New Research Reveals Actual Savings From The Outsourced Software Development in Europe

IT Sourcing Europe highlights some of the findings of its All-European IT Outsourcing research 2010 in regard to the actual savings from the outsourced software development.

IT Sourcing Europe, a UK-based nearshore IT Outsourcing (ITO) market research and advisory firm, announced today the completion of its All-European ITO research 2010. The research was conducted between April and November 2010 and aimed to explore the major trends, challenges and problem solving among the European companies outsourcing their software development (SD) function offshore (at least 2 time zones away from the homeland), nearshore (no more than 2 time zones away) and/or within own country. As a result, 1,557 companies from eight countries - United Kingdom, Germany, Austria, Switzerland, Netherlands, Denmark, Norway and Sweden - took part in IT Sourcing Europe's study.

According to the study findings, the majority of the UK, Swedish and Danish companies save 40%-59% of operating costs from the outsourced SD, while the majority of German, Swiss, Austrian, Dutch and Norwegian outsourcers save 10%-24%. Less than 10% of costs are saved by relatively big numbers of companies in Germany and Netherlands, while more than 60% of costs are saved by a lot of Austrian companies.

The study shows that most of Western European and Nordic ITO services buyers (cumulative 40.96%) still engage with their partners via "traditional" outsourcing models such as dedicated development center (DDC) or captive centers etc, which do not allow them to have as much control of the outsourced projects and development teams as possible and have transparent pricing structures. Only cumulative 21.52% of the European companies know exactly and cumulative 1.52% of companies know partially what they pay for and are fully/partially involved in the process of HR hiring for their outsourced projects.

As per the study findings, the actual annual incurred costs of SD outsourcing and the expected (contracted) costs are about the same for most of the UK, Swedish and Danish companies. For most of German, Swiss, Austrian, Dutch and Norwegian companies the actual incurred costs are up to 25% higher than expected. Denmark is the only country among the surveyed ones whose outsourcers (2% of respondents) report actual costs to be 50% to 75% lower than expected. Additionally, 2% of the German, 1% of the Swiss, 1% of the Austrian and 1% of the Dutch respondents claim that their actual incurred costs of outsourcing are more than 75% lower than expected.

More interesting and thought-provoking findings are available in IT Sourcing Europe's "European ITO Intelligence Report 2010: Western and Northern Europe".