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IT Sourcing
European IT Outsourcing     Europe Ltd
Intelligence Report
2010.
Part 2: trends and
                          ...
Table of Contents

I.        Executive Summary                                  p.3

II.       Swiss IT Sourcing Survey 20...
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                                                                 European IT Outsourcing Intelligence Report. Part 2: Tr...
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                                                               European IT Outsourcing Intelligence Report. Part 2: Tren...
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                                                                  European IT Outsourcing Intelligence Report. Part 2: T...
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                                                                European IT Outsourcing Intelligence Report. Part 2: Tre...
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Swiss IT Outsourcing Intelligence Reprot 2010

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

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Transcript of "Swiss IT Outsourcing Intelligence Reprot 2010"

  1. 1. IT Sourcing European IT Outsourcing Europe Ltd Intelligence Report 2010. Part 2: trends and Nearshore IT Outsourcing challenges among Swiss Market Research & Consultancy outsourcing and non- outsourcing companies (reduced version) Coventry, West Midlands The United Kingdom 2010
  2. 2. Table of Contents I. Executive Summary p.3 II. Swiss IT Sourcing Survey 2010 p.4 II.I. Key Survey Findings p.4 II.II. Trends Analysis p.4 II.III. Findings Discussion p.6 III. Swiss Software Development Best Practices Survey p.7 2010 III.I. Key Survey Findings p.7 III.II. Trends Analysis p.7 III.III. Findings Discussion p.8 IV. Conclusions and Recommendations p.9
  3. 3. 3 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swiss Outsourcing and Non-Outsourcing Companies I. Executive Summary In summer 2010 IT Sourcing Europe initiated the Swiss IT Sourcing and In-House Software Development Survey as part of its ongoing All-European ITO Research The recent economic crisis has proven to be the major force driving Western 2010. We reached our vast network of Swiss business contacts and invited European and Nordic countries to look for ‘survival strategies’. Since in-house corporate IT decision makers to complete our online Survey and share their software/web development, deployment and maintenance involve tremendous outsourced software/web development experiences with a broader business costs, more European companies have turned to IT Outsourcing (ITO) as a way community both within and outside of Switzerland. As a result, 112 companies to reduce operating costs. While being considered as the strategy most kindly responded to our invitation and filled out the online questionnaire. frequently adopted by large companies in the pre-crisis times, today’s ITO practices find more and more supporters among the mid-sized and small Further on, in order to compare and contrast the outsourced software/web development with the best practices of the in-house development and companies, for whom cost efficiency is as important as an opportunity to have understand why some Swiss companies refuse to outsource their software access to skills and services that can generally improve their online presence and project(s) to a 3d party nearshore, offshore or within own country, we have business performance. conducted another Survey of Swiss non-outsourcing companies. As a result, 136 companies with no ITO experience completed the Survey and allowed us to However, engagement in ITO relationships has proven to be the most impactful assess the key factors keeping Swiss businesses away from the outsourced and culture-changing experience that does not always result in success. For development. some companies the outsourced software development can be a ruining rather 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 on the benefits they may gain in a longer-term perspective. Other reasons of the failure of the ITO relationships include, but are not limited to the wrong choice of an Outsourcing destination, partnering with a wrong ITO services supplier, 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. 4. 