UK IT Outsourcing Intelligence Report 2012

European IT Outsourcing Market IntelligenceEuropean ITOutsourcingIntelligence 2012Report: UnitedKingdomPrepared by IT Sourcing Europe Limited based on the results of the 3dAnnual UK IT Outsourcing vs In-House Software Development Research2012

European IT Outsourcing Intelligence Report: United Kingdom 2012CONTENTSEXECUTIVE SUMMARY ....................................................................................................................... 3ABOUT THE SURVEY .......................................................................................................................... 5RESPONDENT PROFILE ....................................................................................................................... 6UK IT OUTSOURCING 2012: DESTINATIONS, TRENDS, CHALLENGES, PROBLEM SOLVING ................... 9FUTURE UK IT OUTSOURCING: FORECASTS & EXPECTATIONS .......................................................... 19 IT Sourcing Europe 2012 | All Rights Reserved Page | 2

European IT Outsourcing Intelligence Report: United Kingdom 2012EXECUTIVE SUMMARYThis year we see an increased adoption of the outsourced IT / software development within the UKbusiness community and a deeper penetration of IT Outsourcing (ITO) into the financial servicesmarket and a B2C focused IT industry. A trend for smaller ITO deals continues to drag from 2011;however, in 2012 a prevailing majority of the outsourced projects fall into a mobile computingdomain. This comes pretty much in line with an extremely rapidly growing global mobile appsmarket and demands for mobile solutions. Cloudsourcing is being used more extensively this year,up 8 percent from 2011, while embedded development remains the least outsourced domain.In 2012 we see a higher number of UK companies that outsource their solutions to more than justone partner and the most popular destinations’ mix for multisourcing is onshore (within the UK),nearshore (within the same / up to 2 time zones away from the UK) and offshore (more than 2 timezones away). In general, nearshore remains the most popular ITO destination, followed by offshore.In 2012, the top three ITO drivers are reduction of operating costs, focus on core competences andnecessity to free in-house IT staff for other business tasks. The top three most decisive factors in thechoice of ITO destination among the UK companies are the available vast IT talent pool, proficientEnglish language skills and economic stability, while the top three factors in the choice of an ITOpartner are positive references from peers, realistic HR scalability and innovative and flexiblebusiness model.Poor communication between ITO buyers and providers is the number one challenge facingoutsourcing companies in the United Kingdom this year, followed by change management andinsufficient project management on vendor’s side.A majority of UK outsourcing companies say they greatly rely on peer references when searching forpotential ITO partners. On the other hand, just slightly more than 10 percent of companies polledadmitted finding their partner(s) via a publicly released RFP/RFI/RFQ.In 2012 more than 50 percent of the survey respondents say they outsource their IT / softwaredevelopment solutions via an Own Development Team model. The reason for this may underlie incurrent concerns about the poor client-vendor communication in most of ITO deals and the increasein face-to-face communication as the most frequently used problem solving practice.Regarding the economy of outsourcing, almost 45 percent of the survey respondents admit actuallypaying 25 percent more than expected in their contracts and save no more than 25 percent ofoperating costs. This does not prevent 50 percent of companies from having a positive opinion abouttheir ITO engagement(s). Nor does it prevent almost 80 percent of respondents from continuing tooutsource their innovative solutions in the next 12 to 24 months.Analyzing behavior patterns of companies that do not outsource their solutions and fulfill their IT /software development functions within own house, we can conclude that the top three drivers ofITIO decisions within the UK business community in the following months will be a slow time tomarket (TTM), high cost of domestic IT talent and a shortage of domestic IT resources. Fifty percentof companies developing their IT solutions in-house report plans to start outsourcing their IT /development this year. Asked where they would outsource their development if they made such a IT Sourcing Europe 2012 | All Rights Reserved Page | 3

European IT Outsourcing Intelligence Report: United Kingdom 2012decision in the future (hypothetically speaking), almost 60 percent answered with “nearshore” andonly less than 15 percent answered with “offshore”.Overall, the results of the UK ITO versus In-House Development Survey 2012 suggest that ITO is yetto be discovered by more small to mid-sized UK organisations in the near future and is here to stayfor a while.A more detailed analysis of the 2012 trends, challenges and behaviors as well as their comparison tothe last year’s practices will be presented in the 3d Annual Pan-European IT Outsourcing IntelligenceReport to be published in Q4 2012 after all of the major European ITO markets have been explored. IT Sourcing Europe 2012 | All Rights Reserved Page | 4

European IT Outsourcing Intelligence Report: United Kingdom 2012ABOUT THE SURVEYThe UK IT Outsourcing and In-House Software Development Survey 2012 was conducted betweenMarch 19 and May 3, 2012, in the frames of the 3d Annual All-European IT Outsourcing research.Survey goals:  Explore factors that drive UK-based companies to outsource their software development / IT function(s) onshore, nearshore and/or offshore  Identify key challenges of the outsourced and in-house software / web development  Benchmark the current and future demands for IT outsourcing services across diverse industries  Benchmark the current and future demands for IT resources within the UK  Find out which business model works best for the outsourced software development and why  Compare and contrast the actual incurred versus contracted costs of ITO services  Explore the current level of satisfaction with ITO service providers and quality of delivered software products/services  Explore factors keeping UK companies away from adopting IT Outsourcing  Explore the key challenges and problem solving best practices adopted by the UK companies that develop / manage their software solutions in-house.The survey was available online and hosted by SurveyMonkey, the world’s leading provider of web-based survey solutions. In order to reach as many UK companies as possible, IT Sourcing Europe usedits own database of business contacts and sent out a survey invitation email to each company’sdecision maker(s) (C-level executives, IT Managers, Directors, Heads of Software Development etc).Additionally, inbound marketing initiatives were launched in order to attract more companies toparticipate in the survey. In the frames of this initiative, the following steps were taken:  Online press releases and survey announcements distribution;  Survey localization and optimization in social media such as LinkedIn, XING, Facebook, Mobile Monday London, blogs ( Twitter, Word Press, IT Sourcing Europe’s Blog), event management systems (Amiando), and B2B web portals (Europages, Hoovers)Number of survey participants – 801 UK companies, of which 416 were IT / software developmentoutsourcing companies and 385 – companies developing their IT solutions within own house. IT Sourcing Europe 2012 | All Rights Reserved Page | 5

European IT Outsourcing Intelligence Report: United Kingdom 2012About IT Sourcing EuropeIT Sourcing Europe is a UK-based market intelligence company specialized in the European ITOutsourcing market research and consultancy.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.comRegistration at the UK Companies House: 07217899Follow Us:You are free to use, share and/or remix any part of this work as long as you attribute it to ITSourcing Europe.IT Sourcing Europe 2012 | All Rights Reserved Page | 22

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UK IT Outsourcing Intelligence Report 2012

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