The Pan-European IT Outsourcing Intelligence Report 2011 presents the summary of the All-European IT Outsourcing and In-House Software Development research conducted between February and December 2011. In the course of the research the following European countries were surveyed (in alphabetical order): Austria, Cyprus, Denmark, Finland, Malta, Norway, Sweden, Switzerland, Netherlands and United Kingdom.
The key goal of the Report is to identify the differences and similarities in the ways how companies from the above listed countries behave in terms of:
Overall adoption of IT / software development outsourcing services
Choosing their IT outsourcing destinations
Choosing their IT outsourcing service providers
Responding to the most critical outsourcing challenges
Managing their vendor relationships
Cost saving
Planning their future adoption of IT / software development outsourcing services
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Pan-European IT Outsourcing Intelligence Report 2011
1. IT Sourcing Europe: Nearshore IT Outsourcing
Market Intelligence
Pan-European IT
Outsourcing
Intelligence
Report 2011
Coventry, UK
December 2011
0|P age
2. Pan-European IT Outsourcing Intelligence Report 2011
Executive Summary Within each group the countries will be compared and contrasted in
terms of:
Top three industries that most actively adopt outsourced
The Pan-European IT Outsourcing Intelligence Report 2011 presents the IT/software development
summary of the All-European IT Outsourcing and In-House Software Top three IT outsourcing drivers
Development research conducted between February and December Top three IT outsourcing geographies
2011. In the course of the research the following European countries Top three IT outsourcing challenges
were surveyed (in alphabetical order): Austria, Cyprus, Denmark, Finland, Top three IT outsourcing problem solving practices
Malta, Norway, Sweden, Switzerland, Netherlands and United Kingdom. Top three IT outsourcing partner search tactics
The key goal of the Report is to identify the differences and similarities in Most outsourced areas of expertise
the ways how companies from the above listed countries behave in terms Most popular IT outsourcing business / engagement models
of: Top three IT outsourcing impressions
Top three reasons keeping companies away from IT outsourcing
Overall adoption of IT / software development outsourcing Future IT outsourcing factors and drivers
services
Choosing their IT outsourcing destinations
Choosing their IT outsourcing service providers
Responding to the most critical outsourcing challenges
Managing their vendor relationships
Cost saving
Planning their future adoption of IT / software development
outsourcing services
All countries to be analyzed in the present Report have been divided into
three groups: 1) Nordic Region (Denmark, Finland, Norway and Sweden),
2) DACH, or German speaking region (Germany, Austria and Switzerland)
and 3) United Kingdom, Netherlands, Malta and Cyprus.
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3. Pan-European IT Outsourcing Intelligence Report 2011
Acknowledgement
Herewith IT Sourcing Europe expresses a heartily gratefulness to its
information partners – Ngi (Dutch platform for ICT professionals),
Outsourcing Verband (Austrian/German/Swiss Outsourcing Association),
and Outsourcing Portal (Polish web portal focused on IT Outsourcing
(ITO), business process Outsourcing (BPO), knowledge process
Outsourcing (KPO), HR Outsourcing (HRO), shared services etc) – for their
assistance in the localization and distribution of the 2011 European IT
Outsourcing and In-House Software Development surveys’
announcements, conditions and web links.
Without their gratuitous help IT Sourcing Europe would not have been
able to get the sufficient research sample of participants in each certain
region polled which would have had a negative impact on the surveys’
results and overall quality of trendwatching.