4 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swiss Outsourcing and Non-Outsourcing Companies II. Swiss IT Sourcing Survey 2010 The values of the outsourced software/web projects make 17% - EUR 0-49K; 51% - EUR make: 50-199K; 22% - EUR 200-499K and 10% - EUR 500K and more. Of the 112 Swiss companies who kindly agreed to complete our online questionnaire, 72% are small (less than 50 employees), 19% are mid-sized (50 to 500 employees) and II.I. Key Survey Findings 9% are large in headcount (500+ employees). In 2010, 42% of the surveyed Swiss % companies expect to gain EUR 1M to 49M in annual revenue; 51% expect to have % revenue less than EUR 1M and 7% of companies anticipate EUR 100M – 499M annual revenue. Available in the Full Version of the Report Regarding the revenue growth, 47% of companies expect 1% - 9% growth, 39% - 10%- 19% growth and only 14% of Swiss companies report expecting 50%+ re revenue growth. Thirty-nine percent of the surveyed companies have more than 3 years of general II.II. Trends Analysis software development outsourcing experience, 49% have 1 to 3 years of experience and e 12% have less than 12 months of ITO experience. Cost Reduction Remains the Major Driver of the Decision to Outsource Outsource! Forty-one percent of the Swiss participant companies currently outsource their Figure 1. Top Three Pressures that drive corporate decisions to outsource software/web development nearshore (maximum 2 time zones away from home maximum software/web development. country), 22% outsource offshore (at least 3 time zones away from home country), 11% at outsource within own country, 10% outsource nearshore and within Switzerland, 9% outsource both nearshore and offshore and 7% outsource offshore and within own country. 32% reduce operating costs Seventy-two percent of the surveyed Swiss companies outsource their software/web development to a single IT services provider, while 28% distribute their development % difficulty finding IT resources in 27% among 2 and more providers. Sixty-two percent of respondents partner with small ITO Switzerland providers (less than 50 in headcount), 21% partner with mid-sized (50 to 499 in sized headcount) and only 17% partner with large providers (500+ in headcount). 0+ pressure from investors/executives 26% The following percentage of Swiss companies that do staff augmentation (i.e. t 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: 27% - 1-3; 28% - 4-8; 11% - 9- -10; 11% - 11-20; 6% - 21-30 and 17% - more than 30 team members. Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
  5. 5. 5 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swiss Outsourcing and Non-Outsourcing Companies Positive References Come First! The Biggest ITO Demand Comes From Web 2.0 and Enterprise 2.0! rom Figure 2. Actions that Swiss companies take prior to signing an Outsourcing contract. Figure 4. Most outsourced areas of expertise in the Swiss ITO. Web 2.0 26% ask others for references 29% Enterprise 2.0 25% conduct in-house assessment of areas 27% to be outsourced Mobile 19% hire a consultancy 21% Embedded Dev. 17% SaaS/Cloud 13% Low Costs and Available Talent Pool Are the Key Drivers of the Choice of Most Swiss Companies Outsource No More Than 40% of Their the Outsourcing Destination! Software/Web Projects! Figure 5. Key drivers of the choice of the Outsourcing destination. Figure 3. Volume of the outsourced software development. 11% 11% low costs 29% less than 10% 14% 10%-39% available IT talent pool 27% 41% 40%-59% 23% 60%-89% geographical/cultural proximity 19% 90%-100% Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
  6. 6. 6 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swiss Outsourcing and Non-Outsourcing Companies and cultural proximity. Factors such as positive references, political and economical stability, maturity of legal system and Intellectual Property (IP) security and strong A More Detailed Trends Analysis is Available in the Full R&D base are considered to be less important by most of the Swiss companies in their choice of the outsourcing destination. Version of the Report 2) To select an ITO supplier, the Swiss companies consider positive references and supplier’s reputation, sound experience in similar projects, innovative business models and specific skills (most of which are hard to find within own country) and II.III. Findings Discussion successful pilot project completion in the first priority. The focus on the innovative The Swiss IT Sourcing Survey 2010 allows us to observe certain trends among the business models demonstrates the willingness of the Swiss companies to get more companies that outsource their software/web development function to a 3d party flexibility, sustainability and managerial control through their ITO engagement. either offshore or nearshore or within Switzerland. Thus, cost reduction remains the key Such criteria as available level of quality certification (ISO, CMMI etc) and supplier factor driving most of Swiss companies to adopt the outsourced development. Other presence in home country are less important for the Swiss companies’ choice of most cited factors include: difficulty finding necessary resources within Switzerland, their outsourcing partner. pressure from investors / executive management to cut operating costs, acceleration of Overall, the Swiss clients challenge their ITO partners to be able to provide