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

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.

Within each group the countries will be compared and contrasted in terms of:

• Top three industries that most actively adopt outsourced IT/software development
• Top three IT outsourcing drivers
• Top three IT outsourcing geographies
• Top three IT outsourcing challenges
• Top three IT outsourcing problem solving practices
• Top three IT outsourcing partner search tactics
• Most outsourced areas of expertise
• Most popular IT outsourcing business / engagement models
• Top three IT outsourcing impressions
• Top three reasons keeping companies away from IT outsourcing
• Future IT outsourcing factors and drivers

Some of the key survey findings presented in the Report are:

• German B2B software development companies are the most active users of the outsourcing services
• Most of ITO projects take 3 to 5 IT specialists to complete and are valued at €500K+
• Web and mobile solutions are most outsourced, while SaaS/Cloud ones are least outsourced in Germany
• Nearshore is the most preferred ITO destination
• Most of German companies outsource to reduce operating costs, focus on core competences, access available IT resources outside Germany and speed up time-to-market
• The key issues in ITO are poor communication with vendor’s teams, change management, cultural difference and poor project management on vendor’s side
• Most of German companies outsource their IT / development to small providers via the fixed-price/time-and-material (T&M) models
• Most of companies refuse to outsource, because they want to have 100% managerial control of own software / IT projects

More interesting findings as well as the 2011 trends and behavior patterns’ comparison to the 2010 ones are available in the actual Report.

• capacity for innovation
• IT labor market efficiency
• flexibility
• spending on research & development (R&D)
• number of IT specialists employed in IT outsourcing industry
• IT rates
• Total Cost of Ownership (TCO) of IT project teams

The Report concludes that Ukraine and Belarus are currently holding the equal positions as the leading non-EU, while Romania is the leading EU locale for IT outsourcing services in the CEE region in terms of cost effectiveness, access to innovation and size of IT resource pool available.

The Report is currently available for free download here.

• Cyprus-based B2B IT companies have the greatest demand for ITO services among other industries and verticals
• The prevailing majority of ITO projects fall under the web development domain, require 1 to 5 IT specialists to complete and do not exceed € 49K in value
• Multi-sourcing is an obvious trend of 2011
• Most of the Cyprus outsourcers transfer their development / IT either nearshore alone or distribute them among multiple providers nearshore, offshore and within Cyprus
• Reduction of operating costs is the core driver of corporate decisions to outsource in Cyprus
• The key challenges of the outsourced IT / software development in Cyprus are poor communication with vendor’s project management and executive teams and vendor’s inability to understand their clients’ business objectives
• Key steps that Cypriot companies make to respond to their ITO challenges are ITO partner change, extension of deadlines and dedication of additional managerial resources
• Most of Cypriot companies manage to save 10% to 24% of operating costs from their ITO endeavors
• More than 66% of non-outsourcing companies complain about the high cost of domestic IT resources and personnel and more than 33% complain about the scarce local IT resource pool
• Around 30% of companies already consider outsourcing as an option to leverage costs and access broader resource pools in the future

These and other thought-provoking findings have been compiled in the Cyprus IT Outsourcing Intelligence Report 2011 that is currently available for free download.

The results of the All-European ITO Research 2011 will be presented in the Pan-European IT Outsourcing Intelligence Report 2011 that is expected to be released before December 25th, 2011.

We thank all European companies that dedicated their time and completed our survey questionnaires!

Key takeaways:

• The greatest demand for ITO services in Norway comes from B2B software development companies

• Most of ITO projects take 3 to 5 and 10 to 19 IT specialists to complete and are valued at€ 0-199K

• Web solutions are most outsourced, while Cloud computing is least outsourced in Norway

• Most of the Norwegian companies single-source offshore or onshore

• Most of the Norwegian companies outsource to reduce operating costs, accelerate time to market, access IT staff outside Norway and release in-house staff for other business purposes

• The key issues in the Norwegian ITO are delayed project delivery, poor project management on vendor’s side and cultural difference

• Own Development Team is the most widely used engagement model in Norway
• In the future, more Norwegian ITO buyers will go nearshore

• Maximum project control retention is the key barrier that prevents many Norway’s companies from adopting ITO services

More thought-provoking findings are available in the Report.

• adoption of ITO services across diverse German industries
• general profile of German ITO service buyers
• factors that drive German companies to outsource their IT / software development functions to external providers onshore, offshore and/or nearshore
• key ITO challenges and solutions

All questions and remarks can be left as comments right below the videocast  and will be replied as soon as possible.

Alternative videocast link - http://www.outsourcing-journal.org/german-market-ito.html

For the second consecutive year Danish IT Outsourcing services provider, pioneer of the own development team model in Ukraine gets highest score for its working conditions and environment amongst software development companies operating in Ukraine, as rated by the IT specialists themselves.

KIEV, Ukraine – November 02, 2011 – Ciklum, a Danish IT outsourcing services provider that specializes in nearshore software development in Eastern Europe, in Ukraine and Belarus, rated Best larger IT Employer 2011 in Ukraine by the annual market study conducted by the Ukrainian Community of Software Developers, DOU. 

“Ukrainian developers are not much different from their Western colleagues. They have the same needs and criteria to evaluate an employer: nice and comfortable office, welcoming work atmosphere, career and self-growth opportunities, good salaries, education, open communication with the client and the team, etc. These are just some of the factors that we continuously keep an eye on and try to improve in Ciklum. Having been rated highest for the second year in a row by DOU’s Best IT Employer in Ukraine study tells us that we are on the right track,” comments Torben Majgaard, Ciklum Founder and CEO.

Conducted for the second time, the annual study aims at identifying best software development companies to work for in Ukraine.

“We aim at helping IT companies to compete more effectively. We believe that our study will ultimately be very beneficial for programmers as employers are able to see which factors are important to their employees, how they are important, and how employers compare to others,” comments Max Ischenko, DOU’s initiator and coordinator of the study during the awards ceremony.

This year 32 leading IT companies from five major Ukrainian IT software development hubs (Kiev, Kharkov, Dnepropetrovsk, Lvov, and Odessa) decided to test themselves against the market. The evaluation was based on various questions that focused around the five key areas: type of projects and teams, compensation, career opportunities, working environment, and management.

This year the online questionnaire received a 62% response rate from the 9,000 programmers study pool, which is more than double from the last year. For better representation and being fair to the participants companies had to provide evaluation feedback from all offices across the country and compete within own company size segment.

Ciklum gets title of the Best IT Employer in Ukraine for the second consecutive year.

In Marina Vyshegorodskikh, Ciklum’s HR Director’s point of view, “Ciklum’s key to success is building the company together with our employees. This involves being truly responsive to their ideas and needs, and creating supportive environment for realization of their initiatives. In a very flat and fast changing world such things as ability to change, adopt, integrate and build on employees strengths will have an increasing value.”

(Source: Ciklum)

Major Strengths That Define Europe

Talent Pool

Europe has a vast talent pool, engineering expertise, and high standard of education. Dmitry Loschinin, President and CEO, says “Confidence is quickly rebuilding and more and more companies are turning to Eastern Europe in particular for technology services expertise. Reason: The region’s talent pool has never been stronger.”

Multilingual Skills

Multiple language capabilities differentiate the European market from most other destinations. There is probably no other such destination that can support six to seven languages at one place. This has enabled the growth of BPO operations and has attracted numerous service providers to the region.

ITO or BPO- Which is Hotter? 

According to Forrester report Market Overview: European IT Infrastructure Outsourcing (2011), cloud-based services are dominating the infrastructure outsourcing market. As concerns over security issues prevail, private dedicated clouds and hybrid solutions are being offered by service providers. Forrester expects that resistance will change as more business professionals push for the flexible capabilities that cloud enables.

Western Europe and UK are gradually, yet confidently gaining the dominant share in the global ITO market, catching up with the United States. The Forrester report states that Ukraine is the lowest-cost nearshore ITO destination. The IT Sourcing Europe Survey discovered these countries as the most attractive locations for the outsourced nearshore IT development- Ukraine, Poland, Romania, Hungary, Belarus and the Russian Federation.

The BPO space is seeing lot of momentum in both voice and non-voice operations. Driven by multilingual capabilities, call center activities are on the rise. Other BPO processes like F&A are also seeing lot of activity. Hungary, Romania, Slovenia are the major markets for voice operations, while Poland is the most desired location in the non-voice space.

Key Country Profiles

Ukraine

• Most attractive destination for nearshore software development.
• Low IT salaries, Strong R&D, high tech education, innovation and abundance of IT resources.
• Ukraine can offer Western European enterprises a cost saving of 40-60 per cent on their inhouse IT spending.

Poland

• Demonstrates maturity of BPO markets.
• The place for Business analytics, HRO, multilingual contact center operations and F&A.

Hungary

• Attractive location for outsourced nearshore IT development.
• Mature BPO market with strong focus on HRO.
• The country’s capital, Budapest, specializes in software development and testing and is 7th of 25 safest cities for offshore/nearshore outsourcing.

Russia

• ITO market value higher than other three countries.
• Russia is in Gartner’s List of Top 30 Outsourcing locations.
• Specialized skills in engineering design and R&D services.

(Source:  European IT Outsourcing Intelligence Report 2010)

Opportunities

Emerging locations in Europe are capturing lot of attention from service providers in different parts of the world. Good infrastructure, abundant labor, language capabilities and huge unexplored resources make these locations attractive investment options. Sitel has expanded its European operations by opening a new call center location in Serbia.

Indian service providers are also targeting the market for establishing a nearshore presence. Mphasis, which has set up operations in Poland this year, is one of them. Gopinathan Padmanabhan, Head Global delivery Unit, Mphasis, commented about the move in one of its recent press releases, “Poland offers ability to service clients in most continental European languages and is well connected with other Western European business centers. The availability of talent, language skills and an established business infrastructure in Poland made it a natural choice for us.”

Eastern Europe will hold its position as the most attractive location for sophisticated IT solutions.“In the next couple of years demand is likely to increase with countries coming out of debt crisis. Eastern Europe will continue to see demand for high order IT skills and niche capabilities, though the overall scale of operations would be lower than that in India and Philippines” says, Salil Dani, Research Director, Global Sourcing, Everest Group.

Challenges

Different locations within Europe have specific characteristics, advantages and limitations. So, service providers will have to employ a combination of strategies to expand within the region.

There exist difficulties in scaling up. The operations in many of the top locations are much lower in scale compared to that of destinations like India and Philippines. “The providers tend to be of a smaller scale, and can put together large teams slower than competitors from other locations. However, for traditional R&D projects that’s not a problem, as big teams are rarely needed” says, General Manager, Andrei Pronin, Auriga.

Currency fluctuations and uncertainty in the economic outlook is posing another challenge.

(Reprint from Global Services Media article)

To advance these priorities, more than 70% of midsize firms are seeking a consultative, versus purely transactional, relationship with their primary IT provider. And whether they are part of the two-thirds who view themselves as advanced when it comes to IT adoption or among those who lag, all midsize firms cite product reliability, product performance, and competitive pricing as the top reasons for choosing their primary IT vendor.

Although midsize businesses clearly want to adopt new, innovative business strategies, make changes required to improve their performance, and partner with an IT provider who can help advance their business strategy, they still face substantial challenges to executing against those goals. Not surprisingly, a key barrier, despite increasing budgets, is cost. This is cited by 58% of respondents as being one of the top barriers to achieving their key IT priorities. Difficulty implementing new technology also represents a top challenge worldwide.

Source: “Inside the Midmarket: a 2011 Perspective,” IBM Worldwide Study 2011