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Cyprus IT Outsourcing Intelligence Report 2011

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This Intelligence Report is based on the survey of the 229 Cyprus-based companies that either outsource their Software Development / Information Technology function(s) to an external service provider …

This Intelligence Report is based on the survey of the 229 Cyprus-based companies that either outsource their Software Development / Information Technology function(s) to an external service provider onshore (within Cyprus), nearshore (within/close to the same time zone) and/or offshore (more than 2 time zones away), or develop their software/IT solutions in-house.

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  • 1. IT Sourcing EuropeEuropean IT Outsourcing European IT Outsourcing MarketIntelligence Report 2011: IntelligenceCyprus December 2011
  • 2. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKContents Executive Summary This Intelligence Report is based on the survey of the 229 Cyprus-basedContents .......................................................................................................... 2 companies that either outsource their Software Development / InformationExecutive Summary ......................................................................................... 2 Technology function(s) to an external service provider onshore (withinSurvey Overview ............................................................................................. 3 Cyprus), nearshore (within/close to the same time zone) and/or offshoreProfile of Outsourcers ..................................................................................... 4 (more than 2 time zones away), or develop their software/IT solutions in-IT Outsourcing Drivers & Factors ..................................................................... 8 house.IT Outsourcing Challenges & Problem Solving ............................................... 10Client – Vendor Relationships ....................................................................... 11 The Report aims to help Cyprus-based outsourcing companies:IT Outsourcing Costs...................................................................................... 13Impressions of IT Outsourcing ....................................................................... 15 Get an in-depth understanding of the current IT Outsourcing demandsTrends & Challenges of the In-House Software Development ...................... 16 and trendsFuture Adoption of IT Outsourcing Services in Cyprus .................................. 20 See what challenges are facing their market peers / competitors andKey Findings at a Glance ................................................................................ 22 how they respond to them Revise / improve their current IT Outsourcing engagements / businessConclusions and Predictions .......................................................................... 23 models based on the industry best practices The Report aims to help Cyprus-based non-outsourcing companies: Better understand modern software development/IT costs optimization and/or reduction strategies See what challenges are facing the in-house software development and how their market peers / competitors respond to them Evaluate own readiness to adopt the outsourced / distributed development Find out what their market peers think about software development /IT Outsourcing and how they are / will be preparing for adoption of the outsourced development in the future2|Copyright IT Sourcing Eur ope | 2011 | All Rights res erved
  • 3. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKSurvey Overview Additionally, inbound marketing initiatives were launched in order to attract more companies to participate in the survey. In the frames of this campaign,The Cyprus IT Outsourcing (ITO) and In-House Software Development (SD) the following steps were taken:survey was conducted between November 22 and December 5, 2011, in the Online press releases and survey announcements distribution;frames of the All-European ITO research 2011. Survey localization and optimization in social media such as LinkedIn, XING, Facebook, Twitter, Google Plus as well as in IT SourcingSurvey goals: Europe’s blog Explore factors that drive Cypriot companies to outsource their SD/IT All data obtained were analyzed in the form of industry aggregates. The functions in 2011 answers to the open-ended questions were organized by their relativity to Explore challenges associated with offshore/nearshore outsourcing the study goals and displayed as the option “all other responses” in charts and the most effective problem solving techniques and graphs further in the Report. Explore the use of different business models in ITO engagements and find out which model works best for what type of companies and Outsourcing Activity Surveyed: industries The following ‘outsourcing activity’ is referred to in the 2011 Cypriot ITO Explore factors that keep Cypriot companies away from outsourcing Report: their SD/IT function(s) Compare and contrast the 2011 and future ITO demands across Software Development / Information Technology Outsourcing (SD/ITO) is Cypriot industries the process of transferring part of/entire software development function and/or other Internet related work to the execution by the external ITThe survey was available online and hosted by SurveyMonkey, the world’s services provider(s)leading provider of web-based survey solutions. In order to reach as manyCyprus-based companies as possible, IT Sourcing Europe used its owndatabase of business contacts and sent out a survey invitation email to eachcompany’s decision maker(s) (C-level executives, IT / Outsourcing Managers,Directors, Heads of Software Development etc).3|Copyright IT Sourcing Eur ope | 2011 | All Rights res erved
  • 4. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKProfile of Outsourcers Do Companies Outsource Any Element of Their IT / Software Current Outsourcing Experience Development?4|Copyright IT Sourcing Eur ope | 2011 | All Rights res erved
  • 5. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK Company Size (Headcount) Primary Industry5|Copyright IT Sourcing Eur ope | 2011 | All Rights res erved
  • 6. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK Size of Project Teams on Vendor’s Side (Headcount) Value of the Outsourced Project(s) (€)6|Copyright IT Sourcing Eur ope | 2011 | All Rights res erved
  • 7. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK The Outsourced Areas of Expertise Do Companies Multi-Source?7|Copyright IT Sourcing Eur ope | 2011 | All Rights res erved
  • 8. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK IT Outsourcing Drivers & Factors Key IT Outsourcing Drivers Outsourcing Destinations8|Copyright IT Sourcing Eur ope | 2011 | All Rights res erved