time to market, freeing in-house resources for other business purposes and transparent cost structures as well as a combination of speed, cost management improvement of business development strategy. and growth supported by business agility and unprecedented technological Prior to looking for the ITO partnerships, most of Swiss companies (77%) ask others for innovation. references, do in-house assessment of the IT areas to be outsourced and hire a Regarding current challenges facing the Swiss outsourcers, 75% pointed to: delays in consultancy to assist with the outsourcing process. A somewhat smaller fraction of the project delivery schedules / inability to meet the most crucial milestones, poor sample (23%) reported hiring and/or promoting a manager to lead the outsourcing project management from the vendor’s side and unexpected overheads. Twenty process and seeking domestic low-cost IT services providers to offload their percent pointed to: poor communication with the vendor’s project software/web development function to. management/development teams, time/cultural difference, the lack of appropriate Most Swiss companies outsource their software/web development to a single ITO resources from vendor’s side and excessive vendor's bureaucracy and/or supplier of 1 to 200 or 500+ employees in size. Analysis of the survey responses suggests organizational hierarchy. Five percent of Swiss companies cited the following critical that the bigger the company, the bigger supplier it tends to partner with, and vice versa. challenges: poor quality of the delivered product, insufficient IP security and vendor’s inability/unwillingness to understand their business needs. The research presents the following findings with regards to the outsourcing destination and vendor selection criteria among the Swiss companies: 1) To select an outsourcing destination, companies pay attention to low costs of An In-Depth Findings Discussion is Available in the Full software development and IT resources, available IT talent pool, and geographical Version of the Report Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
  7. 7. 7 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swiss Outsourcing and Non-Outsourcing Companies III. Swiss Software Development Best Practices Survey III.II. Trends Analysis 2010 Of the 136 Swiss non-outsourcing companies who completed our Softw Software More than 50% of Swiss Corporate Budgets Go To Software Development Best Practices Survey, 62% are small (less than 50 employees) 31% are % employees), Development! mid-sized (50 to 499 employees) and 7% are large (500+ employees). Thirty-nine percent 500+ of companies expect EUR 1M-49M and 22% expect less than EUR 1M in annual revenue % Figure 15. Portions of corporate IT budgets that go to software development. in 2010. Only 4% of Swiss companies expect more than EUR 500M in annual revenue. nies Forty-two percent of companies anticipate 10%-19%, 33% - 1%-9% and 27 – 20%-49% 9% 0%-4% 5%-9% 10%-19% 10% 20%-49% 50%+ revenue growth for 2010. Only 9% of Swiss non-outsourcers expect annual revenue of outsourcers 0% or less in 2010. 4% 12% Fifty-eight percent of Swiss non-outsourcing companies develop, implement and 31% maintain their software through internal IT departments, 21% - through local IT 26% partners, 15% - through freelance software/web developers and 6% purchase pre-built 27% customizable applications instead of developing their own ones. Fifty-two percent of Swiss companies that develop software/web applications in in-house have 1 to 3 IT specialists on their internal IT teams, 27% - 4 to 8 team members 12% - members, 11-20 team members and 9% have more than 60 staff members in their IT departments. rs Slow Time To Market and High Costs Are the Hugest Barriers To We asked our survey participants whether they believe their software is being currently Successful In-House Software Development House Development! developed at the highest possible quality level or not. As a result, only 19% believe so ty versus 81% of those who think their software leaves much to be desired. % Figure 16. The top three challenges of the in in-house software development. III.I. Key Survey Findings slow time to market 31% high cost of development 30% Available in the Full Version of the Report ersion scarce local IT resources 26% Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
