• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Swedish IT Outsourcing Intelligence Report 2010
 

Swedish IT Outsourcing Intelligence Report 2010

on

  • 1,664 views

The Report is based on the results of the All-European IT Sourcing & Software Development Best Practices Survey 2010.

The Report is based on the results of the All-European IT Sourcing & Software Development Best Practices Survey 2010.

Statistics

Views

Total Views
1,664
Views on SlideShare
1,664
Embed Views
0

Actions

Likes
0
Downloads
66
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Swedish IT Outsourcing Intelligence Report 2010 Swedish IT Outsourcing Intelligence Report 2010 Presentation Transcript

    • IT Sourcing European IT Outsourcing Europe Ltd Intelligence Report 2010. Part 2: trends and Nearshore IT Outsourcing challenges among Market Research & Consultancy Swedish outsourcing and non-outsourcing companies (reduced version) Coventry, West Midlands The United Kingdom 2010
    • 2 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swedish Outsourcing and Non-Outsourcing Companies Table of Contents I. Executive Summary p.3 II. Swedish IT Sourcing Survey 2010 p.4 II.I. Key Survey Findings p.4 II.II. Trends Analysis p.5 II.III. Findings Discussion p.6 III. Swedish Software Development Best Practices Survey 2010 p.7 III.I. Key Survey Findings p.7 III.II. Trends Analysis p.8 III.III. Findings Discussion p.8 IV. Conclusions and Recommendations p.9 Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
    • 3 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swedish Outsourcing and Non-Outsourcing Companies I. Executive Summary In summer 2010 IT Sourcing Europe initiated the Swedish IT Sourcing and In- House Software Development Survey as part of its ongoing All-European ITO The recent economic crisis has proven to be the major force driving Western Research 2010. We reached our vast network of Swedish business contacts and European and Nordic countries to look for ‘survival strategies’. Since in-house invited corporate IT decision makers to complete our online Survey and share software/web development, deployment and maintenance involve tremendous their outsourced software/web development experiences with a broader costs, more European companies have turned to IT Outsourcing (ITO) as a way business community both within and outside of Sweden. As a result, 148 to reduce operating costs. While being considered as the strategy most companies kindly responded to our invitation and filled out the online frequently adopted by large companies in the pre-crisis times, today’s ITO questionnaire. practices find more and more supporters among the mid-sized and small companies, for whom cost efficiency is as important as an opportunity to have Further on, in order to compare and contrast the outsourced software/web access to skills and services that can generally improve their online presence and development with the best practices of the in-house development and business performance. understand why some Swedish companies refuse to outsource their software project(s) to a 3d party nearshore, offshore or within Sweden, we have However, engagement in ITO relationships has proven to be the most impactful conducted another Survey of Swedish non-outsourcing companies. As a result, and culture-changing experience that does not always result in success. For 232 companies with no ITO experience completed the Survey and allowed us to some companies the outsourced software development can be a ruining rather assess the key factors keeping Swedish businesses away from the outsourced development. than an improving practice. It mainly happens because companies begin to adopt ITO as a reaction to short-term economic pressures and are not focused All participating companies comprise a survey sample representing all of the on the benefits they may gain in a longer-term perspective. Other reasons of the major vertical markets such as ICT and telecommunications, software failure of the ITO relationships include, but are not limited to the wrong choice development, travel and hospitality, banking and finance, insurance and of an Outsourcing destination, partnering with a wrong ITO services supplier, healthcare etc. underestimation of the outsourced project scope etc. However, as the global economies slowly stabilize, more European companies begin to realize the true value they can gain from the right ITO engagement and start transforming their business plans to source new avenues for generating revenue, and increase productivity and effectiveness of their Outsourcing endeavors. This is how the Western European and global ITO landscapes look like today. Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
