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03 IDC SFIC 2009
- 1. “Madrid as yourIT sourcing location” Fernando Maldonado Program Manager IDC Spain This Presentation is based on IDC WP: Closer To Home: Could Spain be Your Preferred Sourcing Destination Source: IDC 2008 Sponsored by: AEC (Spanish Association of Consulting Firms) Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.
- 2. Agenda 1. A fewwords about IDC 2. The Spanish IT Services Market Overview 3. Why Nearshore? 4. Spain emerges as a credible Nearshore destination 5. Madrid unique value proposition © 2009 IDC Sep-09 2
- 3. IDC Overview IDCis the premier independent global market intelligence, events, and advisory firm for information technology, telecommunications, and consumer technology markets (ICT) More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries We have been delivering IT intelligence, industry analysis, market data, and strategic guidance since 1964 Our multilingual, multicultural workforce surveys over 250,000 technology users and decision makers annually, delivering unrivaled coverage IDC is a subsidiary of IDG, the world's leading technology media, research, and event company © 2009 IDC Sep-09 3
- 4. IDC’s Global Networkof Country Offices • 1000+ analysts providing a global information network • Coverage of 110 countries around the world • More than 44 years experience analyzing IT and Communications markets © 2009 IDC Sep-09 4
- 5. IDC’s Research Assetsare Distributed Around the World IDC’s 1000+ analysts are located in all regions around the world Latin America 10% North America Asia/Pacific 39% 26% 25% EMEA © 2009 IDC Sep-09 5
- 6. Agenda 1. A fewwords about IDC 2. The Spanish IT Services Market Overview 3. Why Nearshore? 4. Spain emerges as a credible Nearshore destination 5. Madrid unique value proposition © 2009 IDC Sep-09 6
- 7. The Spanish ITServices Market Overview (I) Highlights Spanish IT market is quite sensitive (Hw) to economic cycles Cyclical Spanish IT Services grow at a “regular” rate Stability Spanish IT services are winning weight Maturity Spanish IT market growth. Years 1996 - 2007 Spanish IT Segments weights. Years 1996 - 2007 70% 25% 65% 20% 60% 15% 55% 10% 50% 5% 45% 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 40% -5% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Hardware Software Services IT Hardware Software Services Source: IDC, 2008 Source: IDC, 2008 © 2009 IDC Sep-09 7
- 8. The Spanish ITServices Market Overview (II) Highlights Spanish IT market is wining gaining in WE IT market 5th IT market in WE. Spanish services market is growing faster than WE Growing Faster Spanish services market has more than doubled in 10 years Spanish IT market gaining share in WE. Years 1996 - 2007 Spanish services and total IT markets. Years 1996 - 2007 6,5% 30.000 25.000 20.000 Million € 5,5% 15.000 10.000 5.000 4,5% 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: IDC, 2008 Source: IDC, 2008 © 2009 IDC Sep-09 8
- 9. The Spanish ITServices Market Overview (III) Highlights Outsourcing represents more than 1/3 of the Spanish service market. IS outsourcing is the biggest outsourcing market while BPO grows at a high rate. Spanish Service market by Submarket. Year 2007 Spanish Outsourcing by type. Year 2007 100% 90% Application Management 80% 11% Hosted Application Management Network And Desktop Outsourcing 1% Services 70% 27% Hosted Infrastructure Services 6% 60% 50% 40% 30% 20% Key Horizontal Business IS Outsourcing Outsourcing 37% 18% 10% 0% 2007 Total Outsourcing Total Project Based Total Support & Training Support & Training Total Source: IDC, 2008 Source: IDC, 2008 © 2009 IDC Sep-09 9
- 10. Agenda 1. A fewwords about IDC 2. The Spanish IT Services Market Overview 3. Why Nearshore? 4. Spain emerges as a credible Nearshore destination 5. Madrid unique value proposition © 2009 IDC Sep-09 10
- 11. Setting the Stage. Newspending Priorities: Companies under dual pressure. – Lower cost of implementation – High level skill workers scarcity Off-Shoring as a means to alleviate pressures 1st wave off shoring: moving to India. – English speaking countries shore in India. – Application Management Competitive effect – Onshore providers dealing with new entrants Growing offshore demand – Moving beyond English speaking countries – More than Application Management Clients seek to reduce risk Push a reinvention of IT services – So global and India-centric vendors refine Global Delivery © 2009 IDC Sep-09 11
- 12. Understanding Global Delivery Integrating rich domain expertise, broad technical skills, and project management discipline across a network of low-cost locations through consistent and robust processes, tools, and infrastructure to maximize the timely delivery of superior IT and BPO solutions Highlights Yes, really is as complex as it sounds! No, it is not just about labour arbitrage anymore. © 2009 IDC Sep-09 12
