Swiss IT Outsourcing Intelligence Report 2011

IT Sourcing EuropeEuropean IT Outsourcing Nearshore IT OutsourcingIntelligence Report 2011: Market Research & ConsultancySwitzerland May 2011

European IT Outsourcing Intelligence Report 2011: SwitzerlandContents Executive SummaryExecutive Summary .......................................................................................... 2 This Intelligence Report is based on the survey of the 603 Swiss companiesSurvey Overview ............................................................................................... 3 that either outsource their Software Development (SD) / InformationRespondents’ Profile ........................................................................................ 5 Technology (IT) function(s) to an external service provider onshore (within Switzerland), nearshore (within/close to the same time zone) and/or offshoreOutsourcing Behaviors ................................................................................... 11 (more than 2 time zones away), or develop their software/IT solutions in-Outsourcing Drivers & Factors ....................................................................... 14 house.Outsourcing Challenges & Solutions .............................................................. 17 The Report aims to help the Swiss outsourcing companies:Client – Vendor Relationships ........................................................................ 19 Get an in-depth understanding of the current Swiss IT Outsourcing (ITO)Outsourcing Costs........................................................................................... 22 demands and trends See what challenges are facing their market peers and how theySD/ITO Impressions ........................................................................................ 23 respond to themFuture Outsourcing Plans ............................................................................... 24 Revise / improve their current ITO engagements / business models based on the industry best practicesIn-House Software Development Trends & Challenges ................................. 25Key Findings’ Highlights .................................................................................. 33 The Report aims to help the Swiss non-outsourcing companies:Conclusions ..................................................................................................... 36 Better understand modern SD/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 SD/ITO and how they are / will be preparing for adoption of the outsourced development in the future2| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSSurvey Overview Online press releases and survey announcements distribution; Survey localization and optimization in social media such as LinkedIn,The Swiss ITO and In-House Software Development survey was conducted XING, Facebook, Mobile Monday London, blogs ( Twitter, Wordbetween March 14 and April 29, 2011, in the frames of the All-European ITO Press, IT Sourcing Europe’s Blog), event management systemsresearch. (Amiando), and B2B web portals (Europages, Hoovers) All data obtained were analyzed in the form of the industry aggregates. TheSurvey goals: answers to the open-ended questions were organized by their relativity toExplore factors that drive the Swiss companies to outsource their SD/IT the study goals and displayed as the option “all other responses” in chartsfunctions in 2011 and graphs further in the Report. Explore challenges associated with offshore/nearshore outsourcing Outsourcing Activity & Categories Surveyed: and the most effective problem solving techniques The following ‘outsourcing activity’ is referred to in the 2011 Swiss ITO Explore the use of different business models in ITO engagements and Report: find out which model works best for what type of companies and industries Software Development / Information Technology Outsourcing (SD/ITO) is Explore factors that keep the Swiss companies away from the process of transferring part of/entire software development function outsourcing their SD/IT function(s) and/or other Internet related work to the execution by the external IT Compare and contrast the 2011 and future ITO demands in services provider(s) Switzerland The following categories fall under this activity:The survey was available online and hosted by SurveyMonkey, the world’s Application (app) development and maintenance;leading provider of web-based survey solutions. In order to reach as manySwiss companies as possible, IT Sourcing Europe used its own database of Website / ecommerce systems;business contacts and sent out a survey invitation email to each company’s Data warehousing;decision maker(s) (C-level executives, IT Managers, Directors, Heads of IT security;Software Development etc). Data / voice network operations; Remote IT infrastructure managementAdditionally, inbound marketing initiatives were launched in order to attractmore companies to participate in the survey. In the frames of this initiative, These categories further fall under the five key areas of expertise:the following steps were taken:3|Copyright IT Sourcing Europe 2011 | All Rights Reserved

