Out-Law / Your Daily Need-To-Know

Outsourcing in France growing but cultural barriers remain, says expert

30 Jan 2015, 9:54 am

Businesses and public sector bodies in France have been slower than counterparts based in some other parts of the world, notably the US and UK, to embrace outsourcing with cultural differences a major reason for the French approach, a technology law expert has said.

Diane Mullenex of Pinsent Masons, the law firm behind Out-Law.com, said: "Organisations in France have tended to do things in-house. However, slowly but sure French organisations are realising that there is often a business case for outsourcing certain processes and functions so as to benefit from external expertise or new digital technologies, for example, to cut costs and improve efficiency and competitiveness."

Mullenex said that the defence sector is one area in which outsourcing is becoming more prevalent in France, but said issues such as the "protection of strategic assets" and concerns about foreign interception and surveillance are a barrier to IT outsourcing deals in the sector in particular.

"French customers must balance the benefits of outsourcing with their desire to ensure tight control over access to information and the difficulties that can arise if contractual relationships turn sour," Mullenex said.

Mullenex was commenting after a report by the Information Services Group (ISG) revealed that there were 65 major outsourcing contracts agreed in France in 2014, up from 37 in 2013. The total annual contract value for those deals was €1.25 billion, up from €550 million the year before. The ISG figures only account for outsourcing contracts worth at least €4m a year.

The ISG Outsourcing Index (21-page / 1.66MB PDF) revealed that the 588 major outsourcing deals struck across Europe, the Middle East and Asia (EMEA) in 2014 have a total annual worth of €9.5bn, up 7% on 2013 figures. The EMEA market accounts for more than half of the total annual value of the worldwide outsourcing market. The 1,218 outsourcing deals struck globally last year have a total annual worth of €18.5bn, according to the ISG report.

The annual value of outsourcing contracts struck in the UK and Ireland in 2014 was €3.4bn, up from €3bn in 2013.

The global outsourcing market is dominated by IT outsourcing deals, with 880 contracts with IT suppliers worth a total annual value of €13.8bn being signed in 2014, ISG said. The 452 IT outsourcing deals struck in EMEA last year was "the highest ever recorded in the region", it said.

John Keppel, president of ISG, said: "Looking ahead, we expect healthy numbers in 2015, though growth during the first half of the year will look flat at best. The first two quarters of 2014 were particularly strong and so the first half of 2015 may look tepid by comparison."