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Test Outsourcing in Eastern Europe
Agenda
• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends
Agenda
• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends
What is Outsourcing?
“Process of contracting the company’s business process and operations to an external company. It is expected to be done with
a better quality.”
The outsourcing market
Why did it start?• Cost cuttings • Focus on the core business
What can be outsourced?• Everything• It does not happen due to security risks
Outsourcing models
• Offshoring • Outside the home country.• Risks due to language barriers, cultural differences and different
time-zones.• Usually selected because of cheaper labor costs.
• Onshoring• Same country.• It involves less risks but doesn’t allow saving up much.
• Nearshoring• Outsourcing in nearby countries. • Considered best for West Europe who prefer the East European
destinations.
Reduce operation costs
Overcome IT talent shortage
Free up internal resources
Focus on core business functions
Accelerate company transformation
Accelerate projects
Gain access to management expertise
Reduce time to market
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
44%
34%
34%
28%
22%
15%
15%
9%
Reasons to Outsource
Risks
Top 3 reasons why projects fail
1. No process for specifying the work to be done.2. Poor project management.3. No metrics for measuring success.
Unless you solve the first one, then being excellent at the other two won't make a difference.
Forrester Reports
Fiascos
Client What When Cost
UK Government National Program for IT
2002-2011 12bn pounds
U.S. Navy Manage 350,000 Navy and Marine Corps users
2003 $4 bn
US Air force Expeditionary Combat Support System
2005-2012 $1.1 bn
US Government Healthcare exchange website
2012-2014 $200 mln
Success stories25 successful Startups built with outsourced development
Agenda
• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends
Outsourcing 2015
World Quality Report 2014 - 2015
AT Kearney: Outsourcing Market 2015
AT Kearney: Outsourcing Market 2015
Agenda
• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends
Europe Market
Ernst & Young Report 2014
Europe Market1. Krakow, Poland
2. Dublin, Ireland
3. Prague, Czech Republic
4. Budapest, Hungary
5. Brno, Czech Republic
6. Warsaw, Poland
7. St. Petersburg, Russia
8. Bucharest, Romania
9. Belfast, UK
10. Bratislava, Slovakia
Tholons Report Dec 2014
Examples: Poland
• Has Risen from 38th in 2009 to 11th now;• Krakow in Top 10 Locations and #1 in Europe;• More than 500 institutions of high education;• IT business doubled in the last 5 years;• Multilingual;• Proximity to Western Europe;• Still cost-competitive by several magnitudes;• Considered with potential to become Global player;
Examples: Bulgaria
• Ranked 9th in the world and best in Europe;• EOA Award „Offshoring Destination of The Year“ for 2015;• Growth of Outsourcing since 2005 – 500%;• Growth of IT employees since 2010 – 330%;• Among Top 10 countries with fastest Internet worldwide (8th);• 3rd worldwide by the number of certified IT professionals; • Lowest Cost in Europe – both Salaries and Taxes;
Agenda
• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends
Advantages of EE
"There's a lot more to it than just where are the cheap people?'"
Rolf JesterGartner Vice President
Advantages of EE
Why a preferred destination?
• Education based on the Western system of theory and philosophy - Creative thinking;
• Low cost – competitive salaries and taxes; low cost of living;• Highly technical skills;• Languages – Not only High level of English, but German,
French, Spanish, etc.;• Reliable, existing infrastructure;• Companies in Eastern Europe tend to engage in the business
model of their client;
Advantages of EE
• Reduced time differences – almost same working hours;• Less cultural differences and common values shared;• No “Yes, sir” attitude;• Less employee turnover than India;• The growing SME demand needs flexibility;• For the countries in EU – advantage of the VAT system and the
well known EU rules and regulations.
Other very important benefits:
Agenda
• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends
Future Trends
“It is expected that by the end 2015 top six EU markets alone will need 250 000 extra employees with IT skills,
and this doesn’t cover the rapidly and instantly expanding US job market.”
Source: computerweekly.com
Future Trends
• The shift away from “cheaper is better” - quality is again the crucial differentiator.
• Therefore Nearshoring is gathering pace within higher cost but with high-talent labor.
• Gartner: “This trend will result in outsourcing of IT services overseas (India etc.) dropping by at least 15% through to 2016”.
Outsourcing moves into Strategic activities
Future Trends
Expansion of offshore providers in Europe
• Investing heavily in continental Europe:• Wipro announced the addition of 500 FTEs in the Nordics alone
over the coming 3 years reaching > 4000 FTEs in Europe.
• Offshore providers are also on the acquisition trail:• Cognizant acquired ValueSource NV in Belgium.• Have already acquired six companies in Germany.
Future Trends
Expansion of nearshore providers in Europe
• Investing in Eastern Europe:• Luxoft opened a new site in Bulgaria in 2015. Ambition to hire
up to 1000 FTEs. • Already have labs in other EE countries like Romania.• SoftServe also opened a R&D site in Bulgaria.• EPAM has an office both in Romania and Bulgaria.
• Massive Marketing and Sales representation in Europe.
Future Trends
Freelance Outsourcing
• Physical location is irrelevant.
• SME companies now can take advantage of the talent. • No need for cumbersome long-term agreements.• No need of large volume requirements.
• New countries with talent but with strong operational risk are now able to take part in the industry.
• Bigger talent pool than India, China and Mexico altogether.
• Russia and Ukraine lead by far. Romania follows.
Trends in Testing Testing Budget allocation as percentage of IT spend
World Quality Report 2015 - 2016
Trends in Testing
World Quality Report 2014 - 2015
SMAC and IoT increase the importance of Testing
Trends in Testing
World Quality Report 2014 - 2015
World is going AGILE! What about Testing?
Trends in Testing
World Quality Report 2014 - 2015
Test Automation is the Future
Trends in Testing
• Contracting a single vendor to provide both development and testing: • can reduce supplier management costs, but• it is unlikely to deliver the best business value.
• Using a independent provider for testing gives clear reassurance of an independent auditor with no interest in:• completing testing too quickly, or• finding an encouragingly small number of defects.
Increased demand for independent testing supplier
Trends in Testing
• Skill level baselines must be demonstrated:• If your skills fall behind, you become noncompetitive.• Not acceptable in an outsourced world.
• Certifications become mandatory for outsourcing providers:• Required in most of the tenders.
• ISTQB is closing on 500 000 Certified Testers:• Agile Testing is out.• Security and Test Automation in Beta.• Working on Mobile and Usability testing.
Importance of Certifications grows
Questions?