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSThese categories further fall under the five key areas of expertise: Key Takeaways From The Survey: Web (Web 2.0, .NET, Java, PHP, open source etc); In Switzerland, most of outsourcing companies are small by Enterprise 2.0 (J2EE, J2SE, C#, MySQL etc); headcount (less than 50) Mobile development (J2ME etc); The greatest demand for the outsourcing services comes from Embedded development; IT/software development sector, followed by professional and Software as a service (SaaS) and Cloud Computing financial services sectors The majority of non-outsourcing companies anticipate 1% to 9% revenue growth in 2011, while most of outsourcing companies expect to increase their annual revenue by 10% to 19% Most of the Swiss companies have been outsourcing their SD/IT for more than 37 months now Small- and large-value projects are outsourced in equal proportions in Switzerland A Fixed-Price Project model remains the most popular outsourcing model in Switzerland Nearshore is the most preferred outsourcing destination in Switzerland Web is the most outsourced area of expertise in Switzerland, followed by Enterprise development Top Three Drivers of ITO decisions in Switzerland are: reduction of operating costs, shortage of domestic IT skills and resources and focus on core competence Top Three Challenges facing Swiss outsourcers are: change management, cultural difference and poor communication with vendor’s project management4| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSRespondents’ ProfilePrimary Industry All Other Responses include: hospitality, tourism, and mobile computing5| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSRespondents’ ProfilePrimary Industry All Other Responses include: hospitality, tourism, and mobile computing6| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISS Company Size (Headcount) Do Companies Outsource Any Element of Their IT / SD Function?7| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSSize of Outsourcing Companies (Headcount)8| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSRatio of Outsourcing Companies perIndustry9| 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

European IT Outsourcing Intelligence Report 2011: Switzerland Revenue Growth Expectations in 2011: Non-Outsourcers vs. Outsourcers Non-Outsourcers Outsourcers10| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSOutsourcing Behaviors Overall Outsourcing Experience Size of Project Team(s) on Vendor’s Side11| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISS Value of the Outsourced Project(s) (In €) Outsourced Areas of Expertise12| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISS Business Models Used To Partner With ITO Provider(s) Do Companies Multisource?13| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISS Outsourcing Drivers & Factors Drivers of Decisions to Outsource IT/SD Current Outsourcing Destinations14| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSFactors’ Rating in Terms of TheirImportance in the Choice of theOutsourcing Destination15| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSFactors’ Rating in Terms of TheirImportance in the Choice of theOutsourcing Partner16| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSOutsourcing Challenges & SolutionsMain Challenges of the Outsourced SoftwareDevelopment17| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSHow Companies Respond to theirChallenges18| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSClient – Vendor RelationshipsHow Companies Found their ITOPartners19| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISS Size of the ITO Partner* Who Selects IT Specialists to Be Involved in the Project?*Companies with more than 1 partner referred to their major one20| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISS Do Companies Know Exact Salaries of Their Project Team Levels of Satisfaction with ITO Services Provided Members on the Vendor’s Side?21| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSOutsourcing Costs How Actual Annual Incurred Costs of SD/ITO Compare to the Actual Savings from the Outsourced SD/IT Expected (Contracted) Costs22| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The UKImpressions of Outsourcing outsourcing our software development has been the right decision outsourcing saves operating costs, but inevitably increases management costs costs are higher than expected overall, provider’s work is of higher quality compared to in-house capabilities it is important to have the suppliers team working within or close to the same time zone providers have more disciplined methodologies, which can lower costs further in a longer-term perspective it is critical to have backup providers available in case the primary provider is unable to meet deadlines and/or commitments providers are unreliable and not focused on mid- and long-term cooperation overall, provider’s work is of lower quality compared to in-house capabilities Our IP is at risk we are very dissatisfied with the decision to outsource our software development23 | 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSFuture Outsourcing Plans Do Companies Plan to Continue Outsourcing in the Future? Future Outsourcing Destination24| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSIn-House Software Development Trends & Challenges Part of Corporate Budget that the SWISS Companies Spend OnHow Swiss Companies Develop / Manage Their Software IT/SD25| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISS Level of Satisfaction with the In-House Development / IT Key Challenges of the In-House Software Development26| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSHow Companies Respondto their Challenges27| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSFactors Keeping the SWISS Companies Away From SD/ITO we want to have 100% managerial control of our software project(s) we are too small and immature to outsource were afraid that outsourcing will eventually cost us more money and ‘headaches’ than in-house development we think that the outsourced