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How Brexit will impact global CIOs and IT services

Stephanie Overby | April 13, 2017
Global CIOs must begin planning now for the impact of Brexit on their IT services and outsourcing strategies.

That would most directly impact the U.K. IT services market with an estimated value of $74.5 to $93 billion a year and growing at a rate somewhere between 2.6 percent and 4.2 percent a year. “The market for UK clients is expected to continue to grow,” Wright says, “however significant slowdown or contraction depending on the nature of the services is expected for IT services delivered from the UK to EU countries.

 

Global companies that outsource to the UK will need to restructure contracts

Global companies with significant IT infrastructure and operational support services that outsource to the U.K. must revisit and potentially restructure their IT services deals. Companies in the remaining EU nations that outsource to the UK will face the most turmoil. Once the specifics of the UK’s negotiated departure from the EU are clarified, CIOs will have to quickly reassess their IT services deals, potentially restructure them to address new tax, customs, and regulatory requirements, and continue to assure service delivery for their companies.

“To put it in simple terms, they will need to continue in the short term to operate business as usual as a fully compliant EU-member and—post Brexit, within the to be negotiated transition period — demonstrate compliance with both the new UK regulations and re-establish the EU services as a non-EU member compliant solution,” says Wright.

Certain sectors of IT services will be most affected “For core digital infrastructure there is a very real risk that the UK could be deemed inadequate as a data host owing to the lack of ability to certify compliance with EU laws such as the new General Data Protection Regulation (GDPR) and Network Information Security (NOS) directive post-Brexit,” says Wright.

Following the introduction of GDPR in 2018, for example, UK data centers will need to rapidly transition from an EU to non-EU treatment, and somehow overcome the lack of a mature equivalent framework, processes, and procedures for certifying UK-based data services. Any failure to comply with GDPR may result in fines as high as 5 percent of a company’s annual revenue. “The No. 1 concern will be how to ensure the continued free flow and protection of data,” says Wright.

For traditional infrastructure services—data center, service desk, remote infrastructure management, managed security, end user computing--the expected future restrictions on cross border trade, tax implications, and custom tariffs may erode the business case for outsourcing IT to the UK. “It could even impede performance to a level that such services may no longer be viable across UK-Europe borders,” Wright says.

“Global CIOs must pay particular attention to Brexit to ensure that discretionary spend budget and key resources have the appropriate plans or commitments to address essential changes pre-Brexit exit on March 29, 2019 and through the end of the negotiated transition period,” Wright says. “In addition, IT organizations will need the support of enabling functions such as human resources, legal procurement, and vendor management to review Great Reform Bill and Brexit negotiated outcomes.”

 

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