Click here to load reader
Upload
it-sourcing-europe
View
645
Download
1
Tags:
Embed Size (px)
DESCRIPTION
This Intelligence Report is based on the survey of the 229 Cyprus-based companies that either outsource their Software Development / Information Technology function(s) to an external service provider onshore (within Cyprus), nearshore (within/close to the same time zone) and/or offshore (more than 2 time zones away), or develop their software/IT solutions in-house.
Citation preview
IT Sourcing Europe European IT Outsourcing Market
Intelligence
December 2011
European IT Outsourcing Intelligence Report 2011: Cyprus
European IT Outsourcing Intelligence Report 2011: The UK
2 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Contents
Contents .......................................................................................................... 2
Executive Summary ......................................................................................... 2
Survey Overview ............................................................................................. 3
Profile of Outsourcers ..................................................................................... 4
IT Outsourcing Drivers & Factors ..................................................................... 8
IT Outsourcing Challenges & Problem Solving ............................................... 10
Client – Vendor Relationships ....................................................................... 11
IT Outsourcing Costs...................................................................................... 13
Impressions of IT Outsourcing ....................................................................... 15
Trends & Challenges of the In-House Software Development ...................... 16
Future Adoption of IT Outsourcing Services in Cyprus .................................. 20
Key Findings at a Glance ................................................................................ 22
Conclusions and Predictions .......................................................................... 23
Executive Summary
This Intelligence Report is based on the survey of the 229 Cyprus-based
companies that either outsource their Software Development / Information
Technology function(s) to an external service provider onshore (within
Cyprus), nearshore (within/close to the same time zone) and/or offshore
(more than 2 time zones away), or develop their software/IT solutions in-
house.
The Report aims to help Cyprus-based outsourcing companies:
Get an in-depth understanding of the current IT Outsourcing demands and trends
See what challenges are facing their market peers / competitors and how they respond to them
Revise / improve their current IT Outsourcing engagements / business models based on the industry best practices
The Report aims to help Cyprus-based non-outsourcing companies:
Better understand modern software development/IT costs optimization
and/or reduction strategies
See what challenges are facing the in-house software development and how their market peers / competitors respond to them
Evaluate own readiness to adopt the outsourced / distributed
development
Find out what their market peers think about software development /IT
Outsourcing and how they are / will be preparing for adoption of the
outsourced development in the future
European IT Outsourcing Intelligence Report 2011: The UK
3 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Survey Overview
The Cyprus IT Outsourcing (ITO) and In-House Software Development (SD)
survey was conducted between November 22 and December 5, 2011, in the
frames of the All-European ITO research 2011.
Survey goals:
Explore factors that drive Cypriot companies to outsource their SD/IT
functions in 2011
Explore challenges associated with offshore/nearshore outsourcing
and the most effective problem solving techniques
Explore the use of different business models in ITO engagements and
find out which model works best for what type of companies and
industries
Explore factors that keep Cypriot companies away from outsourcing
their SD/IT function(s)
Compare and contrast the 2011 and future ITO demands across
Cypriot industries
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
Cyprus-based 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 / Outsourcing 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 campaign,
the following steps were taken:
Online press releases and survey announcements distribution;
Survey localization and optimization in social media such as LinkedIn,
XING, Facebook, Twitter, Google Plus as well as in IT Sourcing
Europe’s blog
All data obtained were analyzed in the form of industry aggregates. The
answers to the open-ended questions were organized by their relativity to
the study goals and displayed as the option “all other responses” in charts
and graphs further in the Report.
Outsourcing Activity Surveyed:
The following ‘outsourcing activity’ is referred to in the 2011 Cypriot ITO
Report:
Software Development / Information Technology Outsourcing (SD/ITO) is
the process of transferring part of/entire software development function
and/or other Internet related work to the execution by the external IT
services provider(s)
European IT Outsourcing Intelligence Report 2011: The UK
4 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Profile of Outsourcers
Do Companies Outsource Any Element of Their IT / Software
Development?
