European IT Outsourcing Intelligence Report: Denmark

Transcription

1 European IT Outsourcing Market Intelligence European IT Outsourcing Intelligence Report: Denmark 2012 Prepared by IT Sourcing Europe Limited based on the results of the 3d Annual Danish IT Outsourcing versus In-House Software Development Research 2012

2 CONTENTS EXECUTIVE SUMMARY... 3 ABOUT THE SURVEY... 6 RESPONDENT PROFILE... 7 DANISH IT OUTSOURCING 2012: DESTINATIONS, TRENDS, CHALLENGES, PROBLEM SOLVING FUTURE DANISH IT OUTSOURCING: FORECASTS & EXPECTATIONS IT Sourcing Europe 2012 All Rights Reserved Page 2

3 EXECUTIVE SUMMARY The myth that outsourcing can only be effective and beneficial for large companies has finally been dispelled in Denmark this year, with cumulative 21% of all IT outsourcing (ITO) buyers being less than 100 people and only less than 5% of companies being more than 1,000 people in size (up 5% and down 14% from 2011 respectively). B2B focused IT services companies continue to be the biggest outsourcing cluster in Denmark, followed by B2C focused IT / software companies and digital media companies. Regarding the latter, in 2012 the number of digital media houses that outsource their software development to a 3d party has more than doubled, compared to The lowest demand for ITO services comes from companies working in education and financial services areas. Around 55% of all ITO buyers in Denmark surveyed said they had begun outsourcing their IT / software development function more than 37 months ago and only less than 4% of companies admitted having begun outsourcing less than 12 months ago. It comes pretty much in line with the last year s research findings and suggests outsourcing to have become a common and a wellestablished practice within a Danish business community. Most of today s ITO projects require only 1-2 augmented IT specialists to complete (less than 40%) and are valued at 0-49K. Web projects continue to be the most outsourced ones (up 3% from 2011), followed by mobile projects (up 9% from 2011) and enterprise development projects (up 1% from 2011). The number of embedded development projects dropped by 3% this year, compared to 2011, while the number of cloud projects stays the same as in This year multisourcing patterns have not changed much from 2011: the vast majority of companies outsource their solutions to a single service provider. Nearshore (close to / up to 2 time zones away from Denmark) remains the most popular outsourcing destination (cited by 47% of survey respondents, which is up 10% from 2011). Offshore (2+ time zones away from Denmark) remains the second most popular outsourcing destination (cited by almost 44% of companies, which is up 16% from last year). In 2012, the top three drivers pushing Danish companies into outsourcing engagements are needs to: Reduce operating costs, Focus on core competences and business development, and Speed up time-to-market (TTM). In 2011, two first drivers were the same as this year, but the third one was different companies outsourced due to the shortage of domestic IT resources and technologies. This year, a scarce local IT resources pool is a Number Four driver of corporate ITO decisions. The top three most decisive factors in the choice of an ITO destination among the Danish companies are: The available vast IT talent pool, IT Sourcing Europe 2012 All Rights Reserved Page 3

4 Proficient English language skills, and Low costs in general. The top three most decisive factors in the choice of an ITO partner in Denmark are: Successful test project completion, Flexible contract terms, and Positive references from peer companies Poor communication between ITO buyers and providers is the Number One challenge facing outsourcing companies in Denmark this year, followed by cultural difference and lack of appropriate IT resources on vendor s side. The latter was the Number One outsourcing challenge in 2011, followed by change management (i.e. company s inability to sell the idea of outsourcing to all of the stakeholders and resistance to a change in operations and management culture from some departments / teams as a result of this) and vendor s inability / unwillingness to understand clients business goals pursued with the outsourced project(s). Just like in 2011, this year most of Danish companies dedicate more management resources and increase face-to-face communication with their project teams on vendor s side as the key issues management practices. However, in 2012 more companies consider changing their current ITO services provider (up 12% from 2011) as a way to solve their outsourced project issues. On the other hand, this year fewer companies do back-sourcing, i.e. bring their outsourced operations back inhouse down 6% from This generally marks companies overall satisfaction with their outsourcing endeavors and outcomes and possibly high costs of transferring software development back to home countries. A majority of Danish outsourcing companies (more than 45%, which is up 7% from 2011) say they greatly rely on peer references when searching for potential ITO partners, while only 11% admitted having found an ITO partner via a publicly released RFI / RFP (down 4%). Almost 25% of companies admitted using The Danish Federation of Small and Medium-Sized Enterprises (Håndværksrådet) and word-of-mouth to find an ITO partner. A project-based model (fixed price, time and material) remains the most popular one among the Danish companies in 2012 (down 2% from 2011), followed by Own Development Team model (down 5% from 2011). This year most of ITO buyers participate in HR selection and hiring process along with their service providers, which is up 24% from 2011, but most of ITO engagements remain quite non-transparent as far as pricing is concerned. As the research shows, only less than 35% of Danish outsourcers admitted knowing exact salary of each IT specialist involved in their project on vendor s side, which is up nearly 13% from last year. A positive change from 2011 observed is that this year a prevailing majority of survey participants (45%) say their actually incurred ITO costs fully or nearly match the contracted costs (up 26% from 2011) and less than 30% admit their actually incurred costs are up to 25% higher than expected (down 31% from 2011). IT Sourcing Europe 2012 All Rights Reserved Page 4