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4. Pan-European IT Outsourcing Intelligence Report 2011
Contents
Introduction ............................................................................................... 5
All-European IT Outsourcing Research 2011 .............................................. 6
Research Goals ....................................................................................... 6
Research Objectives ............................................................................... 7
All-European In-House Software Development Research 2011 ................. 7
Research Goals ....................................................................................... 7
Research Objectives ............................................................................... 7
Research Methodology .............................................................................. 7
Study Sample ....................................................................................... 10
Part I: Nordic Region ................................................................................ 11
Part II: DACH ............................................................................................ 20
Part III: Cyprus, Malta, Netherlands & United Kingdom .......................... 30
Conclusions & Recommendations ........................................................... 40
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5. Pan-European IT Outsourcing Intelligence Report 2011
Introduction From ITO buyers’ reluctance to willingness to change their service
providers who fail to meet their business goals and project
milestones
From dedicated development center and project-based models to
Despite the last year’s predictions that the European Union is likely to
more innovative business / engagement models able to provide
catch up with the United States by the total IT outsourcing (ITO) contracts
maximum managerial control of the outsourced projects and
value in 2011, the factual state of affairs demonstrates a substantial
transparent pricing
decline in the European outsourcing transaction volumes (both in ITO and
business process outsourcing (BPO)). The last Global Services Industry From short-term cost saving goals to longer-term IT management
strategic partnerships and cross-border knowledge exchange
Quarterly Report by Everest Group, one of the world’s leading
From offshoring to nearshoring
outsourcing consultancies, determines this decline to make 7% from Q2
20111. On the other hand, IT Sourcing Europe’s country-specific surveys With the double dip effect (or second economic downturn) expected to
show that the number of the low-value and less asset-intensive reach its peak in 2012, IT Sourcing Europe remains cautiously optimistic
outsourced IT/development projects has increased in Europe in 2011, about the future development of the European ITO market. Given that
compared to 20102. many corporate IT leaders plan to lay off some of the in-house staff and
increase ITO spending while decreasing overall IT spending, a future
The current economic uncertainty generally leads to the transformation increase in the European ITO transactions becomes almost undisputable.
of the entire ITO landscape in Western and Northern Europe. The Companies may simply have no other choice but to seek external
following distinct shifts have been identified: assistance outside their home countries if the financial situation
continues to worsen in the following months. Besides all, outsourcing will
From single-supplier megadeals to small multi-supplier contracts be considered as the only option to gear companies’ productivity gains in
the future.
Geography wise, United Kingdom remains the European leader in terms
of ITO adoption: according to the recent research by Oxford
1
Everest Group, “Market Vista: Global Services Industry Quarterly Report, Q3 2011,” < Economics/Business Services Association3, the UK outsourcing market is
http://bit.ly/vb4TRf>
3
Oxford Economics/Business Services Association, “The size of the UK outsourcing market - across
2
IT Sourcing Europe, “European IT Outsourcing Intelligence Reports: Austria, Cyprus, Denmark, the private and public sectors,” 2011,
Finland, Germany, Malta, Netherlands, Norway, Sweden, Switzerland, United Kingdom” 2011, < http://www.bsa-org.com/documents/70 >
<http://www.itsourcing-europe.com/IT_Outsourcing_Reports.html>
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6. Pan-European IT Outsourcing Intelligence Report 2011
currently assessed at £207bn, contributing £115bn to the UK economy growth expectations, length of outsourcing engagement, single
each year through supplies, goods and services procured by outsourcing or multi-vendor management)
firms. However, effective since January 2011, the VAT rate on all services, Determine size of augmented IT teams and value of ITO projects
including outsourcing, has gone up to 20% in the UK, which increased the Determine the most and least outsourced IT / software
cost of most of ITO contracts. As a result of this, more UK companies development areas
move their operations to the so-called “tax heavens” such as Malta,
Benchmark the most and least preferred ITO locales
Gibraltar and Cyprus and continue / start outsourcing within / from these
locations. Identify the key factors driving ITO decisions in each country
polled
Additionally, the Nordic region has mobilized significantly over 2011 in Rate different factors in terms of their importance in the choice
terms of ITO adoption. Currently, the Nordic outsourcing market is valued of ITO destination and service provider
at over €5bn of which around 50% belongs in Sweden and the rest is
Identify the key ITO issues and problem solving best practices
equally distributed across Denmark, Norway and Finland4.
