uk it outsourcing intelligence report 2012

European IT Outsourcing Market Intelligence

European IT Outsourcing Intelligence Report: United Kingdom

2012

Prepared by IT Sourcing Europe Limited based on the results of the 3d Annual UK IT Outsourcing vs In-House Software Development Research 2012

European IT Outsourcing Intelligence Report: United Kingdom 2012

IT Sourcing Europe 2012 | All Rights Reserved Page | 2

CONTENTS

....................................................................................................................... 3 EXECUTIVE SUMMARY

.......................................................................................................................... 5 ABOUT THE SURVEY

....................................................................................................................... 6 RESPONDENT PROFILE

................... 9 UK IT OUTSOURCING 2012: DESTINATIONS, TRENDS, CHALLENGES, PROBLEM SOLVING

.......................................................... 19 FUTURE UK IT OUTSOURCING: FORECASTS & EXPECTATIONS



EXECUTIVE SUMMARY

This year we see an increased adoption of the outsourced IT / software development within the UK

business community and a deeper penetration of IT Outsourcing (ITO) into the financial services

market 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 computing

domain. This comes pretty much in line with an extremely rapidly growing global mobile apps

market 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 just

one 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 time

zones 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 and

necessity to free in-house IT staff for other business tasks. The top three most decisive factors in the

choice of ITO destination among the UK companies are the available vast IT talent pool, proficient

English language skills and economic stability, while the top three factors in the choice of an ITO

partner are positive references from peers, realistic HR scalability and innovative and flexible

business model.

Poor communication between ITO buyers and providers is the number one challenge facing

outsourcing companies in the United Kingdom this year, followed by change management and

insufficient project management on vendor’s side.

A majority of UK outsourcing companies say they greatly rely on peer references when searching for

potential ITO partners. On the other hand, just slightly more than 10 percent of companies polled

admitted 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 / software

development solutions via an Own Development Team model. The reason for this may underlie in

current concerns about the poor client-vendor communication in most of ITO deals and the increase

in 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 actually

paying 25 percent more than expected in their contracts and save no more than 25 percent of

operating costs. This does not prevent 50 percent of companies from having a positive opinion about

their ITO engagement(s). Nor does it prevent almost 80 percent of respondents from continuing to

outsource 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 of

ITIO decisions within the UK business community in the following months will be a slow time to

market (TTM), high cost of domestic IT talent and a shortage of domestic IT resources. Fifty percent

of 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



decision in the future (hypothetically speaking), almost 60 percent answered with “nearshore” and

only less than 15 percent answered with “offshore”.

Overall, the results of the UK ITO versus In-House Development Survey 2012 suggest that ITO is yet

to be discovered by more small to mid-sized UK organisations in the near future and is here to stay

for a while.

A more detailed analysis of the 2012 trends, challenges and behaviors as well as their comparison to

the last year’s practices will be presented in the 3d Annual Pan-European IT Outsourcing Intelligence

Report to be published in Q4 2012 after all of the major European ITO markets have been explored.



ABOUT THE SURVEY

The UK IT Outsourcing and In-House Software Development Survey 2012 was conducted between

March 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 used

its own database of business contacts and sent out a survey invitation email 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 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 development

outsourcing companies and 385 – companies developing their IT solutions within own house.

http://www.surveymonkey.com/



RESPONDENT PROFILE



UK IT OUTSOURCING 2012: DESTINATIONS, TRENDS, CHALLENGES, PROBLEM

SOLVING



FUTURE UK IT OUTSOURCING: FORECASTS & EXPECTATIONS



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

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uk it outsourcing intelligence report 2012

Technology

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