Outsourcing trends in Europe

Jan 13, 2014 Market Research
Outsourcing trends in Europe

The UK’s Outsourcing Magazine has done another great survey on the key factors that enable Western European companies to outsource their software development available now also for the visitors of our web site. Surprising facts have popped out. Buyers give advises to Providers, awesome indirect collaboration? thank you for that. Please provide your thoughts as to these factors form the point of buyer’s psychology.

At the end of last year, EY published a report on ‘Outsourcing in Europe’, which provided an in-depth review of drivers, risks and trends in the European outsourcing market. Another drab survey results set? Hopefully not, as this report is different…

The in-depth research specifically focuses on twenty services within the ITO and BPO outsourcing market across eight countries in Europe with analysis by country and industry.

Unsurprisingly, of the 3,700 outsourcing professional respondents, 42 per cent said cost reduction was still one of the main drivers with efficiency having become a very strong driver in today’s climate as well as quality improvements. As an organisation matures through outsourcing, our research shows other factors become more important – specific knowledge, expertise and tools, in other words, how an organisation gets that additional value-add. It’s surprising to note that although efficiency and quality improvements are big drivers, organisations are still choosing to transition services “as-is” with little or no transformation in the majority of cases.

Approximately 75 per cent of IT services still remain in-house, indicating that even a mature ITO market has large potential for growth in the coming years. Interestingly, although respondents note that innovation is difficult to define and harder still to measure, 70 per cent of respondents do in fact try to embed innovation clauses within their services contracts, although this does lead to client and service provider discussions on what is innovation and what is process improvement.

Our research also shows that outsourcing maturity is leading organisations to outsource their core processes and not just the non-core, especially as organisations and service providers are moving up the value chain.

The research also shows that of the organisations that embrace outsourcing, 62 per cent employ different resources with different capabilities and specific skillsets to manage the service post go-live than for pre go-live.

What does this all mean? A few insights…

Maturity is the basis of trust. Companies with a longer history of outsourcing tend to have more positive outsourcing experiences. This maturity deepens trust in outsourcing and, in turn, encourages further outsourcing forays including pushing the outsourcing boundaries further with core processes.

One size doesn’t fit all. Providers realise that, apart from first-generation outsourcing contracts, mature outsourcing clients require further value add and benefits realisation (not just labour arbitrage). Providers now are starting to adapt to this and are specialising more by industry or by service. Organisations are increasingly looking for this, one-size doesn’t fit all anymore, and we expect this trend to continue to grow.

Insourcing for competitive advantage. In certain fast-moving sectors organisations are beginning to bring some services back in-house in order to gain or maintain a competitive advantage in the industry. For example, in the telecoms industry application development and first mover advantage is critical for their consumer base. “Pooled” best practice across a service provider would erode this. In fast moving consumer-focused sectors, this is a trend that may well continue.

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