- 13. Origin of ITServices Import to EMEA 2007 Highlights India EMEA import IT services over $6,129M 7.5 Billion $. India represents more than EMEA imported 80% of the imports. $7,758M in IT services from IDC estimates that in 2007 offshore companies India exports to EMEA grew in 2007 CEE for about 50% $248M An increasing number of companies were using in 2007 Off Shore service providers. ROW $335M China $76M Source: IDC, 2007 © 2009 IDC Sep-09 13
- 14. Why Nearshore? Cost (Focuson India) Rising attrition, wage inflation and skill shortages A victim of its own success, even in a recession Indian skills lose their shine and quality dips More work, higher churn, less seniority Customer issues challenge effective communication Language really and working culture Service quality suffers from poor communication Deals don’t reflect cultural issues Internal business stakeholders put up resistance © 2009 IDC Sep-09 14
- 15. Why Nearshore? Risk (FocusIndia) External risks External risks External risks compound internal risks Time zone • Lack of governance Vendor differences • Lack of management stability • Weak IT processes/outsourcing process maturity (requirements gathering, change Cultural and Country language management, specification writing, infrastructure differences testing/QA, SLAs, documentation) • Internal customers unprepared for the Management rigidity of the outsourcing relationship challenges • Improper project selection Governance • Unrealistic expectations • No recognition that vendors lack business Security knowledge Distance to vendor Source: IDC, 2009 © 2009 IDC Sep-09 15
- 16. Why Nearshore? Value Skilllevels and skill maturity European organizations evaluate, over all, a service provider by the quality of its people. Vertical experience European organizations expect deep industry experience in search of developing solutions that might provide competitive advantage. Transformational outsourcing More than just cost reduction now helping to transform the business. © 2009 IDC Sep-09 16
- 17. Choice of OffshoreLocation Highlights Easter europe is the overall preferred location. Other category includes geographies such Spain and North Africa. Nearshore locations close to 50% of preferred locations. European preferred Offshore destination 40% (% of respondents) 30% 20% 10% 0% Eastern Europe India China Other Note: N(2008)=381 Source: IDC's European Services Survey, 2008 © 2009 IDC Sep-09 17
- 18. European Firms SeekNearshore Skills Some countries are more mature than others Mature nearshore delivery hubs in Eastern Europe Russia rich in software development expertise Spanish industry expertise Many European service providers focused on Poland Pure plays have gone further East What counts in deciding a nearshore location Country stability; infrastructure quality, cultural affinity and the quality of local labour count What about Spain? © 2009 IDC Sep-09 18
- 19. Agenda 1. Few wordsabout IDC 2. The Spanish IT Services Market Overview 3. Why Nearshore? 4. Spain emerges as a credible Nearshore destination 5. Madrid unique value proposition © 2009 IDC Sep-09 19
- 20. Skills, Scale andLocation Underpin Spain’s Appeal • Addressing… … The IT Shortage challenge. Check out the ratios! … The value / cost trade off … The value of industry experience • EU Member Regulation (ie. Security concerns) • Potential to scale with Latin America Spain/Latin American delivery model offering skilled pool © 2009 IDC Sep-09 20
- 21. Addressing the ITSkill Shortage Challenge Number of graduates in sciences, math…Year 2007 Highlights Spain more than doubles Poland number of Science graduates. 70% under 45 Looking at the long term… A high percentage of Spanish graduates are under 45 years old. Source: Eurostat, 2009 © 2009 IDC Sep-09 21
- 22. Addressing the Value/Cost Trade-off Spanish IT labor cost. Year 2007 Highlights Denmark Sweden Spain has a lower cost than western Germany Europe… Norway … while remaining competitive with Netherlands eastern europe. Finland France Spain ranks in between Austria and Belgium Greece. United Kingdom Nordics have the most expensive Ireland human resources. Italy Austria Ireland and Italy are more expensive Spain than Spain. Greece Czech Republic Hungary Romania Poland 0 10.000 20.000 30.000 40.000 50.000 60.000 Experienced (5 - 9 year experience) Juniors (1 - 4 year experience) Source: IDC, 2009 © 2009 IDC Sep-09 22
- 23. The Value ofIndustry Experience Spanish Industry experience. Year 2007. Highlights Spain enjoys high level of experience O. Verticals in the main vertical sectors. Consultants with more than 3 years Telecom experience form the largest segments, followed by analyst and senior consultants Government Finance lead the way in experience at all levels: Analysts, consultants, etc. Utilities Telco and manufacturing surpass 10,000 skilled resources in Spain. Manufacturing Finance 0 5.000 10.000 15.000 20.000 25.000 Analysts (Finance) Consultant (+3 Years experience) Senior Consultant (+4 Years experience) Manager (+5 Years experience) Partner Source: IDC, 2009 © 2009 IDC Sep-09 23
