IT Sourcing Europe highlights some of the key challenges facing outsourcing and in-house software development companies in the United Kingdom in 1Q 2011.

IT Sourcing Europe, a UK-based nearshore IT outsourcing (ITO) research and advisory company, has recently finished the UK ITO and In-House Software Development Survey 2011, conducted in the frames of the All-European research. The survey was conducted online in March – April 2011 and completed by the 729 UK companies of different sizes and industry sectors. The ratio of outsourcing to non-outsourcing companies participating in the survey was 46.9% to 53.1%.

According to the survey findings, more than 35% of the UK outsourcing companies say their greatest challenge is poor quality of the delivered products and/or services. Other most frequently cited challenges of the outsourced development are: poor communication with ITO vendor’s project management and/or project teams, cultural difference, delays in delivery / unmet project milestones, hidden agenda (when the actual incurred costs far exceed the contracted ones), change management and poor client-vendor communication. To respond to these challenges, 50% of the UK outsourcers increase face-to-face communication with their vendors, 42% dedicate more managerial resources and 22% of companies extend project deadlines, revise and update vendor management processes and consider changing their current ITO partner(s). Only 9% of the companies surveyed consider back-sourcing (i.e. bringing the outsourced operations back in-house).

Regarding the non-outsourcing companies, 46% point to the slow time-to-market, and 41% – to the shortage of domestic IT skills and resources as the greatest challenges of the in-house development. In addition, almost 40% of the survey respondents admit their in-house IT teams / departments have to solve a lot of other non-core issues, which makes a negative impact on their internal development outcomes, while more than 35% of companies report very high costs of domestic IT resources and personnel. To respond to their most critical challenges, 45% of the UK in-house development companies improve or change their software development methodology, more than 30% of companies extend project deadlines, and almost 20% of the UK non-outsourcers tend to change their current business model. Another 20% of companies do nothing to overcome their challenges.

More outsourcing and in-house development challenges will be highlighted in the UK IT Outsourcing Intelligence Report 2011 to be published in May 2011.

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