| Throughout 2007, the information technology and | | | | billion Euro. According to recent IDC investigations, its |
| telecommunication market in EU-countries is expected | | | | market share comprises 38%. German top IT |
| to demonstrate 2,9 % increase (668 billion Euro value) | | | | outsourcing providers encompass IBM, Fujitsu, |
| as compared to the previous year. This data is verified | | | | Hewlett-Packard, Siemens, EDS, Info AG and TDS. IT |
| by BITKOM (German Association for Information | | | | outsourcing acquires paramount importance for |
| Technology, | | | | German enterprises: as mentioned in Meta Group |
| Telecommunications and New Media e.V.) and recent | | | | market investigation, 37 % of the companies are willing |
| research by European Information Technology | | | | to execute partial or complete outsourcing of their IT |
| Observatory (EITO). Dr. Bernhard Rohleder, CEO for | | | | activities. Another survey by CIO.de, conducted at the |
| BITKOM forecasts positive market dynamics for 2008 | | | | end of 2006, provides clear evidences that 51% of the |
| at the same growth margins. The guiding industry | | | | interviewees plan to outsource their IT activities and |
| segments encompass Software (6,5% per cent | | | | 15% are still undecided. |
| growth) and IT Services (5,5% growth). | | | | The 30 largest IT providers in Germany occupy |
| When supply meets demand: the case of IT | | | | approximately 60% of total market volume, with the |
| outsourcing | | | | rest of the numerous smaller market players: regional |
| Nearly two thirds of the interviewed firms declared | | | | providers and IT branch establishments. The IT service |
| their intent to employ extra personnel in 2007. In this | | | | landscape in Germany is also characterised by |
| sense, the shortage of the highly qualified IT resources | | | | increasing number of mergers and acquisitions; notes |
| is being considered as a substantial challenge to the | | | | of transactions interest exists both from foreign |
| long-continued development of the information | | | | providers and German IT companies. |
| technology industry. As far back as in 2004, Gartner | | | | According to A.T. Kearney consultancy, IT providers |
| consultants estimated that before 2010 up to 25% of | | | | operating in Germany could be classified as follows: |
| the traditional IT jobs in the Europe will be outsourced | | | | - Global Players (extensive service portfolio, min. EUR |
| to more cost-effective locations. However, taking into | | | | 10 billion turnover); |
| consideration the current outsourcing growth rates, the | | | | - Major Regionals ( broad service portfolio, regional or |
| quantitative dimension of this trend will be even more | | | | country-specific focus, EUR 1 – 10 mln turnover, |
| impressive. | | | | approx. 40% foreign capital involvement); |
| According to BITKOM research, 43 per cent of | | | | - Indian Firms ( major focus on software services, |
| German IT-firms experience problems with staffing. | | | | mid-ranged service portfolio, EUR 500 mln. – 2 |
| During the coming years this trend will become even | | | | billion turnover); |
| more visible due to demographic decline, shortage of | | | | - Captives ( branch establishments with delivery |
| highly qualified personnel and yet good IT market | | | | models oriented to associated company, EUR 50 mln. |
| opportunities. Approximately 20,000 job positions in | | | | – 1 billion turnover, overwhelming regional |
| German IT sector are currently unoccupied. Most | | | | course); |
| popular job offerings include well-trained software | | | | - Second-Tier ( regional firms, up to EUR 500 mln. |
| developers, IT project managers and IT consultants. | | | | Turnover, specific service focus). |
| At the same time, the growing demand in the IT | | | | The ‘big deals’ pattern on the German |
| personnel market brings about corresponding | | | | market much resembles the Swiss one: multi-million |
| proposition from the foreign outsourcing vendors and | | | | contracts are becoming a rare case, with the |
| consequently toughens the competition among the IT | | | | projection of turning into exception in the nearest |
| providers from abroad. Approximately 58% of the | | | | future. Selective outsourcing is gaining more and more |
| Schwartz Public Relations interviews have expressed | | | | popularity, involving partial infrastructure components or |
| their willingness to outsource the activities associated | | | | certain business processes. The substantial number of |
| with IT Services domain to nearshore and offshore | | | | industry players from Finance, Telecommunication, |
| locations like CEE, China and India. Unlike the nearshore | | | | Media and Insurance verticals outsource their IT |
| competitors, Indian IT-specialists are unwilling neither to | | | | processes to external vendors. Another interesting |
| work on onshore contracts nor apply for German | | | | note: the bigger the company, the greater emphasis is |
| Green Card. | | | | laid upon outsourcing: Meta Group survey results for |
| IT outsourcing: attractions and concerns | | | | companies that employ more than 5,000 staff |
| As outlined in recent publication in CIO magazine, the | | | | members testify that 46% of the corporations take |
| main driving force behind outsourcing remains cost | | | | advantage of complete or partial outsourcing. |
| reduction, this aspect gains additional significance for | | | | In outsourcing of applications the lead take ERP |