    • 4 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swedish Outsourcing and Non-Outsourcing Companies Swedish IT Sourcing Survey 2010 Regarding the velue of the outsourced projects, 9% of Swedish outsourcers value their project(s) at EUR 0-49K; 53% - EUR 50-199K; 21% - EUR 200-499K and 17% - EUR 500K Of the 148 Swedish companies that completed our online questionnaire, 56% are small and more. and start-up (less than 50 employees), 31% are mid-sized (50 to 500 employees) and 13% are large in headcount (500+ employees). In 2010, 49% of the surveyed Swedish II.I. Key Survey Findings companies expect to earn EUR 1M to 49M in annual revenue; 33% of companies anticipate EUR 100M – 499M in annual revenue and 18% expect to gain less than EUR • In Swedish, the number of companies that outsource their 1M in annual revenue. software/web development nearshore is slightly bigger than the number of offshore outsourcers. Regarding the revenue growth, 43% of companies expect 1% - 9% growth, 24% - 10%- • The Top Three reasons why Swedish companies choose to outsource 19% growth and 33% - 50%+ revenue growth. their software/web development are: to reduce operating costs; to Fifty-one percent of the surveyed companies have more than 3 years of outsourced accelerate time to market and difficulty finding necessary resources software development experience, 22% have 1 to 3 years of experience and 27% have within home country. less than 12 months of ITO experience. • Web 2.0 and Enterprise 2.0 solutions remain the most outsourced ones among the Swedish companies. Twenty-seven percent of the Swedish surveyed companies currently outsource their software/web development nearshore (maximum 2 time zones away from home country), 25% outsource offshore (at least 3 time zones away from home country), 20% outsource within own country, 11% outsource offshore and within Sweden, 10% outsource nearshore and within Sweden and 7% outsource both offshore and More Survey Findings are Available in the Full Version nearshore. of the Report Seventy-nine percent of the surveyed companies outsource their software/web development to a single IT services provider, while 21% distribute their development among 2 and more providers. Sixty-five percent of respondents partner with small ITO providers (less than 50 in headcount), 30% partner with mid-sized (50 to 499 in headcount) and only 5% partner with large providers (500+ in headcount). The following percentage of Swedish companies that do staff augmentation (i.e. the process of hiring a dedicated team of additional staff to bring better efficiency in the work process) have the following number of team members on the outsourced software/web development teams: 12% - 1-3; 15% - 4-8; 31% - 9-10; 16% - 11-20; 10% - 21-30 and 16% - more than 30 team members. Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
    • 5 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swedish Outsourcing and Non-Outsourcing Companies II.II. Trends Analysis Most Swedish Companies Outsource Their Software/Web Development Function As a Whole! Cost Reduction Remains the Major Driver of the Decision to Outsource! Figure 3. Volume of the outsourced software development. Figure 1. Top Three Pressures that drive Swedish corporate decisions to outsource software/web development. less than 10% 10%-39% 40%-59% 60%-89% 90%-100% 2% 29% 31% 19% reduce operating costs 21% speed up time to market 18% 27% difficulty finding IT resources in Sweden 17% In-House Assessment Come First! The Biggest ITO Demand Comes From Web 2.0! Figure 2. Actions that Swedish companies take prior to signing an Outsourcing Figure 4. Most outsourced areas of expertise in the Swedish ITO. contract. Web 2.0 34% conduct in-house assessment of areas to 34% be outsourced Enterprise 2.0 29% asked for references 29% 20% Mobile hire a consultancy 19% Embedded Dev. 11% SaaS/Cloud 6% Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
    • 6 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swedish Outsourcing and Non-Outsourcing Companies Low Costs and Available Talent Pool Are the Key Drivers of the Choice of Prior to looking for the ITO partnerships, most of Swedish companies (34%) do in-house the Outsourcing Destination! assessment of the software development areas to be outsourced, 29% ask others for references, 19% hire a consultancy to assist with their ITO decisions, 11% hire or Figure 5. Key drivers of the choice of the Outsourcing destination. promote a manager to lead the outsourcing process, only 7% seek domestic low-cost software development vendors to offload their software/web development function to. Seventy-four percent of the surveyed Swedish companies outsource their software/web 21% development to a single ITO supplier of 1 to 200 or 500+ employees in size versus 26% low costs of those who distribute their outsourced software development among two and/or more providers. available IT talent pool 17% The research presents the following findings with regards to the outsourcing destination and vendor selection criteria among the Swedish companies: positive references 15% 1) To select an outsourcing destination, 21% of Swedish companies pay attention to low costs of software development and IT resources, 17% - available IT talent pool, 15% - positive references from the fellow companies/local business An In-Depth Trends Analysis is Available in the Full Version of community, 14% - geographical and cultural proximity and 9% - political and economic stability, 9% - strong R&D base and 15% - maturity of legal system and the Report Intellectual Property (IP) security. II.III. Findings Discussion 2) To select an ITO supplier, 31% of Swedish companies consider low rates, 21% - positive references and supplier’s reputation, 20% - specific skills (most of which The Swedish IT Sourcing Survey 2010 allows us to observe certain trends among the are hard to find within own country), 10% - successful pilot project completion and companies that outsource their software/web development function to a 3d party sound experience in similar projects, 7% - innovative business models, and 6% - either offshore or nearshore or within Sweden. Thus, cost