UK Law and Practice Contributed by: Richard Brown, Louisa Chambers, Adam Wyman and Michael Ross, Travers Smith LLP
Travers Smith LLP 10 Snow Hill London EC1A 2AL United Kingdom Tel: +44 020 7295 3000 Email: commercial@traverssmith.com Web: www.traverssmith.com
1. Market Conditions 1.1 IT Outsourcing
cybersecurity continue to result in a trend towards developing deeper relationships with fewer IT service providers. According to Logpoint’s European Cyber - security Sector 2024 report – a survey of 1,762 senior decision-makers and influencers – 52% of UK busi - nesses used third-party services for security opera - tions and a further 28% of respondents planned to follow suit in the coming years. Data protection remains a key issue for tech outsourc - ing. In recent years, there has been a continued drive to develop new mechanisms to facilitate international transfers of personal data, most recently in respect of transfers from the European Economic Area (EEA) to US organisations that have self-certified to the EU/ US Data Privacy Framework (DPF), and in respect of the UK’s extension to the DPF under which transfers can be made from the UK to such US organisations (see 2.3 Restrictions on Data Processing or Data Security ). The UK government’s data protection reforms set out in the new Data (Use and Access) Act 2025 have not resulted in radical changes to the UK’s existing legal framework for data protection, nor are they expected to put the EU’s adequacy decision at risk (when the decision is reviewed, the deadline for which is Decem - ber 2025). Some outsourcings may, however, benefit from the relaxation of the rules around automated decision-making contemplated by this new legisla - tion. Inflation is not only having a major impact on the cost of living, but also on the IT outsourcing industry. Wage inflation and cost increases will affect those suppliers
The IT outsourcing industry remains strong, with increasing demand for specialist expertise and for automation technology being two of the main drivers. According to Statista, revenue in the UK IT outsourc - ing market is projected to reach GBP34.60bn billion in 2025. From 2025 to 2030, revenue is expected to maintain a steady annual growth rate of 7.18%, resulting in a substantial market volume of GBP48.04 billion by the end of 2030. The key drivers for busi - nesses outsourcing IT functions continue to be lower costs, access to expertise, ability to scale IT projects up or down without the delays of scaling in-house teams, the ability to focus on core business functions as IT challenges are dealt with externally, enhanced security, proactive support and maintenance (offer - ing improved resilience) and greater opportunities for innovation. Organisations are also increasingly using AI outsourc - ing, which allows them to benefit from cutting-edge AI technology. Uses for AI outsourcing include customer assistance, data analytics and cybersecurity (see 1.4 Outsourced Services for more detail). As cybersecurity becomes an ever-greater concern for all business, with a recent Deloitte survey finding that 70% of respondents discuss cybersecurity as a regular board agenda item (on a monthly or quar - terly basis), UK businesses are increasingly seeking expertise in this area to manage their cybersecurity risk. The cybersecurity outsourcing market continues to be highly competitive, as growing concerns over
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