Current Outsourcing Experience
European IT Outsourcing Intelligence Report 2011: The UK
5 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Company Size (Headcount)
Primary Industry
European IT Outsourcing Intelligence Report 2011: The UK
6 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Size of Project Teams on Vendor’s Side (Headcount)
Value of the Outsourced Project(s) (€)
European IT Outsourcing Intelligence Report 2011: The UK
7 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
The Outsourced Areas of Expertise
Do Companies Multi-Source?
European IT Outsourcing Intelligence Report 2011: The UK
8 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Outsourcing Destinations
IT Outsourcing Drivers & Factors
Key IT Outsourcing Drivers
European IT Outsourcing Intelligence Report 2011: The UK
9 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Factors’ Rating In Terms of Their Importance in the Choice of the
Outsourcing Destination
Factors’ Rating In Terms of Their Importance in the Choice of the
Outsourcing Partner
European IT Outsourcing Intelligence Report 2011: The UK
10 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
IT Outsourcing Challenges & Problem Solving
Key Challenges of the Outsourced IT / Software Development
Key Responses to the ITO Challenges
European IT Outsourcing Intelligence Report 2011: The UK
11 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Client – Vendor Relationships
How Companies Found Their ITO Vendor(s)
Vendor’s Size*
*Respondents were asked to refer to their primary vendor in case of
multisourcing
European IT Outsourcing Intelligence Report 2011: The UK
12 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Service Delivery Models Used In the Outsourcing Engagements
Who Makes Final HR Decision / Selects Specialists To Be Involved In
the Project?
European IT Outsourcing Intelligence Report 2011: The UK
13 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Levels of Companies’ Satisfaction with Their Current Vendors and
Quality of Services Provided
IT Outsourcing Costs
Do Companies Know Exact Salaries of Their Project Team Members
on Vendor’s Side?
*Other: partially
European IT Outsourcing Intelligence Report 2011: The UK
14 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
How Actual Annual Incurred Costs Compare to the Contracted Ones
Actual Savings from the Outsourced IT / Development
European IT Outsourcing Intelligence Report 2011: The UK
15 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Impressions of IT Outsourcing
European IT Outsourcing Intelligence Report 2011: The UK
16 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Do Companies Plan to Continue Outsourcing Their Projects In The
Next 12 To 24 Months?
*Other: “we haven’t decided yet”
Trends & Challenges of the In-House Software
Development
How Non-Outsourcing Companies Fulfill Their IT / Development
Tasks
European IT Outsourcing Intelligence Report 2011: The UK
17 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Size of In-House IT Teams
Part of Corporate Budget Spent on Software Development
European IT Outsourcing Intelligence Report 2011: The UK
18 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Level of Satisfaction with the In-House Development
Key Challenges of the In-House Software Development
European IT Outsourcing Intelligence Report 2011: The UK
19 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
How In-House Developers Respond To Challenges
Reasons Keeping Companies Away From ITO
European IT Outsourcing Intelligence Report 2011: The UK
20 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Future Adoption of IT Outsourcing Services in Cyprus
Circumstances in Which Companies Would Consider Outsourcing IT /
Development in the Next 12 To 24 Months
Where Current Non-Outsourcers Would Transfer Their IT /
Development In the Future
European IT Outsourcing Intelligence Report 2011: The UK
21 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Factors’ Importance In the Future Choice of the Outsourcing
Destination
Factors’ Importance In the Future Choice of the Outsourcing Partner
European IT Outsourcing Intelligence Report 2011: The UK
22 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Key Findings at a Glance
Over the past years Cyprus has gained recognition as a true “tax heaven” for
doing business and has therefore attracted many international companies
seeking substantial relief from domestic tax burdens and complicated
regulations. In particular, international companies move their operations to
Cyprus in order to enjoy the benefits of its double-tax treaties as well as
other offshore jurisdictions such as a 10% tax rate, 15% VAT, confidentiality,
well established infrastructure etc. However, being a European Union
member state (since 2004), Cyprus loses its cost advantage with regards to
in-house IT function management. The present survey demonstrates that
high cost of domestic IT resources and personnel is the Number One barrier
in the way of successful in-house software development / IT (reported by
almost 70% of the survey respondents). Additionally, cumulative 33% of the
respondents admitted scarce local IT resource pool and pressures from C-
suite / investors to lower down IT costs / reduce IT budgets. These and other
issues typical for the EU member states drive Cypriot companies to look
beyond local resources in search of cost effective IT solutions and access to
innovation and diversification. As the survey shows, the prevailing majority of
Cyprus companies source IT / software development resources nearshore or
multi-source nearshore, offshore and onshore.
