IT Sourcing Europe highlights the major challenges facing today’s software development outsourcing companies in the Netherlands.
IT Sourcing Europe, a UK-based IT outsourcing (ITO) research and advisory company, announced today the completion of its Dutch IT Outsourcing Survey, conducted in the frames of its All-European ITO Research 2010 . The survey aimed to explore the major trends and challenges facing Dutch companies that outsource their software/web development function to 3d parties within the Netherlands, offshore or nearshore.
According to the survey findings, the top three challenges of the outsourced development in the Netherlands are: poor communication between the service buyers and providers, delayed project delivery and/or missed milestones and cultural difference. These challenges were mostly reported by offshore outsourcers, i.e. companies locating their software development function 2 and more time zones away from the home country (to ‘traditional’ outsourcing hubs such as India, China etc). To respond to these challenges, the majority of Dutch companies polled increase face-to-face communication with their vendors, dedicate more management resources and extend deadlines.
Regarding companies that transfer their development nearshore, i.e. maximum 2 time zones away from the Netherlands (e.g., Central and Eastern Europe), they demonstrate higher levels of satisfaction with vendor relationships and quality of project deliveries. However, most of them pointed to vendor’s inability to understand their business goals, poor project management from vendor’s side and excessive vendor’s bureaucracy and/or organizational hierarchy.
Both nearshore and offshore outsourcers reported the following challenges equally: inability to control and/or manage their outsourced teams due to vendor’s staff turnover, non-transparent pricing structures of their ITO engagements and that the actual annual incurred costs of the outsourced development exceed the contracted (expected) ones (normally up to 25% and sometimes up to 50% higher than expected).
These findings suggest that traditional ITO models such as dedicated development center (DDC) or managed team, which imply 100% project management by the vendor, are not able to bring long-term value to Dutch outsourcers and fail to provide efficiency to certain types of companies such as SMOs, tech start-ups, venture capital backed ones etc who need full control of their ITO spending, transparency of transactions and fast time to market to gain a respective market share and/or win their own market niche as soon as possible.