep existing customers while looking to new service areas such as cloud computing that larger providers have not yet come to dominate.