IT Sourcing Europe highlights the key trends of Western European software development outsourcing in 2010 and provides a comparison analysis of the corporate outsourcing behaviors in the United Kingdom, Denmark, Germany, Switzerland, Netherlands and Austria.
IT Sourcing Europe, a UK-based nearshore IT outsourcing (ITO) research and advisory company, has surveyed the key users of the outsourced software development in Western Europe between April and October 2010 and identified certain similarities and differences in their ITO engagement and management practices.
Regarding the most popular outsourcing destinations in 2010, the majority of the UK and Dutch companies (23% and 29% respectively) outsource their software/web development offshore (i.e. India, China, Philippines, Pakistan etc), while most of Danish (34%), German (37%), Swiss (41%) and Austrian (32%) companies transfer their development nearshore (i.e., Central and Eastern Europe and Baltic states).
Figure 1: Popular outsourcing destinations in 2010
Regarding the future outsourcing destinations, the equal number of the UK outsourcers (28% and 28% respectively) will place their software development function nearshore and offshore; the majority of Dutch companies will be sourcing nearshore (27%), while Danish, German, Swiss and Austrian companies will continue outsourcing nearshore (25%, 31%, 32% and 30% respectively).
Figure 2: Future ITO destinations
We have also identified the top three pressures driving Western European companies to adopt the outsourced development. According to the survey results, 58% of the UK companies outsource to reduce operating costs, accelerate time to market via flexibility and scalability and to free in-house resources for other business purposes; 57% of Dutch, 58% of Danish, and 82% of German companies outsource to reduce operating costs, accelerate time to market and due to difficulty finding appropriate IT resources within own country; 85% of Swiss and 76% of Austrian companies outsource to reduce operating costs, to get access to specific skills and resources which are hard to find within home countries and to respond to the pressure from investors/executive management to cut down their software development budgets.
Figure 3: Top Three pressures that drive companies to outsource their software development
An interesting finding was made with regards to the portion of the outsourced software development function: the UK appears to be the only country surveyed whose companies outsource up to 100% of their software development (30% of respondents). Most of German (37%) and Danish (25%) companies outsource between 60% and 89% of their software development, most of Austrian companies (28%) transfer between 40% and 59% of their software development to the 3d parties, while the majority of Dutch and Swiss companies (29% and 41% respectively) outsource only between 10% and 39% of their development volume. These figures generally reflect each surveyed country’s level of maturity to adopt / confidence in the outsourced software development.
Figure 4: The portion of the outsourced development by countries
Regarding the actual savings from the outsourced development, most of the UK (36%) and Danish (27%) companies save 40% to 59% of their operating costs, while majority of Swiss (35%), German (38%), Dutch (28%) and Austrian (31%) companies manage to save 10% to 24% from their outsourced development.
Figure 5: Actual savings from the outsourced development
More thought-provoking findings will be available in the European ITO Intelligence Report 2010 to be released in December 2010.
(Data courtesy of IT Sourcing Europe Limited. Any reprint requires a link to IT Sourcing Europe’s website )