Find out how ITO buyers search for their ITO partners
Determine the general profile of ITO service providers
Determine the most and least popular ITO business /
engagement models in each country polled
All-European IT Outsourcing Research 2011 Benchmark ITO buyers’ dependence / independence from service
providers with regards to personnel selection and salaries’
negotiation
Measure the level of satisfaction with ITO service providers as
Research Goals well as overall impressions of ITO engagements
Compare and contrast the actually incurred versus contracted
Identify the general profile of ITO buyers in each respective costs of ITO engagements
country surveyed (company size, industry, annual revenue
Assess the overall savings from ITO engagements
Determine future ITO plans of current ITO buyers
4
Burnt Oak Partners, “Nordic outsourcing market heats up,” 2011, <http://www.burntoak-
partners.com/2011/09/01/nordic-outsourcing-market-heats-up/>
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7. Pan-European IT Outsourcing Intelligence Report 2011
Research Objectives Rate different factors by their importance in the future choice of
ITO hubs and partners
Get an in-depth understanding of the current ITO demands and Research Objectives
trends in each country surveyed
Help current ITO buyers compare own ITO strategy and problems
against those of their industry peers Help today’s non-outsourcing companies compare own in-house
Help current ITO buyers revise and/or improve their current ITO development / IT issues and problem solving techniques with
engagements / business models based on the industry best those of their industry peers
practices Determine key concerns and fears that prevent today’s non-
outsourcing companies from adopting ITO services and make ITO
service providers aware of these concerns
All-European In-House Software Development
Research 2011 Research Methodology
Research Goals
Both IT Outsourcing and In-House Software Development surveys were
Determine current level of satisfaction with the outcomes of the designed and hosted by SurveyMonkey, the world’s leading provider of
in-house software development / IT function management web-based survey solutions.
Identify major challenges of the in-house development that may
lead companies to adopt outsourcing in the future The IT Outsourcing survey was comprised of 25 questions divided into 8
Identify the major factors that currently prevent companies from question blocks. The In-House Software Development survey was
adopting the outsourced development / IT comprised of 13 questions divided into 4 question blocks. The following
Identify circumstances that are likely to drive companies to adopt types of questions were used in both surveys: M-C - multiple-choice (only
ITO in the future one answer), multiple-choice (multiple answers) and M/C - matrix of
choices. Some multiple-choice questions contained an open-ended
Identify ITO locales that seem to be most and least attractive for
today’s non-outsourcers
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8. Pan-European IT Outsourcing Intelligence Report 2011
response option that was included as the answer “other” in the actual
analysis of responses (see Table 1). Where do you outsource your M-C (multiple
software work? answers)
Table 1. Question blocks & types What are the TOP THREE factors M-C (multiple
that drove your company's answers)
Block Question Type decision to outsource IT?
IT Outsourcing Survey
What is your company size M-C (1 answer) Rate the following factors in M/C (1 answer per
(headcount)? Outsourcing Drivers terms of their importance in your row)
& Factors choice of the outsourcing
What is your primary industry? M-C (multiple destination
answers)
Respondents’ profile What revenue growth are you M-C (1 answer) Rate the following factors in M/C (1 answer per
expecting in 2011? terms of their importance in your row)
choice of the outsourcing partner
Do you currently outsource any M-C (1 answer)
element of your corporate IT What are the TOP THREE M-C (multiple
function /software development? challenges of your outsourced answers)
Outsourcing IT/development?
What is your overall IT M-C (1 answer) Challenges
outsourcing experience? How do you respond to your M-C (multiple
current challenges? answers)
If you do staff augmentation, M-C (1 answer)
what is the size of your current How did you find your current M-C (multiple
outsourced team(s)? ITO partner(s)? answers)
If you do project outsourcing, M-C (1 answer) What size is your major ITO M-C (1 answer)
Outsourcing what is the value of your partner (headcount)?
Behavior project(s) (in €)?
What business model do you use M-C (multiple
Vendor Relations for your outsourced answers)
What area of expertise does your M-C (multiple
outsourced software answers) development?
development fall into?
Who decides on your outsourced M-C (multiple
Do you multi-source? M-C (1 answer) development team's structure answers)
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9. Pan-European IT Outsourcing Intelligence Report 2011
and members? IT/software products?
