Outsourcing - Boring, Boring, Boring!

I hosted a really pleasant dinner at Mosimanns last week for some pretty important CEOs from the software sector. I thought, as I was paying for the evening, they would be ‘nice to me’. Have none of it!

Basically I was severely criticised for banging on about outsourcing – ITO and BPO and Capita in particular. Unlike the really exciting software sectors that these CEOs represented – and had all made multimillions from – outsourcing was truly boring...and that’s not in the complimentary way that Holway normally uses the word!

Of course, they were right. Even I cannot get excited about the detail of an insurance back office outsourcing deal anymore. I can however get distinctly excited about the share price performance of the outsourcers. Capita is still the best performing share in my – or probably anyone else’s – tech portfolio. Up an amazing 174xtimes since their 1989 IPO. That is twice the 82xtimes that the second best performer – Sage – has achieved.

But, as they say, ‘past performance is no guide to the future’. However, in a period when almost every software (indeed every SITS) company has showed massive share price falls (the UK FTSE SCS Index is well over 20% off its 2007 high), the outsourcers have held up very well. Capita, Serco and Xchanging are pretty much where they started 2008 compared with a 12% decline in both the FTSE100 and the FTSE SCS Indices. I can tell you, that’s pretty good!

For further reading see Lex on the UK outsourcers in the Financial Times on 14th Mar 08. It quotes Ovum Holway research too.