development will result in poorer software product quality we do not want to create any shared environments were totally satisfied with our in-house development results we dont want to put our intellectual property at risk we dont get any pressure to cut costs from customers/investors/executive management we had some negative experience with the outsourced development in the past28| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSCircumstances in Which CompaniesWould Consider Outsourcing TheirSD/IT in the Future29| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSWhere Companies Will Outsource IfThey Make Such a Decision in theFuture30| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSHow Companies Will Rate DestinationSelection Criteria If They Decide toOutsource in The Future31| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSHow Companies Will Rate ProviderSelection Criteria If They Decide toOutsource in The Future32| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSKey Findings’ Highlights In 2011, three most popular engagement models that the Swiss outsourcersThe 2011 Swiss IT Outsourcing and In-House Software Development Survey use to partner with their ITO providers are: a project –based model (fixedallows better understanding of the general profile and demographics of the price, time & material) – 48% of respondents, nearshore/offshoreoutsourcing companies in Switzerland. According to the survey findings, 51% development center - 40% of companies and Own/Dedicated/Managedof the outsourcing companies are less than 50 in headcount, 19% - 50-199, Team Model – 24% of all companies surveyed.almost 10% are mid-sized (200 to 999) and 19.5% are large (more than 1000 In 2011, the vast majority of companies in Switzerland outsource theirin headcount). projects to a single external services provider – 51.6%, which is down 20.4%The vast majority of the Swiss outsourcers come from IT/SD sectors (almost from 2010, while almost 48.4% of companies multisource (i.e. distribute the45%), followed by providers of professional services such as accounting, outsourced operations among 2 and/or more providers, usually theconsulting, legal etc (16%) and financial services (almost 14%). geographically dispersed ones), which is up 20.4% from 2010. This finding marks the evolving trend for multisourcing on the Swiss ITO market. This canMore outsourcing companies expect their annual revenue to increase by 10% be explained by the Swiss companies’ urge to secure their outsourced- 19% in 2011, compared to the companies developing their solutions in- operations and have backup providers available in case the primary one failshouse - 42% vs. 22.5%. Additionally, more outsourcers expect 20%-49% to deliver properly, on time and on budget. On the other hand, 50% of therevenue growth in 2011, compared to the in-house developers – 9% vs. 8%, Swiss outsourcers partner with ITO providers who are less than 50 people infewer outsourcers expect 0% or less in annual revenue growth– 4% vs. 10.5% size and are, therefore, unable to have sufficient expertise in several areas atand the equal number of companies anticipate to increase their revenue by the same time. This leads outsourcers to distribute projects among several50% and more – 8% in each segment. providers based on their available Center(s) of Excellence (e.g., the entire product development function is transferred to provider X, while QA andRegarding the value of the outsourced projects, the following trends are testing or customization is transferred to provider Y. Such dissemination alsoobserved in 2011, compared to 2010: the number of the €0-49K projects allows an additional external audit of the product(s) developed by providerdropped by 12.6%, the number of the €50-199K projects dropped by 21.4%, X). It is expected that in the years to come the number of multisourcers willthe number of the €200-499K projects dropped by 10.9% and the number of significantly exceed the number of singlesourcers both on the Swiss andthe €500K+ projects increased by 19.6%. This finding proves 2011 to be the global outsourcing markets.year of both small and large ITO contracts.33| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSIn 2011, web projects remain the most outsourced area of expertise (by 78% Regarding the highest rated criteria of the outsourcing partner selection inof companies, which is up 52% from 2010). Enterprise development is 2011, 65.5% of companies mention successful test/pilot project completion;outsourced by 29.6% of all outsourcers, which is up 4.6% from 2010. Mobile 59.8% of companies consider innovative and flexible business / serviceand embedded development projects are transferred by 18.5% each (down delivery models offered by vendor(s); and 58.6% consider vendor’s0.5% and up 1.5% from 2010), while SaaS and Cloud remain the least experience in the similar projects.outsourced areas (by 11.1% of companies, which is down 1.9% from 2010). This finding mirrors well the current situation on the global ITO market.In 2011, the outsourcing destinations of the Swiss companies have changed, Traditional outsourcing models such as fixed price projects, Build-Operate-compared to 2010: 51.4% of companies outsource nearshore (up 10% from Transfer (BOT) or Dedicated Development Center (DDC) prove to be unable2010), 20% - onshore, i.e. within Switzerland (up 9% from 2010), 17.1% - to meet today’s market demands for agility, scalability, speed of marketingnearshore and within Switzerland (up 7.1% from 2010), 11.4% - offshore time and predictable ITO costs. Therefore, more Swiss companies begin to(down 10.6% from 2010), another 11.4% - both