Do you know the exact salaries of M-C (multiple If you have an in-house IT team, M-C (1 answer)
each of your employee on the answers) In-House Software what size is it (headcount)?
outsourced development team? Development
Behavior What part of your corporate M-C (1 answer)
Evaluate your current level of M-C (1 answer) budget is spent on IT/software
satisfaction with the outsourced development?
services provided
Are you satisfied with your in- M-C (1 answer)
How do actual incurred annual M-C (1 answer) house development outcomes?
costs of the outsourced
development compare to the What are the TOP THREE M-C (multiple
expected (contracted) costs? challenges of your in-house answers)
Outsourcing Costs Challenges of In- software development?
What are your actual savings M-C (1 answer) House Development
from the outsourced software How do you respond to current M-C (multiple
development versus the in-house challenges? answers)
development?
Factors Keeping What are the TOP THREE factors M-C (multiple
What are your general M-C (multiple Away from that keep your company away answers)
Impressions of ITO impressions of the outsourced answers) Outsourcing from ITO?
software development?
Rate each circumstance below in M/C (1 answer per
Do you plan to continue M-C (1 answer) terms of your company's row)
outsourcing your software likelihood to begin outsourcing
development? IT/development in the future
Future Outsourcing
Plans In the future, where would you M-C (multiple Where would you outsource your M-C (multiple
outsource your software answers) software development / IT in the answers)
development? future?
Future Adoption of
Outsourcing Rate the following factors in M/C (1 answer per
In-House Software Development Survey terms of their importance in your row)
How do you currently M-C (multiple future choice of ITO destination
develop/manage your answers)
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10. Pan-European IT Outsourcing Intelligence Report 2011
Rate the following factors in M/C (1 answer per
terms of their importance in your row)
future choice of the ITO partner
If you decide to outsource IT / M-C (multiple
software development in the answers)
future, how would you search for
your outsourcing partner?
Do you plan to outsource any M-C (1 answer)
part of your IT function /
software development in 2011?
Study Sample
The following number of companies took part in IT Sourcing Europe’s
surveys in each country surveyed:
Country # of outsourcers # of non- Total # of
outsourcers participants
Austria 320 213 533
Cyprus 129 100 229
Denmark 434 240 674
Germany 140 164 304
Malta 78 76 154
Netherlands 216 240 456
Norway 285 206 491
Switzerland 422 181 603
Sweden 192 287 479
United Kingdom 387 342 729
Grand Total 2603 2049 4652
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Part I: Nordic Region
Figure 1: Top 3 industries that most actively use ITO services in 2011 Figure 2: Top 3 outsourced project areas
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Figure 3: Multi-sourcing vs single-sourcing Figure 4: Top 3 IT outsourcing geographies
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Figure 5: IT Outsourcing projects value (€) Figure 6: Top 3 IT Outsourcing drivers
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Figure 7: Top 3 IT Outsourcing Challenges Figure 8: Top 3 Responses to Challenges
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Figure 9: Top 3 IT Outsourcing Destination Selection Criteria Figure 10: Top 3 IT Outsourcing Partner Selection Criteria
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Figure 11: Top 3 IT Outsourcing Partner Search Tactics Figure 12: Top 3 IT Outsourcing Engagement Models
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Figure 13: ITO Buyers’ Involvement in HR Selection on Vendor’s Figure 14: ITO Buyers’ Involvement in Salary Negotiations with Project
Side Team Members on Vendor’s Side
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Figure 15: ITO Buyers’ General Satisfaction with Their Service Figure 16: Top 3 Impressions of IT Outsourcing
Providers
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Figure 17: Top 3 Factors Preventing Companies from IT Outsourcing Figure 18: Top 3 Factors Likely to Influence Companies’ IT Outsourcing
Decisions in the Future
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Part II: DACH
Figure 1: Top 3 Industries that Most Actively Use ITO Services in 2011 Figure 2: Top 3 Outsourced Project Areas
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Figure 3: Multi-sourcing vs Single-sourcing Figure 4: Top 3 IT Outsourcing Geographies
