A unique, valuable, 164-page-report “Central and Eastern Europe IT Outsourcing Review 2010” has been just released. Except of a comprehensive country anaylsis, presentation of reasearch results and the list of IT companies operating in the CEE region, expert interviews (Phil Fersht, Boris Kontsevoi, Magdalena Szarafin, Christoph Prieler and Franco Dal Molin) have been published.
Here is an excerpt from the interview with Magdalena Szarafin:
Question 1. What are the main development trends on IT outsourcing services market and what will be the main outsourcing drivers for the years to come?
Let’s perceive the IT market from the perspective of the trends affecting its main players (vendors and buyers). The following trends can be observed on vendors’ side:
· Searching for new products and solutions to increase sales revenues,
· All big suppliers (and many smaller ones as well) deal with new service models (e.g. cloud computing, managed services, SaaS),
· Integration of IT and telecommunications solutions,
· Using service models based on economies of scale: having a large number of customers, low sales revenue per customer and low costs of sales per customer.
And the trends observed on buyers’ end can be summarized as follows:
· Cost pressure and limited budgets for IT investments,
· Security concerns,
· Need for flexible solutions,
· Multi-site collaboration, need for product and services supporting home office and mobility solutions.
Question 2. Has the recession and the following cost-pressures changed the companies’ attitude to outsourcing (IT outsourcing specifically)?
For many vendors the crisis time has brought the opportunity to increase revenues as many companies think about outsourcing their operations to third parties in difficult times. Also those of them who were skeptical about outsourcing until now. The decision whether to outsource (or not) tends also to be met quicker and easier under the pressure of crisis.
Companies try to focus on their core competencies and to cut costs. Therefore IT outsourcing has been as popular in the crisis time – trying to improve their cost structure, companies tend to implement projects which help them to improve performance and have short time of amortization. Also outsourcing infrastructure to third party enables the buyer to improve shortterm liquidity.
What is going to come after the crisis? Vendors can be optimistic, after the phase of cost-driven, quantitative outsourcing the phase of qualitative outsourcing is likely to come. Companies searching for innovations, quality improvement and use of external know-how will try to outsource their operations, expecting vendors to help them to achieve these objectives.
Question 3. View of the CEE region as a cluster of IT outsourcing
services providers. Advantages, disadvantages, trends, image, specifics.
One friend of mine, who comes from Canada, visited Poland a few years ago. Then he said to me: you know what? I am very impressed by what I saw. That is a very modern country. I visited some companies: everywhere young, dynamic, high-motivated people speaking foreign languages.
In my opinion, that statement describes the CEE region very well. Another maxim which points out the situation very well is: “Outsourcing is people’s business” – the geographical, cultural and
language proximity are of importance for buyers. Customers from Western Europe are likely to make business with partners from Central and Eastern Europe as their locations are available within 2-3 hours their business partners speak their languages. They are high-qualified and the prices are still lower than those in Western Europe.
And another maxim yet: “We are the second (third, fourth) – we try harder” implies that a customer doing business with partners from CEE countries can expect to be delivered with highquality services.
One of the challenges is cost explosion: wages and salaries in the CEE countries are rising quicker than those in Western Europe. Also lack of professionals which can already now be observed in many industries is the next challenge for the upcoming years.
Question 4. Europe outran US as the biggest outsourcing spender last year (http://bit.ly/5PQcFA), will this trend remain?
Yes, I would definitely say yes. The improvement in macroeconomic
conditions will actively contribute to this positive trend. According to Gartner, IT spending in Europe increase in 2010 by 5.2 percent comparing with the previous year while the average increase of IT spending in the US amounts to “just” 2.5 percent in 2010 comparing to 2009. And one thing cannot be forgotten: there is still a gap regarding IT and telecommunications between Europe and the US so that European companies have no solution than to spend more than the US to make up for the distance missing.
Question 5. How growth of new technology trends (Cloud computing, virtualization, etc) impacts IT outsourcing and business models?
It is expected that IT outsourcing will get much more heterogeneous than ever before. Security concerns buyers have tend to motivate vendors to offer new forms of business relations. Traditional outsourcing with personnel, assets and responsibility transfer is very likely to be amended by outtasking and utility sourcing where no personnel and assets transfer takes place and the buyer is responsible for processes.
The full report can be downloaded from the following location: