Most of German IT outsourcers are dissatisfied with their offshore providers

Posted: September 1, 2010 in Market Research

IT Sourcing Europe is highlighting the preliminary results of its ongoing German IT Sourcing and Software Development Best Practices Survey 2010.

According to the preliminary results of the German IT Sourcing and Software Development Best Practices Survey, conducted by IT Sourcing Europe in the frames of its All-European IT Outsourcing and Software Development Research 2010, the majority of German companies that outsource entire/part of corporate software development function to a 3d party are not quite satisfied with their current ITO providers. In-depth analysis of responses allows observing the following pattern: most of the dissatisfied companies outsource their development offshore, i.e. at least 3 time zones away from the home country. Companies that outsource their software development nearshore (i.e. maximum 2 time zones away from Germany) demonstrate much higher levels of satisfaction with the quality of products, services and attitudes received from their ITO partners.

Comparing the preliminary results of the German survey to the results of the completed UK and Danish Surveys 2010 , it becomes obvious that the German companies, unlike their UK and Danish competitors, are more flexible towards terminating their failed or failing ITO contracts and either do back-sourcing (i.e. move outsourced operations back to house) or partner with different ITO providers within Germany or nearshore (Central and Eastern Europe). In the UK and Denmark, most of companies, dissatisfied with their providers, try to retain their existing engagements and dedicate more managerial and financial resources to save their contracts from failure.

In Germany, the most frequently cited factors driving dissatisfaction with the outsourced development are the lack of appropriate resources/skills from the vendor’s side, poor communication with the vendor’s project management, vendor’s inability to understand their business needs, time and cultural difference and hidden costs of outsourcing (when the actual incurred costs far exceed the contracted ones).

IT Sourcing Europe will be able to portray a full picture of behaviors of the German IT outsourcing companies and their attitudes towards the outsourced software development soon after the completion of the German survey.

  1. Abha says:

    I have many years of experience of managing relationships with German clients. I agree completely agree with the results of the survey. that there are lots of instances of failed relationships between German IT organizations and Indian offshore vendors. There are few reasons for the samea) Indian vendors generally do not understand German business culture well. Moreover they are very used to working with American firms and try to handle German relationships in the same way (which is the biggest mistake any offshore vendor can make). b) Second issue is with the language capabilities. I know that many vendors at the time of winning the deal make tall claims but mostly they remain unfulfilled. To succeed Indian vendors have to invest in building team of German speaking resources and managers. Just trying to manage a relationship with only one German speaking person interfacing with German client leaves lots to desirec) Third issue is of quality – Germans are very quality conscious and they expect the same from their vendors as well. In most relationship, you see that the vendor organizations start the relationship with the best resources (this helps them win the contract with German organizations), but slowly after winning the deal, vendors generally do not pay much attention to the quality. German companies take long time to decide on the vendor and the relationships for them are for keeps, unless and until the partner goofs up on many parameters mentioned above. To be successful Indian offshore vendors need to invest in understanding German culture, building language capabilities, maintaining the quality and keeping their promises.

  2. Thanks for your insightful comment!

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