In general, the survey allows identifying positive and negative trends in
behaviors of Cypriot companies with regards to adoption of IT / software
development outsourcing services.
The positive trends observed are:
More than 40% of Cyprus ITO buyers make final HR decisions / select
IT specialists to be involved in their outsourced project fulfillment
This generally marks the pattern when companies tend to retain control of
own projects and selectively review candidate profiles to make sure they
really match project expectations and possess the appropriate skills level.
More than 70% of Cyprus ITO buyers report general satisfaction with
their current vendors and overall quality of services provided
More than 80% of companies plan to continue with their outsourced
development in the next 12 to 24 months
Nearly 30% of today’s non-outsourcing companies in Cyprus already
consider outsourcing their development / IT function in the next 12
to 24 months, which suggests future expansion of the ITO buyers’
pool
More than 80% of companies multi-source, which generally marks
companies’ willingness to stay independent from a single vendor
engagement and back up their outsourced operations in case of
vendor’s failure to deliver on time, missing resources and/or unmet
deadlines. In addition, multisourcing allows companies to have
different areas of their IT projects fulfilled by vendors with the best
expertise in each certain domain.
However, some negative trends have also been observed in the course of the
research. Among them are:
Although a high number of companies report general satisfaction
with their vendor’s service quality, the same high number of
companies consider changing their current vendor(s) as a response
to their most critical challenges such as poor communication with
vendor’s project management, vendor’s inability to understand their
business goals, mismatch in contracted and actually incurred costs
and poor quality of project deliveries.
European IT Outsourcing Intelligence Report 2011: The UK
23 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
The readiness to change ITO service providers witnesses of the following
scenario on today’s Cyprus ITO market: driven by global business trends for
diversification, differentiation and innovation, ITO buyers currently “raise the
bar” for their service providers and challenge them with more difficult and
sophisticated tasks, both technology and HR growth related. However, as
most of ITO buyers partner with small service providers (less than 50 by
headcount), they’re less likely to get a sufficient feedback and have their
expectations met. As the practice shows, lots of small providers are only
focused on closing new deals and filling their pipelines by all means including
provision of incomplete / untruthful information in their RFP responses,
intentional overestimation of own project execution capabilities, low bidding
etc and are unable to hire /retain highly qualified specialists due to their high
cost and career aspirations. As a result, they oftentimes fail to meet their
clients’ increased technology demands, scale up project teams, ensure
project’s sustainability etc.
More than 85% of Cyprus ITO buyers engage with their providers via
project-based models (fixed-price, T&M)
This basically leads to the situations when the actual incurred costs are
higher than expected (up to 25% as well as 25% - 49%) and other issues such
as poor product quality and poor managerial control. Also, the use of this
model does not allow ITO buyers to have predictable costs and plan their
long-term use of outsourcing. As the survey shows, more than 70% of
companies do not know exact salaries of each and every IT specialist on their
vendor’s team(s), meaning they are not aware of the difference between
what the vendor charges them and what it actually pays their employees.
Due to the additional fees most of ITO buyers have to pay on top of the
official service fees, they only save 10% to 24% of operating costs from their
ITO engagements.