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Figure 5: IT Outsourcing Projects Value (€) Figure 6: Top 3 IT Outsourcing Drivers
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Figure 7: Top 3 IT Outsourcing Challenges Figure 8: Top 3 Responses to Challenges
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Figure 9: Top 3 IT Outsourcing Destination Selection Criteria Figure 10: Top 3 IT Outsourcing Partner Selection Criteria
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Figure 11: Top 3 IT Outsourcing Partner Search Tactics Figure 12: Top 3 IT Outsourcing Engagement Models
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26. Pan-European IT Outsourcing Intelligence Report 2011
Figure 13: ITO Buyers’ Involvement In HR Selection On Vendor’s Side Figure 14: ITO Buyers’ Involvement In Salary Negotiations With
Project Team Members On Vendor’s Side
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Figure 15: ITO Buyers’ General Satisfaction With Their Service Figure 16: Top 3 Impressions of IT Outsourcing
Providers
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Figure 17: Top 3 Factors Preventing Companies From IT Outsourcing Figure 18: Top 3 Factors Likely To Influence Companies’ IT
Outsourcing Decisions In The Future
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29. Pan-European IT Outsourcing Intelligence Report 2011
networks to single topics such as Shared Services or as representation of markets /
outsourcing destinations Goal is to represent the interests of the respective market
segments, topics, branches or locations in an independent, collaborative manner. Usual
tasks are for instance: representation within our markets, publishing respective
information, reviewing information, establishing partnerships, building networks and
supporting the knowledge transfer by organising workshops, seminars, webinars and
webcasts. The membership with the councils is for professionals free of charge,
The German Austrian Swiss Outsourcing Association (Deutscher Outsourcing Verband e.V.)
organizations can support the work of the councils with a sustaining membership.
represents the interests of outsourcing professionals and organizations and is an
independent partner of outsourcing users, consultants and service providers in Germany,
The Outsourcing Journal
Austria and Switzerland.
The Outsourcing Journal is THE independent news and information services about BPO,
Mission
ITO and Shared Services in Germany, Austria and Switzerland. It provides exclusive
information, company news, professional articles, interviews, best practices, studies,
The main goal of the Association is to further influence the market for outsourcing
market data, reports and much more for outsourcing professionals in Germany, Austria,
services - BPO, ITO and SSC - in the DACH region. The development of dedicated
Switzerland and beyond. > www.outsourcing-journal.org
communication channels and media, a massive expansion of the communication within
the market and the available information as well as the installation of an independent
Public Relations
platform for maintaining and extending the network were identified as key aspects of the
work of the association.
Market attendees can take advantage of the network and communication channels of the
association and get support in their public relations and communication efforts. The
In 2011 the association has established several councils and local representations as well
association offers via its PR agency professional and market fit services.
as relationships with the key organizations and leading professional. Further the
> www.outsourcing-marketing.org
association has actively supported the main industry events and published almost 400
articles with special relevance to the DACH markets for outsourcing services.
Partner Program
Network and Councils
The partner program opens professionals and corporates the opportunity to support the
market and to gain access to first-hand information and an independent network. Further
Good co-operation is built on good contacts. Therefore the association aims to establish
the program supports corporate partners and members actively in their marketing and
good relationships with knowledge carriers, business leaders and other independent
public relations efforts in the DACH region.
organizations, both on national and on international level. Further the association offers
free presentation services and moderates open groups on social / business networks.
For further information please visit www.outsourcing-verband.org/en or contact Mr.
