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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Gartner Reveals Technology Predictions for 2011

End of the year is as ever favorite time of most analyst firms for rolling out predictions, forecasts and all sorts of watch lists for the coming year. Especially of interest are those from most influential analyst powerhouses, like Gartner for example. Last week Gartner – the world's leading information technology research and advisory company –issued its “Top Technology Predictions” for IT organizations and users for 2011 and beyond. Let’s have a closer look at some of them which we find are worth sharing:

• Twenty Percent of Non-IT Global 500 Companies to Deliver through the Cloud. More and more – 20 percent – of non-IT companies in the Global 500 will continue to deliver products and services through the cloud, becoming de facto cloud computing companies by 2015. That means the role of IT decision making gets broader, and non-IT companies find themselves competing directly with IT service providers.

• IT Automation Results in Tangible Costs Savings through Man-hour Reductions. Self-service and automated provisioning associated with cloud delivery means productivity levels for service providers will increase—Gartner estimates a 25 percent reduction in IT labor hours by 2015.

• Consumerization of IT Transitions to “Postconsumerization”. Gartner predicts “postconsumerization” as one of the major trends for the upcoming years where instead of IT focusing on devices, apps and infrastructure, IT will shift to address info and peer-to-peer interaction. It is expected that ninety percent of companies will support corporate apps on personal devices like mobile, laptops and tablets, by 2014.

• Tablets Get Enterprise Support. iPad is just the first in a long future line of media tablets focused on “communications and consumption” of data instead of “creation” . As a result, 80 percent of enterprises will offer support for network connectivity, email, calendaring, and help desks by 2013 on tablets, says Gartner.

• National Infrastructure Hacked and Disrupted. By 2015, Gartner predicts at least one of the G20 nations will be the victim of dramatic online sabotage that will disrupt and damage critical infrastructure components. Whether it’s a stock exchange, physical nuclear plants or mobile-phone message routers, the analyst firm says attacks with lasting damage are only a matter of time.

Source: Channel Insider

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Western Europe’s Outsourcing Trends

Western Europe, the second largest outsourcing market after the US, is characterized by a pretty diverse behavior in terms of software development outsourcing habits. The latest trends and key similarities and differences in ITO engagement were recently highlighted in a report by an independent IT outsourcing (ITO) research and advisory company IT Sourcing Europe. The report is based on a comparison analysis of corporate outsourcing behaviors in the United Kingdom, Denmark, Germany, Switzerland, Netherlands, and Austria.

Below are some thought-provoking findings for nearshore and offshore software vendors:

1. Regarding the most popular outsourcing destinations in 2010, the majority of the UK and Dutch companies (23% and 29% respectively) outsource their software/web development offshore (i.e. India, China, Philippines, Pakistan, etc.), while most of Danish (34%), German (37%), Swiss (41%), and Austrian (32%) companies prefer nearshoring when it comes to outsourcing software development (Eastern Europe and the Baltic states are among the most popular destinations).

2. Regarding the future outsourcing destinations, the equal number of the UK outsourcers (28% and 28% respectively) will place their software development function nearshore and offshore; the majority of Dutch companies will be sourcing nearshore (27%), while Danish, German, Swiss, and Austrian companies will continue outsourcing nearshore (25%, 31%, 32%, and 30% respectively).

3. Regarding the actual savings from the outsourced development, most of the UK (36%) and Danish (27%) companies save 40% to 59% of their operating costs, while majority of Swiss (35%), German (38%), Dutch (28%), and Austrian (31%) companies manage to save 10% to 24% from their outsourced development.

More interesting findings will be available in the European ITO Intelligence Report 2010 to be released in December 2010.

Source: IT Sourcing Europe

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Outsourcing Market is Ramping Up Challenging Established Locations

A newly released study by Duke University's Offshoring Research Network and PricewaterhouseCoopers has revealed that the long established outsourcing locations India and North America are steadily surrendering in the space of outsourced software development. Eastern Europe, Latin America, and Asia, on the contrary, are picking up steam and emerge as strong global rivals. The challenging service areas are named contact centers, business process outsourcing, and information technology outsourcing. The results are based on a global survey conducted among 514 outsourcing service providers in 50 countries.

The survey’s findings clearly indicate the growing potential of the outsourcing market with offshoring continues constituting its biggest part – the market continues to expand globally driving competition and more cost-effective services. "Growing competition has transformed the outsourcing industry into a global race for market share," PricewaterhouseCoopers’ Managing Director Charles Aird noted in his statement.

Other facts of interest according to the survey include:

• A large number of service providers expect to begin new software development and IT-service contracts over the next several years. Overall, 62 percent of service providers said they plan to expand the scale of their existing offerings.

• The survey also found that the economic crisis of 2009 reemphasized the importance of cost savings and efficiency improvement as the top strategic reasons for outsourcing, followed by access to qualified personnel.

Source: Outsourcing-Russia.com

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