Eastern Europe to Dominate the IT / ICT Outsourcing Space

Eastern Europe, already a popular and trusted nearshore location for continental Europe outsourced functions, is sweepingly ramping up as a hotspot for global players luring more and more software outsourcing contracts. Just consider the latest activity in the region: Wipro opened its development center in Budapest (in December 2010) and chemical producer Celenase has recently contracted IBM to run its financial shared services center in Hungary.

So what are the driving forces that make the Eastern European region so attractive? A shift in economic patterns, rise in tertiary occupations, improved FDI and government initiatives (lowered tax rates) to promote trade, and improvement of national fiscals are the underlying factors for increased ICT and are the major drivers for IT services and software development. Eastern Europe also ranks high in terms of work ethics and cultural sensitivity, adding to the region’s attractiveness as a base for outsourced activity.

And of course not to forget about the cost advantage. According to the industry experts, the cost advantage offered by Central and Eastern European firms to nearshore and offshore buyers is comparable with that offered by China.

Summing up, it is now highly likely that Eastern Europe will move out from being an ‘emerging destination’ to a ‘key destination’ for IT outsourcing activity. The region is expected to experience a new surge of demand from Western Europe and at the same time gain a ‘hard to ignore space’ on the world arena in the coming years.

Source: SourcingNotes

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Ukraine Reports Highly Profitable Year in IT Exports

Ukraine's Vice Prime Minister Serhiy Tyhypko announced that the country’s exports of computer software reached 1 billion USD in 2010. Ukraine – the world's fifth biggest IT services exporter – doubles its IT services exports every year, making IT the fastest growing export-oriented sector of the country.

"The steel export totals 2.8 billion USD, the export of agricultural products is up at 9.5 billion USD, and chemical products export reached 3.5 billion USD. And the export of software products is worth 1 billion USD. Moreover, the inflow doubles each year," said the Vice Prime Minister of Ukraine.

In terms of IT services and software engineering, Ukraine primarily places emphasis on its deep talent pool. With 14,000 IT specialists graduating from Ukrainian universities each year, the country holds the fourth position in the world in the number of IT specialists, following the USA, India, and Russia. On top of that, the experts recognize both quantitative and qualitative potential of the Ukrainian specialists.

By the way, there has recently appeared a monument to IT specialists in the Eastern Ukrainian city of Kharkiv. The monument is placed outside of the Kharkiv National Radioelectronics University and depicts a young IT student holding an opened laptop. He is deep in his thoughts, perhaps thinking of creating a software program which could eclipse Microsoft.

Source: PR Newswire

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European Trends in ITO for 2011 (Part II)

As promised in the previous post, here comes the continuation on the development tendencies of the European ITO market in 2011. Judging from the perspective of ITO services providers, the following trends and changes are anticipated:

It is expected that an increased demand to adopt outsourced IT services will come from the SME segment. This will force service providers to anticipate smaller and, thus, less profitable deals. To ensure more significant profits in the long term, IT providers will have to improve their adding-value service offering, cloud capabilities and modify current engagement models to help SMEs grow their business and, as a result, to benefit from their clients' growth.

Secondly, innovative outsourcing engagement models are anticipated to hit the mainstream. Outsourcing entire product or application development processes, the companies will demand from their potential partners transparent cost structures, no hidden agenda, options to easily scale up or down in compliance with the current business situation, etc., which makes service providers diversify/innovate their engagement offerings.

And the third trend reveals itself in the breakdown of the client-silo approach. As businesses aim to learn more best practices by sharing knowledge with their peers across different industries, IT providers will be challenged to transform their client-silo mindsets and encourage collaboration between clients from various industry domains.

All in all, 2011 promises a prosperous but at the same time challenging year for European ITO with focus on agility, processes optimization, transparency of transactions and payments, innovation, and cloud. But we’re looking with optimism into the new 2011!

Source: EzineMark

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European Trends in ITO for 2011 (Part I)

Well, another year is here with its new perspectives, new hopes, new aspirations, as well as new plans and strategies. At the very start of the year we bring to your notice IT Sourcing Europe’s outlook on the European ITO market and future development trends and relations between Western European ITO services buyers and Eastern European ITO services providers.

Judging from the perspective of ITO services buyers, the following trends and changes are anticipated in 2011:

One of the most vivid tendencies – which came from 2010 with over 9 billion Euro in contract value and is anticipated to further increase in 2011 – is the increased demand for outsourced IT services from the public sector. The demand for cost-effective outsourcing opportunities in this sector is primarily explained due to recent turmoil in such countries as Ireland and Greece as well as economic uncertainties in other EU member states.

Secondly, there is traced a shift from mere cost saving to access to qualified and lower-cost IT resources. Already in the previous year Western Europe faced a significant shortage in skills and resources in the branch of software development; Eastern Europe, on the contrary, showed a significant increase in IT workforce led by Romania with a 12.33% growth in the number of IT specialists and followed by Ukraine with a 9.51% growth.

Closely connected with the above comes the third trend: nearshoring will hit the mainstream. Of almost 2,000 non-outsourcing companies polled in the survey, more than 22% plan to transfer their IT/software development nearshore versus only 11% of those who plan to outsource offshore.

And last but not least, service integration will help achieve innovation. In 2011, more Western European IT leaders are expected to realize the importance of integrating the outsourced project management, orchestration and delivery, thus gaining full control of their sourced projects.

In the second part of the post we’ll dwell on the trends and changes which are anticipated in 2011 judging from the perspective of ITO services providers.

Source: EzineMark

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