Stephan Fricke at s.fricke@outsourcing-verband.org
The association has established interest groups - councils - that act as knowledge
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30. Pan-European IT Outsourcing Intelligence Report 2011
Part III: Cyprus, Malta, Netherlands & United Kingdom
Figure 1: Top 3 Industries That Most Actively Use ITO Services In Figure 2: Top 3 Outsourced Project Areas
2011
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31. Pan-European IT Outsourcing Intelligence Report 2011
Figure 3: Multi-sourcing vs Single-sourcing Figure 4: IT Outsourcing Projects Value (€)
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Figure 5: Top 3 IT Outsourcing Geographies Figure 6: Top 3 IT Outsourcing Drivers
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Figure 7: Top 3 IT Outsourcing Challenges Figure 8: Top 3 Responses to Challenges
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Figure 9: Top 3 IT Outsourcing Destination Selection Criteria Figure 10: Top 3 IT Outsourcing Partner Selection Criteria
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Figure 11: Top 3 IT Outsourcing Partner Search Tactics Figure 12: Top 3 IT Outsourcing engagement models
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36. Pan-European IT Outsourcing Intelligence Report 2011
Figure 13: ITO Buyers’ Involvement In HR Selection On Vendor’s Side Figure 14: ITO Buyers’ Involvement In Salary Negotiations With
Project Team Members On Vendor’s Side
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37. Pan-European IT Outsourcing Intelligence Report 2011
Figure 15: ITO buyers’ general satisfaction with their service Figure 16: Top 3 impressions of IT Outsourcing
providers
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38. Pan-European IT Outsourcing Intelligence Report 2011
Figure 17: Top 3 Factors Preventing Companies From IT Outsourcing Figure 18: Top 3 Factors Likely To Influence Companies’ IT
Outsourcing Decisions In The Future
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39. Pan-European IT Outsourcing Intelligence Report 2011
Ngi, the Dutch Computer Society, represents 2,500 ICT Contact Details:
professionals. Ngi is a non-profit organisation seeking to improve Postbus 1058
and promote high standards among Informatics Professionals in 3860 BB Nijkerk
recognition of the impact that Informatics has on employment, Netherlands
Web: https://www.ngi.nl
business and society.
Email: info.ngi@ngi.nl
Ngi is a member of IFIP (International Federation for Information Tel.: 033 247 3427
Processing) and CEPIS (Council of European Professional
Informatics Societies).
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40. Pan-European IT Outsourcing Intelligence Report 2011
9. The majority of ITO buyers in Europe are not involved in salary
Conclusions & Recommendations
negotiations with their project team staff on vendor’s side, which
marks a high level of hidden agenda in ITO transactions
10. The majority of ITO buyers in Europe are either somewhat
satisfied, or just satisfied with their service providers
The following IT outsourcing behavior patterns common for all European
regions surveyed have been observed in the course of the 2011 All- The following IT outsourcing concerns common for all European regions
European IT Outsourcing and In-House Software Development Research: surveyed have been identified in the course of the 2011 All-European IT
Outsourcing and In-House Software Development Research:
1. IT (software) industry demonstrates the highest demand for IT
outsourcing services 1. Poor communication with project teams and/or management on
2. Web development is the most outsourced area of expertise vendor’s side
3. Nearshoring is the most popular geography of outsourcing in 2. Actual incurred costs exceed or far exceed the expected
Europe (contracted) costs
4. 2011 has been the year of small ITO projects (up to €50K) 3. Loss of managerial control of corporate IT / development projects
5. Cost reduction remains the major driver of corporate decisions to in case of outsourcing
outsource IT /development in Europe
6. When choosing their ITO hubs, European companies make sure To keep their current and future customers satisfied with their ITO
they have a vast pool of IT talent with an excellent command in outcomes, ITO service providers should revise and update their models of
foreign languages (e.g. English) engagement to allow a better project scrutiny and control on client’s side
7. When searching for potential ITO service providers, European and more transparent pricing structures to ensure more predictable
companies rely most on own online research and vendor longer-term ITO budgets. Additionally, it is highly recommended that ITO
references from their market peers service providers look beyond their Service Level Agreements and
8. The project-based and Managed / Own Development (Agile, develop a set of value-added services to proactively meet their clients’
SCRUM etc) Team models are the most popular engagement business needs in today’s hectic and rapidly changing business
models in Europe environment.
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41. Pan-European IT Outsourcing Intelligence Report 2011
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