  • 9. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK Factors’ Rating In Terms of Their Importance in the Choice of the Factors’ Rating In Terms of Their Importance in the Choice of the Outsourcing Destination Outsourcing Partner9|Copyright IT Sourcing Eur ope | 2011 | All Rights res erved
  • 10. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKIT Outsourcing Challenges & Problem SolvingKey Challenges of the Outsourced IT / Software Development Key Responses to the ITO Challenges10 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 11. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKClient – Vendor Relationships Vendor’s Size* How Companies Found Their ITO Vendor(s) *Respondents were asked to refer to their primary vendor in case of multisourcing11 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 12. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK Service Delivery Models Used In the Outsourcing Engagements Who Makes Final HR Decision / Selects Specialists To Be Involved In the Project?12 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 13. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK IT Outsourcing Costs Levels of Companies’ Satisfaction with Their Current Vendors and Quality of Services Provided Do Companies Know Exact Salaries of Their Project Team Members on Vendor’s Side? *Other: partially13 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 14. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK How Actual Annual Incurred Costs Compare to the Contracted Ones Actual Savings from the Outsourced IT / Development14 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 15. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKImpressions of IT Outsourcing15 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 16. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK Trends & Challenges of the In-House Software Development Do Companies Plan to Continue Outsourcing Their Projects In The Next 12 To 24 Months? How Non-Outsourcing Companies Fulfill Their IT / Development Tasks *Other: “we haven’t decided yet”16 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 17. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK Size of In-House IT Teams Part of Corporate Budget Spent on Software Development17 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 18. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK Level of Satisfaction with the In-House Development Key Challenges of the In-House Software Development18 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 19. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK How In-House Developers Respond To Challenges Reasons Keeping Companies Away From ITO19 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 20. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKFuture Adoption of IT Outsourcing Services in Cyprus Where Current Non-Outsourcers Would Transfer Their IT /Circumstances in Which Companies Would Consider Outsourcing IT / Development In the Future Development in the Next 12 To 24 Months20 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 21. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK Factors’ Importance In the Future Choice of the Outsourcing Factors’ Importance In the Future Choice of the Outsourcing Partner Destination21 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 22. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKKey Findings at a Glance This generally marks the pattern when companies tend to retain control of own projects and selectively review candidate profiles to make sure they really match project expectations and possess the appropriate skills level.Over the past years Cyprus has gained recognition as a true “tax heaven” fordoing business and has therefore attracted many international companies  More than 70% of Cyprus ITO buyers report general satisfaction withseeking substantial relief from domestic tax burdens and complicated their current vendors and overall quality of services providedregulations. In particular, international companies move their operations to  More than 80% of companies plan to continue with their outsourcedCyprus in order to enjoy the benefits of its double-tax treaties as well as development in the next 12 to 24 monthsother offshore jurisdictions such as a 10% tax rate, 15% VAT, confidentiality,  Nearly 30% of today’s non-outsourcing companies in Cyprus alreadywell established infrastructure etc. However, being a European Union consider outsourcing their development / IT function in the next 12member state (since 2004), Cyprus loses its cost advantage with regards to to 24 months, which suggests future expansion of the ITO buyers’in-house IT function management. The present survey demonstrates that poolhigh cost of domestic IT resources and personnel is the Number One barrier  More than 80% of companies multi-source, which generally marksin the way of successful in-house software development / IT (reported by companies’ willingness to stay independent from a single vendoralmost 70% of the survey respondents). Additionally, cumulative 33% of the engagement and back up their outsourced operations in case ofrespondents admitted scarce local IT resource pool and pressures from C- vendor’s failure to deliver on time, missing resources and/or unmetsuite / investors to lower down IT costs / reduce IT budgets. These and other deadlines. In addition, multisourcing allows companies to haveissues typical for the EU member states drive Cypriot companies to look different areas of their IT projects fulfilled by vendors with the bestbeyond local resources in search of cost effective IT solutions and access to expertise in each certain domain.innovation and diversification. As the survey shows, the prevailing majority of However, some negative trends have also been observed in the course of theCyprus companies source IT / software development resources nearshore or research. Among them are:multi-source nearshore, offshore and onshore.  Although a high number of companies report general satisfactionIn general, the survey allows identifying positive and negative trends in with their vendor’s service quality, the same high number ofbehaviors of Cypriot companies with regards to adoption of IT / software companies consider changing their current vendor(s) as a responsedevelopment outsourcing services. to their most critical challenges such as poor communication withThe positive trends observed are: vendor’s project management, vendor’s inability to understand their business goals, mismatch in contracted and actually incurred costs  More than 40% of Cyprus ITO buyers make final HR decisions / select and poor quality of project deliveries. IT specialists to be involved in their outsourced project fulfillment22 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 23. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKThe readiness to change ITO service providers witnesses of the following Conclusions and Predictionsscenario on today’s Cyprus ITO market: driven by global business trends fordiversification, differentiation and innovation, ITO buyers currently “raise the Based on the results of the Cyprus ITO and In-House Software Developmentbar” for their service providers and challenge them with more difficult and Survey, several obvious trends were identified:sophisticated tasks, both technology and HR growth related. However, asmost of ITO buyers partner with small service providers (less than 50 by  The majority of the Cypriot outsourcers are very small by headcountheadcount), they’re less likely to get a sufficient feedback and have their (less than 5)expectations met. As the practice shows, lots of small providers are only  Cyprus-based B2B focused IT companies have the greatest demandfocused on closing new deals and filling their pipelines by all means including for ITO services among other industries and verticalsprovision of incomplete / untruthful information in their RFP responses,  The prevailing majority of ITO projects fall under the webintentional overestimation of own project execution capabilities, low bidding development domain, require 1 to 5 IT specialists to complete and doetc and are unable to hire /retain highly qualified specialists due to their high not exceed € 49K in valuecost and career aspirations. As a result, they oftentimes fail to meet their  Multi-sourcing is an obvious trend of 2011clients’ increased technology demands, scale up project teams, ensure  Most of the Cyprus outsourcers transfer their development / ITproject’s sustainability etc. either nearshore alone or distribute them among multiple providers  More than 85% of Cyprus ITO buyers engage with their providers via nearshore, offshore and within Cyprus project-based models (fixed-price, T&M)  Reduction of operating costs is the core driver of corporate decisions to outsource in CyprusThis basically leads to the situations when the actual incurred costs are  Cypriot companies look for language skills availability, low costs andhigher than expected (up to 25% as well as 25% - 49%) and other issues such vast IT talent pool as far as ITO locales are concernedas poor product quality and poor managerial control. Also, the use of this  When choosing their ITO partners, Cypriot companies pay mostmodel does not allow ITO buyers to have predictable costs and plan their attention to current experience in similar projects and low servicelong-term use of outsourcing. As the survey shows, more than 70% of ratescompanies do not know exact salaries of each and every IT specialist on their  The key challenges of the outsourced IT / software development invendor’s team(s), meaning they are not aware of the difference between Cyprus are poor communication with vendor’s project managementwhat the vendor charges them and what it actually pays their employees. and executive teams and vendor’s inability to understand theirDue to the additional fees most of ITO buyers have to pay on top of the clients’ business objectivesofficial service fees, they only save 10% to 24% of operating costs from theirITO engagements.23 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 24. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UK  Key steps that Cypriot companies make to respond to their ITO Regarding the future outsourcing geography, it is not expected to alter much challenges are ITO partner change, extension of deadlines and from 2011: most of companies will still focus on onshore and nearshore dedication of additional managerial resources development, while only few will move offshore.  Most of ITO buyers in Cyprus find their ITO partners via own online research  Most of Cypriot companies manage to save 10% to 24% of operating costs from their ITO endeavors  Sharing their impressions of ITO, the majority of companies believe that outsourcing saves operating costs, but inevitably increases cost of managementOverall, it is expected that more Cyprus-based companies will outsourcetheir IT solutions in the following months. This conclusion is particularlybased on the following findings of the survey of non-outsourcing companies:  Nearly 43% of in-house development companies say they are not quite satisfied with the outcomes of their in-house development / IT  More than 66% of non-outsourcing companies complain about the high cost of domestic IT resources and personnel and more than 33% complain about the scarce local IT resource pool  Around 30% of companies already consider outsourcing as an option to leverage costs and access broader resource pools in the future  More than 80% of today’s in-house developers admit the high likelihood to adopt outsourcing in the next 12 to 24 months to accelerate time to market, while 100% of respondents admit their readiness to outsource in the near future to respond to pressures from investors and share risks24 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
  • 25. European IT Outsourcing Intelligence Report 2011: CyprusEuropean IT Outsourcing Intelligence Report 2011: The UKAbout IT Sourcing Europe Our Contacts:IT Sourcing Europe is a UK-based market intelligence company specialized inEuropean IT Outsourcing research and advisory. The Meridian, 4 Copthall House, Station Square Coventry, West Midlands,IT Sourcing Europe provides: CV1 2FL United Kingdom  Top quality quantitative and qualitative IT Outsourcing market Email: info(at)itsourcing-europe.com research and fieldwork services Tel.: +44(0)2476992505  Evaluation of Central and Eastern Europes IT Outsourcing services Web: www.itsourcing-europe.com providers and their factual capabilities to deliver innovative Blog: http://itsourcingeurope.wordpress.com technological solutions on time and on budget Facebook: http://www.facebook.com/pages/It-Sourcing-  Free consulting services for European companies planning to Europe/136082959822709 outsource IT / software development functions and / or change their current IT Outsourcing strategy / engagement Follow our tweets @ITSourcingEurop  Ad-Hoc IT Outsourcing strategy development and full-cycle support SlideShare: http://www.slideshare.net/itsourcingeuropeIT Sourcing Europe cooperates with several European ICT and Outsourcing Registration at the UK Companies House: 07217899organisations in terms of free analytics / information exchange. Amongst itsmajor information partners are Outsourcing Verband, Das OutsourcingJournal, Outsourcing Portal, NGI and others. You are free to use, share and/or remix any part of this work as long as you attribute it to IT Sourcing Europe.25 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d

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