- 24. Considering Spain 1. ValuedSkills in a low-risk environment at a competitive cost. 2. Ability to source the right skills for specific tasks from the preferred locations for commoditized projects. 3. Vertical expertise, length of experience in innovation in the market, and global best practices. 4. Investments by established service providers, attractiveness of IT sector (influences future availability of skills) 5. Common environment: similar practices, vertical maturity, EU regulations, etc. 6. Cultural affinity between Spain and the rest of Europe as opposition to the cultural issues raised by offshore projects. © 2009 IDC Sep-09 24
- 25. Agenda 1. Few wordsabout IDC 2. The Spanish IT Services Market Overview 3. Firms move nearshore to solve offshore issues 4. Spain emerges as a credible nearshore destination 5. Madrid unique value proposition. © 2009 IDC Sep-09 25
- 26. Madrid Region: Snapshot Madrid contribution to Spain through different variables. Year 2007 Highlights 25% Madrid contributed in 19,20% 20% 18,60% 2007 to the Spanish As percentage of Spain 15% population by 13,6% (6,2 13,60% Million) while its 10% contribution to the GDP was 18,6% (203.237 M€). 5% 1,60% Madrid counts with 14 0% universities and a number Size Population GDP Foreign population of graduates of 232,449 Madrid skill work force. Year 2007 250000 232449 (2007). While engineering students were 64,855 200000 which was about 17% of Spain. 150000 In 2007 95,785 people 95785 100000 were employed by the IT 64857 50000 sector in madrid. 35000 0 Graduates Under graduate Engeniering students IT employees Source: Madrid region statistics sector, Observatorio regional de inmigración, Secretaria general del consejo de coordinación universitaria. © 2009 IDC Sep-09 26
- 27. Check List WhenConsidering a Location Economic and Political Factors Resources Skill Factors • Political Commitment • Education Levels • Regulatory Environment • Language Proficiency • Intellectual Property Protection • Resource Availability • Economy • Work Culture Financial Factors • Compensation • Tax and Country-Specific Costs Check out the ratios! • Fixed Costs and Variable Costs IT industry Itself Infrastructure Factors • ICT Infrastructure Business and Regional Factors • Transportation • Location • Employee Acquisition and Dismissal • Market Experience • Real Estate © 2009 IDC Sep-09 27
- 28. Madrid Contribution toSpanish IT Market. Highlights Madrid is the biggest IT market inside Spain, it represented 39% in 2007. Madrid concentrates more than half of the Spanish external IT expenditure made by very large companies. Madrid Contribution to Spanish IT market Madrid Contribution to Spanish IT market by company size Year 2007. Year 2007. SMB Madrid 39% Large Enterprise Very Large Enterprise Resto de España 61% Consumer & Soho 0% 10% 20% 30% 40% 50% 60% Source: IDC, 2008 (España en Cifras) Source: IDC, 2008 (España en Cifras) © 2009 IDC Sep-09 28
- 29. Madrid Contribution toSpanish IT Market. Highlights Madrid gathers more than 50% of the IT expenditure made by 5 vertical markets Madrid contributes to more than 40% of the Spanish outsourcing market. Madrid Contribution to Spanish IT vertical markets Madrid Contribution to Spanish IT segment markets Year 2007. Year 2007 Utilities Workstations Transport Support Professional Services Infraestructure software Personal and other Servers Health Public Peripherics Other Financial Desktop Industrial processes Laptop Industrial discrete Outsourcing Education Networking Retail Distribution System Integration Wholesale Distribution Development tools Consumer and Soho Communication and Media Training Banking Consulting Insurer Applications Agriculture / Construction / Commodities Storage 0% 10% 20% 30% 40% 50% 60% 70% 0% 10% 20% 30% 40% 50% Source: IDC, 2009 (España en Cifras) Source: IDC, 2009 (España en Cifras) © 2009 IDC Sep-09 29
- 30. Considering Madrid • Valueadded specialised expertise Expertise centres in Madrid with technology and industry focus • Strong infrastructures reduces operating cost Communication infrastructure (ie Travelling cost reduction) • High rate of IT employment High percentage with more than 3 Years experience • Experience and collaboration with European and Latam peers Project management expertise and complex IT processes • Physical and cultural affinity Reduced hidden cost (ie Smoothing day-to-day relationship) Good balance of Risk – Value – Cost. © 2009 IDC Sep-09 30
- 31. Agenda 1. Few wordsabout IDC 2. The Spanish IT Services Market Overview 3. Firms move nearshore to solve offshore issues 4. Spain emerges as a credible nearshore destination 5. Madrid unique value proposition. 6. Key take away © 2009 IDC Sep-09 31
- 32. Key take away Global delivery is used in most large 1 outsourcing deals 2 European firms need Nearshore options Spain offers a credible Nearshore 3 destination Madrid have shown a good balance: 4 Cost / Risk / Value © 2009 IDC Sep-09 32
- 33. Thank You! Fernando Maldonado IDC fmaldonado@idc.com Plaza Colón 2 Program Manager 28046 Madrid www.idc.com www.idc.com/spain © 2009 IDC Sep-09 33