Market Trends of United Kingdom IT Services Industry
Growth in Nearshoring IT Outsourcing and the SaaS (Software-as-a-Service) Industry Driving the UK IT Services Market
- Domestic outsourcing is a technique in which a country's corporations prefer to outsource services to vendors within their own country. They primarily favor nearshore providers outsourcing overseas because of proximity, language, cultural commonalities, and minor time differences. For example, Infinity Group, a UK-based company, is one of the industry's leading IT outsourcing organizations, providing outsourced IT support to over 1,000 businesses across the United Kingdom. The company works with many kinds of clients, ranging from fast-growing start-ups and SMEs to well-established larger corporations.
- Some key technology trends for nearshore IT services include a rise in the adoption of 5G technology, IT automation, container technology, serverless computing, and virtual desktop infrastructure. Over the coming years, 5G will be critical to the growth of the overall digital economy and society. 5G technology has the full potential to impact practically every area of UK residents' lives, from personalized medicine to precision agriculture and smart energy grids to connected mobility.
- Moreover, the key corporates of the country are prioritizing domestic outsourcing of 5G services because it is critical to ensure the security of the European Union’s future 5G networks. For example, in May 2022, Baltic telecommunications and media group Ericsson signed a framework agreement to introduce 5G technology in the UK market. The deal would provide 5G network coverage in the most densely populated cities and districts, with plans to expand customer services in media entertainment and gaming, cloud, data centers, and the Internet of Things.
- The Bank of England estimates that 40-90% of bank workloads will be hosted on the public cloud or software-as-a-service in the coming ten years. It is crucial to examine the impact on business continuity if one of the suppliers fails. Hence, the financial authorities in the United Kingdom and worldwide, notably the Bank of England, the Financial Conduct Authority (FCA), and the Prudential Regulation Authority (PRA), are keeping a close eye on this. This will create several growth opportunities for the UK IT services market.
- Between 2020 and 2025, the SaaS (software-as-a-service) industry is estimated to grow significantly in the United Kingdom. Moreover, the market is anticipated to experience a drastic increase, from EUR 7500 million to EUR 14,500 million in 2025. This rise in the overall share of the SaaS segment will create ample opportunities for the market to grow extensively throughout the forecast period.
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Digitalization in the BFSI Segment Driving the Growth of the UK IT Services Market
- With a significant talent pool and high-service quality offerings, the United Kingdom is one of the most appealing IT outsourcing destinations. The overall fintech investments in the country are rising significantly. These fintech companies have the requisite domain expertise and experience in designing various fintech solutions like digital banking, money transfers, personal financial management, risk and compliance management, peer-to-peer lending, and various other applications.
- For instance, in June 2022, SurePay, a European platform that provides online banking account verification services, teamed up with Virgin Money in the United Kingdom to launch its UK Confirmation of Payee solution.
- Moreover, banking-as-a-service (BaaS) is a crucial component of open banking. It involves banks opening their systems and allowing third parties to access their data in real time to improve their services. BaaS businesses within the country are disrupting retail banking business models, altering incumbents' client relationships, and making it easier for fintech companies to enter the UK market. With regulatory initiatives echoing worldwide, the United Kingdom is leading the open banking industry, driving the UK IT services market. For instance, 11:FS Foundry, a UK-based SaaS/PaaS business, is working on a platform to provide fundamental banking features that mainly eliminate the need to choose between agility and scalability.
- In addition, Bankable is a London-based firm aiming to make it easier for traditional financial institutions and other businesses to launch innovative payment options. A virtual ledger manager, digital banking, payment card programs, and e-wallets are among the company's key BaaS offerings. Its end-to-end payment services are accessible through a unique interoperable platform that is PCI-DSS (payment card industry - data security standards) certified and hosted in tier-4 data centers for increased security. Bankable also plays a significant role in assisting its partners in overcoming the technological and regulatory obstacles that arise while creating innovative financial services.
- Moreover, various key global MNCs are well-indulged in acquiring UK-based fintech companies. For instance, in March 2022, Apple purchased Credit Kudos, a fintech firm based in London. Credit Kudos is a software start-up that helps businesses improve their affordability and risk assessments by utilizing open banking. Lenders mainly use the software to expedite underwriting, increase decision-making accuracy, and improve customer service.
- As per the Bank of England, there is a total count of around 377 monetary financial credit institutions operating in the United Kingdom, 130 of which are UK-headquartered. Monetary financial institutions (MFI) primarily include all the building societies and the banks that have permission to accept deposits in the United Kingdom. Hence, with the rise in the number of monetary financial institutions (MFI) within the country, the overall demand for various IT services, especially in the banking industry, will rise significantly, expediting the overall market's growth exponentially.
