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Research reveals a surge in the number of deals as outsourcing becomes an increasingly popular strategy for energy and utilities companies

Published: 9 April 2015 - Marianne Evans

The number of outsourcing contracts signed by the UK energy & utilities sector more than doubled year-on-year in 2014, according to the latest arvato UK Outsourcing Index.

Together with year-on-year growth in average contract value of 32% to £54 million, the rise in the number of contracts indicates a maturing market with outsourcing becoming an increasingly popular strategy among companies in the sector.

The research, compiled by business process outsourcing (BPO) provider arvato, in partnership with industry analyst, NelsonHall, also revealed that 70% of all energy & utilities contracts signed in 2014 were second generation partnerships – extensions, renewals or the replacement of incumbents – up from 56% in 2013.

Energy & utilities firms spent a total of £1.072 billion on outsourcing contracts in 2014, representing 15% of the total value of all agreements signed in the UK last year. Firms in the industry significantly increased their ITO spend in 2014, with deals totalling £1.046 billion compared to £148.6 million in the previous year. Contracts predominantly focused on application management and application hosting. Within business process outsourcing (BPO) deals, the majority of agreements included HR, customer management and engineering services.

Bryan Mouat, CEO of arvato Financial Solutions in the UK & Ireland, commented: “The energy and utilities sector is under immense pressure to transform, both in terms of cutting costs for consumers and improving customer services. Our research suggests that outsourcing continues to be seen as a viable strategy for the sector to deliver flexibility and enable transformation.”

Jim Gallagher, General Manager, Supply Chain Management at arvato UK, commented: “To address these pressures, companies in the sector are increasingly looking to new innovations to drive efficiency improvements for customers and advance digital consumer technology in the home. Outsourcing can provide the necessary flexibility, expertise and economies of scale across the supply chain and customer service functions that businesses require to deliver these often complex, large scale projects effectively and within budget.”

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