reduction remains the key flexible contract terms. Such criteria as available level of quality certification (ISO, factor driving most of Swedish companies to adopt the outsourced development. Thirty- CMMI etc) and supplier presence in home country are considered to be primary in nine percent of companies admitted outsourcing their software development for the the choice of the ITO partner by 13% of Swedish companies. purpose of cost reduction. Other most cited factors include: acceleration of time to market (18%), difficulty finding necessary resources within Sweden (17%), freeing in- Overall, the Swedish clients challenge their ITO partners to be able to provide house resources for other business purposes (14%) and improvement of business transparent cost structures as well as a combination of speed, cost management and development strategy (12%). Additionally, 31% of respondents expect to get a better growth supported by business agility and unprecedented technological innovation. product quality from their outsourced development. Regarding current challenges facing the Swedish outsourcers, 31% pointed to delays in project delivery schedules / inability to meet the most crucial milestones; 19% - poor Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
    • 7 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swedish Outsourcing and Non-Outsourcing Companies project management from the vendor’s side and 17% - hidden costs/overheads 9% - 9-10 team members, 12% - 11-20 team members, 15% - 21-40 members and 9% - associated with their outsourced development. Additionally, 12% of companies cited more than 60 IT specialists. poor communication with the vendor’s project management/development teams, 12% - the lack of appropriate resources from vendor’s side, 9% - time/cultural difference, 5% We asked our survey participants whether they believe their software is being currently pointed to excessive vendor's bureaucracy and/or organizational hierarchy and 5% - developed at the highest possible quality level or not. As a result, 51% believe so, 37% of poor quality of the delivered product, insufficient IP security and vendor’s companies think there is room for improvement and 12% say it depends on the software inability/unwillingness to understand their business needs. project. Overall, 29% of the surveyed companies spend 20% to 49% of their corporate budgets More Thought-Provoking Findings are Discussed in the Full on software/web development, 22% - 10%-19%, 17% - 5%-9%, 18% - 50%+ and 14% - 0- Version of the Report 4%. II. Swedish Software Development Best Practices Survey 2010 III.I. Key Survey Findings Of the 232 Swedish non-outsourcing companies who completed our Software • The majority of the Swedish non-outsourcing companies do not think their Development Best Practices Survey, 44% are mid-sized (50 to 499 employees) small (less software/web is being developed at the highest possible quality level. than 50 employees), 40% are small and 16% are large (500+ employees). Fifty-six • Time it takes to complete a software development project, high cost of percent of companies expect EUR 1M-49M in annual revenue in 2010; 28% - less than development and implementation and software bugs/errors fixing are the Top EUR 1M, 7% - EUR 50-99M; 5% - EUR and 3% - EUR 500M and more. Three obstacles to successful in-house development in Sweden. • Most of the Swedish companies do not outsource, because they think that Eleven percent of companies anticipate 0% or less in annual revenue growth; 34% - 1%- Outsourcing and vendor management will eventually cost them more money, 9% growth; 34% - 10%-19% growth; 15% - 20%-49% growth and 5% - 50%+ in annual efforts and other “headaches”. revenue growth. • Most of the surveyed Swedish companies will start considering outsourcing Sixty-six percent of Swedish non-outsourcing companies develop, implement and their software/web development, if they can’t find required skills/resources maintain their software through internal IT departments, 16% - through freelance within home country. software/web developers, 13% - through local IT partners, and 5% purchase pre-built customizable applications instead of developing their own ones. Thirty-five percent of Swedish companies that develop software/web applications in- house have 1 to 3 IT specialists on their internal IT teams, 21% - 4 to 8 team members, Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
    • 8 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swedish Outsourcing and Non-Outsourcing Companies III.II. Trends Analysis Swedish Companies Do Not Outsource, Because They’re Afraid of High Costs and Slow Time To Market Are the Hugest Barriers To Hidden Costs! Successful In-House Software Development! Figure 17. Top Three reasons keeping Swedish companies away from the outsourced Figure 15. Top Three challenges of the in-house software development. software development. high cost of development 23% think that outsourcing will cost more 19% money and 'headaches' slow time to market 22% want to have 100% managerial control of 17% IT bugs/errors fixing 21% are satisfied with in-house SD 16% Methodology Improvement Is The Solution! An In-Depth Trends Analysis is Available in the Full Version of Figure 16. Top Three strategies that Swedish companies use to respond to challenges. the Report III.III. Findings Discussion improve SD methodology 42% The Swedish In-House Software / Web Development Survey 2010 allows us to observe certain trends, challenges and problem solving strategies among the Swedish companies that develop their software solutions internally and stay away from ITO. encourage staff to work overtime 20% Unlike their outsourcing fellow companies, the Swedish non-outsourcers do not view reduction of operating costs as the major driver of their possible future outsourcing implement distributed development 18% decision. Twenty-eight percent of the surveyed companies admitted the likelihood to outsource software/web development, if they can’t find appropriate IT resources/specific skills within Sweden; 22% of companies said they would outsource if they needed faster time to market via flexibility and scalability; 16% would outsource if Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