5 One more positive change relates to the factual saving from outsourcing: this year cumulative 28% of ITO buyers report saving 10% to 39% of operating costs (up 5% from 2011), only 17% save less than 10% (down 12% from 2011). Regarding enormous savings (60% +), this year s percentage of such companies remains almost the same as it was in %. In general, 50% of survey respondents do not regret their decision to outsource software development (no change from 2011), around 35% complain that ITO costs them more than they expected (down 9% from 2011) and slightly more than 30% say that although outsourcing does save operating costs, it inevitably increases the management costs (down around 10% from 2011). Only 4.5% of Danish outsourcing companies polled regretted their decision to outsource their technological solutions to a 3d party, which is down 1% from Asked whether they plan to continue outsourcing in the next 12 to 24 months, 100% of survey respondents replied with yes, which is up 35% from last year. Having analyzed behavior patterns of companies that do not outsource their solutions and fulfill their IT / software development functions in- house, we have concluded that the top three drivers of ITIO decisions within the Danish business community in the following months will be: 1) Lack of domestic IT resources able to unload internal IT departments, 2) High cost of domestic resources available, and 3) A slow time to market (TTM) Asked where they would outsource their development if they made such a decision in the future (hypothetically speaking), 50% of companies answered with nearshore. Twenty-three percent of research participants admitted either being in the process of arranging an ITO partnership or considering outsourcing during It generally marks a high level of trust in success of ITO engagements with the Danish business community. A more detailed analysis of the 2012 trends, challenges and behaviors as well as their comparison to the last year s behavior patterns will be presented in the 3d Annual Pan-European IT Outsourcing Intelligence Report to be published in Q after all of the major European ITO markets have been explored. IT Sourcing Europe 2012 All Rights Reserved Page 5

6 ABOUT THE SURVEY The Danish IT Outsourcing versus In-House Software Development Survey 2012 was conducted between April 17 and May 31, 2012, in the frames of the 3d Annual All-European IT Outsourcing research. Survey goals: Explore factors that drive Danish 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 Denmark 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 Danish companies away from adopting IT Outsourcing Explore the key challenges and problem solving best practices adopted by Danish companies that develop / manage their software solutions in-house. The survey was available online and hosted by SurveyMonkey, the world s leading provider of webbased survey solutions. In order to reach as many Danish companies as possible, IT Sourcing Europe used its own database of business contacts and sent out a survey invitation to each company s decision 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 to participate 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 Denmark, Twitter, Word Press Number of survey participants 695 Danish companies, of which 382 were IT / software development outsourcing companies and 313 companies developing their IT solutions in-house. IT Sourcing Europe 2012 All Rights Reserved Page 6

23 About IT Sourcing Europe IT Sourcing Europe is a UK-based market intelligence company specialized in the European IT Outsourcing market research and consultancy. IT Sourcing Europe provides: Top quality quantitative and qualitative ITO market research and fieldwork services Evaluation of Central and Eastern Europe's 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 support Our Contacts: The Meridian, 4 Copthall House, Station Square Coventry, West Midlands, CV1 2FL United Kingdom info(at)itsourcing-europe.com Tel.: +44(0) Web: Registration at the UK Companies House: Follow Us: You are free to use, share and/or remix any part of this work as long as you attribute it to IT Sourcing Europe. IT Sourcing Europe 2012 All Rights Reserved Page 23