AI use rises but few see transformation as IT sourcing evolves
Whitelane Research has released its 2025 UK & Ireland IT Sourcing Study, highlighting widespread uptake of artificial intelligence, increased offshore IT outsourcing, and changing client expectations of service providers.
The study is based on responses from nearly 400 organisations with substantial IT budgets in the UK and Ireland, analysing over 1,000 IT sourcing relationships and more than 1,100 cloud platform relationships. Organisations from various sectors, including financial services and manufacturing, contributed to the report, which identifies emerging trends among major technology buyers in the region.
AI adoption and impact
According to the report, AI and generative AI adoption among organisations has become almost universal, with 94% of respondents now using these technologies. This marks a significant increase from the 78% reported twelve months prior. However, the anticipated transformation has not yet materialised across most businesses. Only 4% said they had achieved a full business transformation due to AI, 5% reported notable operational change, and the majority indicated the impact was minor or still developing.
Despite the modest impact so far, optimism remains strong, with 88% of organisations planning to increase their AI-related investments over the next two to three years. Of those, 34% expect a significant increase in spending, while 54% foresee a moderate rise. Compliance concerns (55%), a lack of skilled staff (46%), and data quality (45%) remain the most commonly cited barriers to broader AI implementation.
Shifts in IT outsourcing
The study reports that 61% of organisations plan to either maintain or increase IT spending on external service providers, though the share planning higher expenditure (30%) is down 5% compared to last year. Meanwhile, 22% of organisations, particularly in the financial services sector, aim to reduce their use of external providers and bring more IT services in-house. Retaining specialist in-house expertise (68%) and cost management (49%) are named as the principal reasons for insourcing. Other reasons include achieving quicker time-to-market, improving quality, and developing captive delivery centres.
Business transformation remains the leading factor for increasing outsourcing, identified by 59% of organisations who plan to boost external IT spend, followed by scalability and access to innovation. Although tapping into external resources and talent dropped 13 percentage points as a reason for outsourcing compared to 2024, it still remains relevant for 44% of respondents.
Offshore sourcing and sectoral variation
The study also shows growing interest in offshore outsourcing, with 35% of organisations planning to increase their offshore activities. Only 14% intend to reduce offshore engagement. This trend is particularly pronounced in financial services, where nearly half of respondents (48%) reported plans to expand offshore IT delivery, compared to 33% for manufacturing and 24% in the public sector.
Service provider performance and client feedback
Client satisfaction with IT service providers has hit a record high, with the reported average general satisfaction score increasing to 75%. This year, Hexaware was ranked the number one service provider for general satisfaction at 85%, maintaining its position from the previous survey, and achieving the top spot in both application services and service delivery.
"Hexaware's sustained rise and strong client satisfaction across multiple segments are clear indicators of its strategic focus and delivery maturity. Their performance in this year's UK&I study sets a strong benchmark in categories that matter most to enterprise buyers," Jef Loos, Head of Research, Europe, Whitelane, said.
Following Hexaware, EPAM scored 83%, with HCLTech, TCS, Infosys, and Persistent each achieving a satisfaction score of 82%. There were 38 service providers assessed in total, including new entrants such as GTT, KPMG, Stefanini, Vodafone, and Zensar.
"We're honored by the continued trust placed in us by our clients across the UK&I. These rankings reflect our deep commitment to co-creating value through technology, simplifying the complex, and delivering with agility. Our strong performance reinforces the strength of our partnerships and the consistency of our outcomes," Amrinder Singh, Corporate Vice President & Head – EMEA & APAC Operations, Hexaware, said.
Thirteen service providers were named as Exceptional Performers in one or more service towers. Hexaware, EPAM, and Persistent were identified in application services; HCLTech, Infosys, and TCS in cloud and infrastructure services; Wipro, HCLTech, Stefanini, and Capgemini in workplace services; GTT, DXC Technology, and TCS in network and connectivity; with TCS, Deloitte, HCLTech, and KPMG in security services.
"These scores are a direct readout from our clients. They show we're trusted for our consistent, day-to-day delivery and give us a clear roadmap to raise the bar even further. We'll continue to deepen our local expertise and convert that trust into measurable results on every engagement," Parameshwaran Iyer, Senior Vice President & Regional Head – UK & Ireland, Hexaware, noted.
Still, the report notes that clients increasingly want more from their providers: 41% cited lack of proactive challenge as the leading weakness, while 29% complained about insufficient business knowledge and usage of inexperienced resources by providers.
Cloud platform preferences
Public cloud adoption remains robust, with 77% of organisations saying they plan to maintain or increase current levels. Only a minimal share (2%) expect to reduce usage. In satisfaction ratings for cloud platforms, Amazon Web Services achieved the highest score in infrastructure cloud platforms with 77%, while Microsoft Dynamics 365 led in software platforms with 73%.
Whitelane Research expects to continue monitoring these trends through its European-wide annual studies, providing detailed analysis of sourcing strategies and the activities of major IT service providers in the market.
