Outsourcers see profits in risk transfer says Northgate

Increasingly suppliers have to charge end-users higher premiums, as they take on more risk in contracts, says outsourcer and software developer Northgate Information Solutions.

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Outsourcers are pushing up prices in response to end users efforts to shift the balance of risk in contracts onto their suppliers.

That was the message from Michael Custers, marketing director at outsourcer and software developer Northgate Information Solutions, which reported pre-tax profits up 9% to £60m, this week.

Northgate supplies software and IT services for local and central government offices in the UK, serving nine out of 10 of the UK’s local authorities, and all of the UK police forces.

Custers told Computerworld UK that end users’ efforts to offload risk onto their outsourcers would offer the opportunity to generate higher rates of profit on contracts - provided the suppliers could avoid project failures and demonstrate they were adhering to service level agreements.

Human resources outsourcing is a growing part of Northgate's portfolio, for which it recently acquired specialist firm Arinso at a cost of approximately £250m.

The company said its human resources division signed a record number of new client contracts and has benefited from clients signing up for larger outsourcing deals over longer periods. The HR unit, which signed new contracts with companies including Alliance Boots and Thistle Hotels, signed six agreements worth more than £1m pounds in the year.

Custers said: “In human resource (HR) outsourcing, for example, there are three levels of outsourcing. The initial deals are mainly about processing data, but then contracts move up the value chain to managed services and high risk comprehensive outsourcing.”

Renewed spending on IT in the public sector also helped Northgate’s results, with extensive numbers of large contracts in that vertical, including electoral administration systems. It signed six deals worth over £1m in the period, as well as smaller deals in the Building Schools for the Future scheme.

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