    • 9 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swedish Outsourcing and Non-Outsourcing Companies they had to free in-house resources for more critical business needs; 13% would III. Conclusions and Recommendations outsource to leverage operating costs, 10% would outsource if their revenues fall dramatically and they need to cut costs; and 6% - if they decide to launch 24/7 The Swedish IT Sourcing Research 2010 arrives at some important conclusions which operations. Only 5% of Swedish said they would never ever outsource their software help better understand current trends, challenges and problem solving techniques development function. related to the outsourced software/web development. The key findings are that in 2010 more small to mid-sized Swedish companies (including start-ups) start outsourcing their Just like the Swedish outsourcers, the non-outsourcers express willingness and readiness software development function to a 3d party either within own country, or nearshore, to outsource nearshore and/or within own country rather than offshore. Eighteen or offshore. Small companies prefer partnering with small ITO suppliers, while large percent of Swedish companies pointed to low costs of development and maintenance, companies partner with one or several large ITO suppliers. Cost reduction remains the 18% - to available IT resource pool and 16% - legal system and Intellectual Property (IP) major factor driving Swedish companies to outsource their software development. maturity as the major determinants of their future choice of the ITO destination. Other frequently cited factors are acceleration of time to market and a shortage of the Additionally, 15% of companies mentioned geographical and cultural proximity; 14% - local IT resources and specific skills needed to create state-of-the-art applications and political and economic stability; 13% - strong research and development base and 24% - drive the Swedish businesses to the higher levels of global maturity. Besides, the all of the above among the major factors influencing their future choice of the Swedish clients are looking for innovation, sustainability and flexibility in their outsourcing destination. outsourcing relationships. Regarding the future choice of the ITO supplier, 18% of Swedish non-outsourcers Currently, Swedish companies outsource mostly nearshore, and the number of pointed to vendor’s positive references and reputation, 12% - sound experience in the companies that transfer their software/web development offshore is significantly similar projects, 12% - successful pilot project completion, 11% - innovative business shrinking in 2010, compared to the past years. model; 10% - low service rates; 9% - level of quality certification (ISO, CMMI etc), 9% - specific skills which are hard to find in Sweden, 8% - flexible contract terms and 11% - all As seen from the survey of non-outsourcers, more Swedish companies who plan to of the above as the key factors likely to impact their future choice of the ITO partner. outsource their software/web development in the future, plan to locate their projects nearshore and/or nearshore and within Sweden. It supports the previous finding that More Thought-Provoking Findings are Discussed in the Full Nearshoring would be the destination of the future IT Outsourcing for most of today’s Version of the Report Swedish non-outsourcers. More Conclusions and Recommendations are Available in the Full Version of the Report Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
    • 10 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swedish Outsourcing and Non-Outsourcing Companies About IT Sourcing Europe IT Sourcing Europe Ltd is a UK-based research and consultancy company specializing in nearshore IT/software development Outsourcing. Our services include: • Independent IT Outsourcing market research and analysis • Independent surveys of Western European outsourcers and their ITO demand • Independent surveys of Central and Eastern Europe's ITO services providers and their factual capability to deliver top quality products and services on time and on budget • Consultancy and recommendations to companies planning to change their current outsourcing strategies • Consultancy and recommendations to companies planning to outsource their IT function nearshore • Custom market and competition research and surveys Our Contact Details: IT Sourcing Europe Ltd The Meridian, 4 Copthall House, Station Square, Coventry, West Midlands, CV1 2FL United Kingdom Email: info@itsourcing-europe.com Tel.: +44(0)2476992505 Web: www.itsourcing-europe.com Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.