Conclusions and Predictions
Based on the results of the Cyprus ITO and In-House Software Development
Survey, several obvious trends were identified:
The majority of the Cypriot outsourcers are very small by headcount
(less than 5)
Cyprus-based B2B focused IT companies have the greatest demand
for ITO services among other industries and verticals
The prevailing majority of ITO projects fall under the web
development domain, require 1 to 5 IT specialists to complete and do
not exceed € 49K in value
Multi-sourcing is an obvious trend of 2011
Most of the Cyprus outsourcers transfer their development / IT
either nearshore alone or distribute them among multiple providers
nearshore, offshore and within Cyprus
Reduction of operating costs is the core driver of corporate decisions
to outsource in Cyprus
Cypriot companies look for language skills availability, low costs and
vast IT talent pool as far as ITO locales are concerned
When choosing their ITO partners, Cypriot companies pay most
attention to current experience in similar projects and low service
rates
The key challenges of the outsourced IT / software development in
Cyprus are poor communication with vendor’s project management
and executive teams and vendor’s inability to understand their
clients’ business objectives
European IT Outsourcing Intelligence Report 2011: The UK
24 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
Key steps that Cypriot companies make to respond to their ITO
challenges are ITO partner change, extension of deadlines and
dedication of additional managerial resources
Most of ITO buyers in Cyprus find their ITO partners via own online
research
Most of Cypriot companies manage to save 10% to 24% of operating
costs from their ITO endeavors
Sharing their impressions of ITO, the majority of companies believe
that outsourcing saves operating costs, but inevitably increases cost
of management
Overall, it is expected that more Cyprus-based companies will outsource
their IT solutions in the following months. This conclusion is particularly
based on the following findings of the survey of non-outsourcing companies:
Nearly 43% of in-house development companies say they are not
quite satisfied with the outcomes of their in-house development / IT
More than 66% of non-outsourcing companies complain about the
high cost of domestic IT resources and personnel and more than 33%
complain about the scarce local IT resource pool
Around 30% of companies already consider outsourcing as an option
to leverage costs and access broader resource pools in the future
More than 80% of today’s in-house developers admit the high
likelihood to adopt outsourcing in the next 12 to 24 months to
accelerate time to market, while 100% of respondents admit their
readiness to outsource in the near future to respond to pressures
from investors and share risks
Regarding the future outsourcing geography, it is not expected to alter much
from 2011: most of companies will still focus on onshore and nearshore
development, while only few will move offshore.
European IT Outsourcing Intelligence Report 2011: The UK
25 | C o p y r i g h t I T S o u r c i n g E u r o p e | 2 0 1 1 | A l l R i g h t s r e s e r v e d
European IT Outsourcing Intelligence Report 2011: Cyprus
About IT Sourcing Europe
IT Sourcing Europe is a UK-based market intelligence company specialized in European IT Outsourcing research and advisory. IT Sourcing Europe provides:
Top quality quantitative and qualitative IT Outsourcing market research and fieldwork services
Evaluation of Central and Eastern Europe's IT Outsourcing 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 IT Outsourcing strategy / engagement
Ad-Hoc IT Outsourcing strategy development and full-cycle support
IT Sourcing Europe cooperates with several European ICT and Outsourcing organisations in terms of free analytics / information exchange. Amongst its major information partners are Outsourcing Verband, Das Outsourcing Journal, Outsourcing Portal, NGI and others.
Our Contacts:
The Meridian, 4 Copthall House, Station Square
Coventry, West Midlands,
CV1 2FL United Kingdom
Email: info(at)itsourcing-europe.com
Tel.: +44(0)2476992505
Web: www.itsourcing-europe.com
Blog: http://itsourcingeurope.wordpress.com
Facebook: http://www.facebook.com/pages/It-Sourcing-
Europe/136082959822709
Follow our tweets @ITSourcingEurop
SlideShare: http://www.slideshare.net/itsourcingeurope
Registration at the UK Companies House: 07217899
You are free to use, share and/or remix any part of this work as long as
you attribute it to IT Sourcing Europe.