IT Sourcing Europe provides a comparative analysis of the major challenges facing software development outsourcing companies in the United Kingdom, 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 most critical challenges preventing them from gaining the maximum value from their ITO engagements.
According to the country-specific surveys’ results, 34% of the UK, 63% of the German, 27% of the Dutch, 47% of the Swiss and 31% of the Austrian software development outsourcers point to delayed delivery/missed project milestones and poor communication with their vendors as the main challenges of their ITO engagements. Additionally, 10% of the UK and 10% of the Dutch outsourcing companies claim that time and cultural difference is a huge barrier in the way of successful adoption of the outsourced software development (See Fig. 1). Overall, 73% of the surveyed companies (from all countries polled) pointing to the above challenges are offshore outsourcers (i.e. companies that outsource their software development more than 2 time zones away from the home country), 19% are nearshore outsourcers (i.e. companies that outsource their software development maximum 2 time zones away from the home country) and 8% are companies that outsource within own country and/or use distributed development (e.g., in-house development plus freelancers or domestic low-cost providers).
Figure 1: Major challenges of the outsourced software development by countries surveyed
To respond to these challenges, most of the UK companies (22%) dedicate more managerial resources, while 25% of the Dutch, 26% of the Swiss and 31% of the Austrian outsourcers increase face-to-face communication by increasing the frequency of vendor’s visits and/or placing own project manager on vendor’s site. Unlike these countries, most of the German software development outsourcers (31%) choose to terminate their current ITO contracts and consider new partnerships. Only 7% of the UK, 5% of the Swiss, 8% of the Dutch, 1% of the German and 6% of the Austrian companies surveyed cancel their ITO strategies and back-source their software development back to house (See Fig. 2).
Another outsourced software development challenge frequently cited by the German, Swiss and Austrian companies polled is that the actual annual incurred costs of outsourcing far exceed the contracted ones. This challenge was actually cited by 19% of the German, 19% of the Swiss and 22% of the Austrian outsourcers (See Fig. 1). Regarding the UK and Netherlands, this challenge was mentioned, too, but not among the top three challenges.
Figure 2: Actions companies take to respond to the most critical challenges (by countries surveyed)
Overall, nearshore outsourcers participating in IT Sourcing Europe’s IT Outsourcing research 2010 appear to have fewer challenges compared to the offshore outsourcers.
More interesting 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)