nearshore and offshore (up realize the importance of having as much managerial control of their2.4% from 2010), 8.7% - both offshore and within Switzerland (up 1.7% from outsourced projects and resources as possible and use outsourcing as a long-2010) and 5.7% of the survey respondents outsource nearshore, offshore and term strategy to improve software/IT products’ quality and respondonshore (up 1.2% from 2010). proactively to pressing customers and rapidly changing market demands rather than just a short-term tactic to reduce costs. Thus, they tend toIn 2011, 63.3% of the Swiss companies outsource to reduce operating costs partner with those ITO service providers who are able to offer engagement(up 31.6% from 2010), 43.3% - to focus on their core competences (up 26.1% via innovative business models such as Client Own/Dedicated Team, Virtualfrom 2010), and another 43.3% - to find appropriate IT skills and resources Operating Subsidiary, SCRUM Team and other likewise models allowingoutside Switzerland where the qualified resources and specific skills are in a transparent pricing and no hidden agenda, access to the resources and skillsvery short supply (up 16.3% from 2010). The two other huge drivers of ITO that is not limited to a single geography, extensive knowledge sharingdecisions in Switzerland are necessity to free in-house resources for other beyond Service Level Agreements (SLAs) and easy / flexible contract exitbusiness purposes (mentioned by 36.7% of respondents) and necessity to terms.accelerate time-to-market (mentioned by 30% of respondents). In 2011, the top three challenges of the outsourced SD/IT in Switzerland are:In 2011, the Swiss companies consider the following three factors as the change management (44%), cultural difference (40%) and poormost important ones when choosing their outsourcing geographies: available communication with vendor’s project teams/management (36%). In contrast,IT talent pool (81% of respondents), appropriate English and German the top three challenges in 2010 were: delayed delivery of / missed projectlanguage skills (65.5%) and cultural proximity (48.3%). milestones, poor project management on vendor’s side and hidden agenda (when the actual incurred costs of ITO exceed the contracted ones).34| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSTo respond to their most critical challenges, 62% of Swiss outsources tend to home countries’ market rates) to their employees, the risk is high that theincrease face-to-face communication with their vendor’s project managers clients get insufficient and unqualified personnel involved in their outsourcedand execution teams (up 36% from 2010), 41.4% of companies dedicate projects. In addition, many small nearshore ITO vendors practice outsourcingmore managerial resources (up 20.4% from 2010) and 24.1% revise and some of their clients’ tasks to even lower-cost offshore destinations due toupdate their vendor management processes (up 13.1% from 2010). Only 10% the lack of domestic resources they have access to / financial inability toof companies choose to back-source (i.e. bring operations back in-house), outbid competitors’ staff / win the local headhunting. The mix of suchwhich is up 5% from 2010. circumstances inevitably leads to the situations when the ITO buyers are overcharged in order to cover new hires / employee replacement in case ofRegarding the actual annual incurred costs of ITO, 65.4% of companies say vendor’s staff turnover, “secret” re-outsourcing / outtasking practices as wellthey match the contracted costs (up 47.4% from 2010), 23.1% say they are as fixing product’s bugs and errors at the post-release stages due to vendor’sup to 25% higher than expected (up 1.9 from 2010), 11.5% say they are 25%- unqualified resources. These obstacles typically prevent most of the Swiss49% higher than expected (down 12.5% from 2010) and 3.8% point out that outsourcers to save more from their ITO engagements.their actual ITO costs are up to 25% lower than expected (down 7.2% from2010). In spite of the insignificant cost arbitrage achieved via the outsourced SD/IT and insufficient vendor management processes, the grand majority of theRegarding the actual savings from the outsourced SD/IT in 2011, 37% of the Swiss outsourcers – 48.1% - believe that outsourcing their IT/SD function(s)survey respondents admit saving less than 10% of their operating costs (up has been the right decision. In contrast, only 3.7% of companies regret27% from 2010), 22.2% save 10% to 24% (down 12.8% from 2010) and having made a decision to transfer their IT/SD to the external servicesanother 22.2% save 40%-59% (up 1.2% from 2010). In addition, 7.4% of provider(s).companies report saving 25% to 39% of operating costs (down 12.6% from2010) and 11.1% of companies save 60% and more, which is down 2.9% from2010.The fact that the vast majority of the Swiss outsourcers actually save lessthan 10% of costs with help of outsourcing can be attributed to the fact that50% of Swiss outsourcers partner with very small ITO service providers who,unlike their mid-sized and large peers, do not have an appropriate access tothe qualified IT workforce, do not invest enough in the training andprofessional advancement of their employees and do not have any bestpractice in effective staff retention. Also, since only very few small ITOproviders are able to afford to pay competitive salaries (in terms of their35| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISSConclusions • In 2011, a significantly bigger number of Swiss companies take part in / fully manage the hiring of IT specialists to be involved in the execution of their