UK IT Outsourcing Intelligence Report 2012

European IT Outsourcing Market Intelligence

European IT
Outsourcing
Intelligence 2012
Report: United
Kingdom
Prepared by IT Sourcing Europe Limited based on the results of the 3d
Annual UK IT Outsourcing vs In-House Software Development Research
2012

European IT Outsourcing Intelligence Report: United Kingdom
2012

CONTENTS

EXECUTIVE SUMMARY ....................................................................................................................... 3

ABOUT THE SURVEY .......................................................................................................................... 5

RESPONDENT PROFILE ....................................................................................................................... 6

UK IT OUTSOURCING 2012: DESTINATIONS, TRENDS, CHALLENGES, PROBLEM SOLVING ................... 9

FUTURE UK IT OUTSOURCING: FORECASTS & EXPECTATIONS .......................................................... 19

IT Sourcing Europe 2012 | All Rights Reserved Page | 2

2012

EXECUTIVE SUMMARY
This year we see an increased adoption of the outsourced IT / software development within the UK
business community and a deeper penetration of IT Outsourcing (ITO) into the financial services
market and a B2C focused IT industry. A trend for smaller ITO deals continues to drag from 2011;
however, in 2012 a prevailing majority of the outsourced projects fall into a mobile computing
domain. This comes pretty much in line with an extremely rapidly growing global mobile apps
market and demands for mobile solutions. Cloudsourcing is being used more extensively this year,
up 8 percent from 2011, while embedded development remains the least outsourced domain.

In 2012 we see a higher number of UK companies that outsource their solutions to more than just
one partner and the most popular destinations’ mix for multisourcing is onshore (within the UK),
nearshore (within the same / up to 2 time zones away from the UK) and offshore (more than 2 time
zones away). In general, nearshore remains the most popular ITO destination, followed by offshore.

In 2012, the top three ITO drivers are reduction of operating costs, focus on core competences and
necessity to free in-house IT staff for other business tasks. The top three most decisive factors in the
choice of ITO destination among the UK companies are the available vast IT talent pool, proficient
English language skills and economic stability, while the top three factors in the choice of an ITO
partner are positive references from peers, realistic HR scalability and innovative and flexible
business model.

Poor communication between ITO buyers and providers is the number one challenge facing
outsourcing companies in the United Kingdom this year, followed by change management and
insufficient project management on vendor’s side.

A majority of UK outsourcing companies say they greatly rely on peer references when searching for
potential ITO partners. On the other hand, just slightly more than 10 percent of companies polled
admitted finding their partner(s) via a publicly released RFP/RFI/RFQ.

In 2012 more than 50 percent of the survey respondents say they outsource their IT / software
development solutions via an Own Development Team model. The reason for this may underlie in
current concerns about the poor client-vendor communication in most of ITO deals and the increase
in face-to-face communication as the most frequently used problem solving practice.

Regarding the economy of outsourcing, almost 45 percent of the survey respondents admit actually
paying 25 percent more than expected in their contracts and save no more than 25 percent of
operating costs. This does not prevent 50 percent of companies from having a positive opinion about
their ITO engagement(s). Nor does it prevent almost 80 percent of respondents from continuing to
outsource their innovative solutions in the next 12 to 24 months.

Analyzing behavior patterns of companies that do not outsource their solutions and fulfill their IT /
software development functions within own house, we can conclude that the top three drivers of
ITIO decisions within the UK business community in the following months will be a slow time to
market (TTM), high cost of domestic IT talent and a shortage of domestic IT resources. Fifty percent
of companies developing their IT solutions in-house report plans to start outsourcing their IT /
development this year. Asked where they would outsource their development if they made such a


2012

decision in the future (hypothetically speaking), almost 60 percent answered with “nearshore” and
only less than 15 percent answered with “offshore”.

Overall, the results of the UK ITO versus In-House Development Survey 2012 suggest that ITO is yet
to be discovered by more small to mid-sized UK organisations in the near future and is here to stay
for a while.

A more detailed analysis of the 2012 trends, challenges and behaviors as well as their comparison to
the last year’s practices will be presented in the 3d Annual Pan-European IT Outsourcing Intelligence
Report to be published in Q4 2012 after all of the major European ITO markets have been explored.


2012

ABOUT THE SURVEY
The UK IT Outsourcing and In-House Software Development Survey 2012 was conducted between
March 19 and May 3, 2012, in the frames of the 3d Annual All-European IT Outsourcing research.

Survey goals:

 Explore factors that drive UK-based companies to outsource their software development / IT
function(s) onshore, nearshore and/or offshore
 Identify key challenges of the outsourced and in-house software / web development
 Benchmark the current and future demands for IT outsourcing services across diverse
industries
 Benchmark the current and future demands for IT resources within the UK
 Find out which business model works best for the outsourced software development and
why
 Compare and contrast the actual incurred versus contracted costs of ITO services
 Explore the current level of satisfaction with ITO service providers and quality of delivered
software products/services
 Explore factors keeping UK companies away from adopting IT Outsourcing
 Explore the key challenges and problem solving best practices adopted by the UK companies
that develop / manage their software solutions in-house.

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 UK 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 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 initiative, the following steps were taken:

 Online press releases and survey announcements distribution;
 Survey localization and optimization in social media such as LinkedIn, XING, Facebook,
Mobile Monday London, blogs ( Twitter, Word Press, IT Sourcing Europe’s Blog), event
management systems (Amiando), and B2B web portals (Europages, Hoovers)

Number of survey participants – 801 UK companies, of which 416 were IT / software development
outsourcing companies and 385 – companies developing their IT solutions within own house.


2012

RESPONDENT PROFILE


2012


2012

UK IT OUTSOURCING 2012: DESTINATIONS, TRENDS, CHALLENGES, PROBLEM
SOLVING


2012


2012

FUTURE UK IT OUTSOURCING: FORECASTS & EXPECTATIONS


2012


2012

About IT Sourcing Europe

IT Sourcing Europe is a UK-based market intelligence company specialized in the European IT
Outsourcing market research and consultancy.

IT Sourcing Europe provides:

 Top quality quantitative and qualitative ITO market research and fieldwork services
 Evaluation of Central and Eastern Europe's ITO 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 ITO strategy / engagement
 Ad-Hoc ITO strategy development and full-cycle support

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

Registration at the UK Companies House: 07217899

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Sourcing Europe.


UK IT Outsourcing Intelligence Report 2012

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UK IT Outsourcing Intelligence Report 2012