Major Trends and Challenges of German IT Outsourcers

Posted: September 17, 2010 in Market Research

IT Sourcing Europe highlights the key findings of its German IT Outsourcing Survey 2010.

IT Sourcing Europe , a UK-based nearshore IT outsourcing (ITO) research and advisory company, announced today the completion of its German IT Outsourcing survey, conducted in the frames of the ongoing All-European IT Sourcing and Software Development Best Practices Research 2010. The survey was completed by the 258 companies with any kind of ITO experience (i.e. companies that outsourced/outsource entire/part of their software/web development function to a 3d party offshore, nearshore and/or within Germany). The survey sample represents all of the major verticals from technology and telecommunication to retail to banking to travel etc. 

The survey finds the following key trends to be characteristic of today’s German ITO market:

  • In Germany, companies that outsource their software/web development nearshore outnumber those that transfer their software development function offshore by almost twice;
  • first and foremost, German companies engage in ITO relationships to reduce operating costs, to accelerate time to market and to be able to find necessary resources / specific skills that are missing within home country;
  • when choosing an outsourcing destination, most of German companies consider the following factors as first priority: low costs of doing business and development, available IT talent pool and positive references from the fellow companies / vendor’s track record;
  • the majority of German companies outsource 60% to 89% of their software development function;
  •  the majority of German outsourcers actually save up to 25% from the outsourced development;
  • most of German outsourcers say the actual annual incurred costs of their outsourced operations are up to 25% higher than expected;
  • most of German outsourcers still fail to gain significant benefits from ITO and achieve state-of-the-art innovation due to the fact that they engage with their partners via traditional models such as dedicated development center (DDC) or Build-Operate-Transfer (BOT), which do not allow having 100% managerial control of the outsourced project and teams and offer rather non-transparent pricing structures (when clients don’t know exactly what they pay for).

According to the survey findings, the following key challenges are facing German outsourcers in 2010:

  • delayed project delivery and unmet milestones;
  • poor project management from vendor’s side;
  • actual incurred annual costs exceed the contracted ones (by almost twice in many cases).

The Report arrives at more thought-provoking conclusions that generally shape the German ITO landscape of 2010. 

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More
survey findings can be downloaded from here .

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