outsourced project(s), which generally hallmarksThe 2011 Swiss IT Outsourcing and In-House Software Development survey their urge to retain as much control of the outsourced project(s) asdemonstrates insignificant changes in the ways companies behave with possible.regards to the adoption / management of their outsourced development / IT • In general, Swiss outsourcers demonstrate rather high levels offunction(s). Overall, in 2011 outsourcing is reinforcing its position as a satisfaction with their outsourcing partners and think thatcommodity practice it has gained over the past [post-crisis] years, and the outsourcing their functions has been the right decision. As a result,majority of the Swiss companies continue to use it as a way to reduce the vast majority of companies plan to continue outsourcing theiroperating costs / lower down IT/SD budgets and get access to the lower cost IT/SD in the next 12 months.and better qualified IT resources outside Switzerland. The negative trends of the Swiss ITO market observed in the course of theThe positive trends of the Swiss ITO market observed in the course of the research are as follows:research are as follows: The prevailing majority of Swiss outsourcers manage to save less • • The outsourced development / IT function(s) obviously help Swiss than 10% of operating costs through the outsourced development. companies increase their annual revenue by allowing acceleration of This can be explained by the fact that most of Swiss companies the time-to-market and spending more on customer service engage with their external service providers via traditional models improvement and overall company growth such as project-based outsourcing and dedicated development • Many Swiss organisations aim to use outsourcing as a strategic cost centers that do not allow significant cost savings due to hidden saving and knowledge enhancement tool rather than a short-term agendas and high level of bureaucracy. Therefore, it is possible to tactic to lower down IT/SD budgets and respond to pressing resume that many Swiss outsourcers are still missing sufficient customers knowledge about the innovative business models such as Own Team • Compared to 2010, in 2011 more Swiss outsourcers realize the model and other likewise ones allowing elimination of overheads and importance of securing their outsourced operations and, therefore, transparent pricing structures. distribute development among two and more external service • Companies’ management and staff inability to properly interact with providers (usually the geographically dispersed ones) to reduce the their outsourcing vendors is the Number One challenge facing most risk of project failures of the outsourcing relationships. It means that many Swiss companies still do not plan their outsourcing strategies effectively and need to bring in outside assistance to help redesign corporate processes prior to outsourcing.36| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The SWISS • Outsourcing is still underused by the Swiss innovative lucrative niches such as digital media, gaming / iGambling and mobile computing which are dominated by high-tech startups who believe they are yet too small and immature to outsource. It proves once again that the Swiss companies do not have enough knowledge on the newest outsourcing engagement models that work perfectly well with their segments.Shortage of domestic IT resources is the second most frequently cited driverof corporate decisions to outsource IT/SD in Switzerland. Fifty percent oftoday’s non-outsourcers report the high likelihood of transferring IT /development to external services providers if they are not able to findappropriate resources within Switzerland in the near future. Based on thesefindings, it is possible to assume that outsourcing will be playing a greaterrole in the Swiss companies’ strategic business planning in the following yearsand outsourcing services providers will be forced to redesign their processesand delivery models as well as pricing structures to be able to satisfy the evergrowing demands of both well-established and mature and innovative start-up organizations for the outsourced project control retention, costeffectiveness, agility, speed, knowledge sharing, innovation and overallsustainability.37| 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

European IT Outsourcing Intelligence Report 2011: SwitzerlandEuropean IT Outsourcing Intelligence Report 2011: The UKAbout IT Sourcing EuropeIT Sourcing Europe is a UK company specialized in nearshore IT Outsourcing consultancy, market research and analysis.IT Sourcing Europe provides: • Top quality quantitative and qualitative ITO market research and fieldwork services • Evaluation of Central and Eastern Europes ITO services providers and their factual capabilities to deliver innovative technological solutions on time and on budget • Free consulting services for European companies planning to outsource IT / software development functions and / or change their current ITO strategy / engagement • Ad-Hoc ITO strategy development and full-cycle supportOur Contacts:The Meridian, 4 Copthall House, Station SquareCoventry, West Midlands,CV1 2FL United KingdomEmail: info(at)itsourcing-europe.comTel.: +44(0)2476992505Web: www.itsourcing-europe.comBlog: http://itsourcingeurope.wordpress.comFollow our tweets @ITSourcingEuropRegistration at the UK Companies House: 07217899You are free to use, share and/or remix any part of this work as long as you attribute it to IT Sourcing Europe.38 | 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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