  8. 8. 8 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swiss Outsourcing and Non-Outsourcing Companies Methodology Improvement Is The Solution! house resources for more critical business needs 5% would outsource if their revenues needs; fall dramatically and they need to cut costs; 9% - if they decide to launch 24/7 Figure 17. Top 3 strategies that Swiss companies use to respond to challenges challenges. operations and 6% said they would never consider outsourcing their software development function. Just like the Swiss outsourcers, the non-outsourcers express willingness and readiness to outsourcers outsource nearshore and/or within own country rather than offshore. Thirty-nine improve SD methodology 31% percent of Swiss companies pointed to available IT resource pool as the major determinant of their choice of the ITO destin destination; 21% pointed to low costs of 27% development and maintenance and 21% - to geographical and/or cultural proximity. hire foreign IT specialists Additionally, 8% mentioned legal and Intellectual Property protection maturity, 6% - strong research and development base and 6% - political and economical stability as the encourage staff to work overtime 25% key factor likely to impact their future choice of the ITO destination. Regarding the possible future choice of the ITO supplier, 29% of Swiss non-outsourcers pointed to positive references and reputation, 21% - innovative business model, 18% - specific skills, 14% - low prices, 10% - sound experience in the similar projects, 4% - level A More Detailed Trends Analysis is Available in the Full etailed of quality certification (ISO, CMMI etc) and 4% - flexible contract terms as the key factor likely to impact their future choice of the ITO partner. Version of the Report According to our Research, the major challenges of the successful inin-house software development among the Swiss companies are: slow time to market (31% of respondents), high costs of software development, implementation and maintenance III.III. Findings Discussion (30%), scarce local IT resources (26%), extra costs associated with the software bug/error fixing (10%), and staff turnover (3%) (3%). The Swiss In-House Software / Web Development Survey 2010 allows us to obobserve certain trends among the Swiss companies that develop their software solutions internally and stay away from ITO. Unlike their outsourcing fellow companies, the Swiss non-outsourcers do not view outsourcers An In-Depth Findings Discussion is Available in the Full Depth reduction of operating costs as the major driver of their possible future outsourcing Version of the Report decision. Most companies (31%) admitted the likelihood to outsource software/web development, if they can’t find appropriate IT resources/specific skills within Switzerland. Further, 28% of companies said they would outsource if they needed faster time to market via flexibility and scalability; 21% would outsource if they had to free in lity in- Copyright IT Sourcing Europe Ltd. 2010. All Rights Reserved.
  9. 9. 9 European IT Outsourcing Intelligence Report. Part 2: Trends & Challenges Among Swiss Outsourcing and Non-Outsourcing Companies IV. Conclusions and Recommendations About IT Sourcing Europe The Swiss IT Sourcing Research 2010 arrives at some important conclusions which help IT Sourcing Europe Ltd is a UK-based research and consultancy company better understand current trends, challenges and problem solving techniques related to specializing in nearshore IT/software development Outsourcing. Our services the outsourced software/web development. The key findings are that in 2010 more include: small to mid-sized Swiss companies start outsourcing their software development function to a 3d party either within own country, or nearshore, or offshore. Small companies prefer partnering with small ITO suppliers, while large companies partner • Independent IT Outsourcing market research and analysis with one or several large ITO suppliers. Unlike other European countries, in Switzerland • Independent surveys of Western European outsourcers and their cost reduction is not the major factor driving companies to outsource their software ITO demand development. The major factor is shortage of the local IT resources and specific skills • Independent surveys of Central and Eastern Europe's ITO services needed to create state-of-the-art applications and drive the Swiss businesses to the providers and their factual capability to deliver top quality higher levels of global maturity. Besides, the Swiss clients are looking for innovation, products and services on time and on budget faster time to market and flexibility in their outsourcing relationships. • Consultancy and recommendations to companies planning to change their current outsourcing strategies Currently, Swiss companies outsource mostly nearshore and within own country, and • Consultancy and recommendations to companies planning to the number of companies that transfer their software/web development offshore is outsource their IT function nearshore significantly shrinking in 2010, compared to the past years. • Custom market and competition research and surveys Our Contact Details: More Conclusions and Recommendations are Available in the IT Sourcing Europe Ltd Full Version of the Report 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.
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