| larger enterprises. Additional reasons for outsourcing | | | | programs (especially SAP), another 12 per cent |
| encompass betterment of services, achieving flexibility | | | | occupy CRM-applications and branch-specific solutions. |
| and conformity to industry standards. | | | | The prominent role in German IT market plays |
| Judging from the outcomes of CIO-Online Survey, 77 | | | | offshore outsourcing, besides Indian subcontractors, the |
| per cent of the interviewees outline loss of know-how | | | | significant market share retain CEE and SEE |
| as the major risk of outsourcing. It has demonstrated | | | | outsourcing providers, working within well-established |
| visible opinion shift as compared to 2005 poll: | | | | and cost-attractive niches. The recent years have |
| professional know-how loss constituted significant | | | | given birth to brand new models of both ITO and BPO: |
| concern “only” to 36 per cent of | | | | “Software as a Service”, “On |
| surveyed professionals, while inappropriate quality | | | | Demand Sourcing”, “Dynamic |
| caused substantial problems to 48 % of the | | | | Infrastructure” and “Shared |
| interviewees. Additional arguments against outsourcing | | | | Services”. |
| included overwhelming dependence from the provider, | | | | Outsourcing in Austria: growth fueled by SMEs |
| loss of primary competence, security issues and lack | | | | As publicized by IDC Study, until 2010 Austrian market |
| of adaptable processes. overhead, non-transparent | | | | for information technology services will grow by 3,9 |
| business models and failing to meet deadlines. | | | | per cent. In 2006, the Austrian IT market volume has |
| Wolfgang Janko, Austrian IT industry expert mentions | | | | increased by 2,9 %, keeping step with EU average |
| that the first and foremost rule of outsourcing is: | | | | indicator. When evaluating rankings, the major IT |
| “never to outsource the IT services, which | | | | service players, the lead takes Siemens Business |
| constitute the core competence of the enterprise. It is | | | | Service, followed by Raiffeisen Informatik, iT-Austria |
| the mistake that has been executed by nearly 60% of | | | | and IBM. The most dramatic development is being |
| the surveyed companies”. | | | | demonstrated by open source and IT security |
| However, effective risk mitigation strategies along with | | | | services. Since 2004, the most significant IT business |
| carefully examined and mutually agreed partnership | | | | domain remains outsourcing (36% of market share). |
| conditions are capable of minimizing the unwanted | | | | Siemens Study adduces new arguments for increased |
| outcomes of outsourcing. | | | | dynamics for IT outsourcing market in Austria. While |
| Swiss outsourcing times: mega-deals left behind | | | | international analysts measure the market |
| The analysts from Active Sourcing estimate the | | | | development at 12 %, Siemens experts forecast even |
| overall Swiss IT outsourcing market volume in nearly | | | | more rapid IT outsourcing growth. The most important |
| 12,9 billion Euro. The market analysis by | | | | IT business domain in Austria remains outsourcing with |
| German-French corporation PAC supposes that during | | | | market share of 36%. While the complete outsourcing |
| 2006 – 2010 Swiss IT outsourcing market will | | | | of the IT infrastructure experiences stagnation, such |
| grow at 7,5 %. The leading IT outsourcing-consumers | | | | segments as application management along with |
| among industry verticals include Retailing, Public Sector, | | | | network- and desktop-outsourcing demonstrate visible |
| Transport/Tourism, Telecommunications and Insurance. | | | | growth from 11,8 to 13,8 %. |
| In relation to “big deals”, Finance sector | | | | The outsourcing clients are willing to invest in the issues |
| continues to occupy prominent positions: 84% of the IT | | | | with a long–term effect: service-oriented |
| outsourcing agreements with more than CHF 10 million | | | | architecture, enterprise application integration and web |
| total cost of contract were concluded during the last | | | | services. Much emphasize in outsourcing services is |
| twelve months in Finance/Banking industry. The leading | | | | placed upon innovation in other to beat the competition. |
| position at the Swiss outsourcers ranking list occupies | | | | The powerful incentive is given to industry-specific |
| IBM; its close competitors include Swisscom IT | | | | solutions. According to IT branch analyst Christiane |
| Services, T-Systems, EDS, HP, Accenture and CSC. | | | | Pütter, Austrian SMEs are making their choice in |
| Judging from the statistical data for the beginning of | | | | favour of ERP and CRM solutions. The efforts of IT |
| 2007, the total cost of the contracts is decreasing, with | | | | outsourcing providers are focused on Austrian small |
| the era of mega-deals switching to multitude of | | | | and medium enterprises. Joachim Seidler, Branch |
| middle-size contracts in private sector. Over the years, | | | | Manager at IDC Austria notes that “nearly 60% |
| SME segment is gaining increasing popularity among IT | | | | of IT outsourcing services in Austria is delivered to |
| service providers. Other trend that is obviously taking | | | | SME segment”. The subcontracting of IT and |
| place is multisourcing, selective distribution of IT tasks | | | | Telecommunication infrastructure to external providers |
| among diversified providers; it capacitates the | | | | proves to be of utmost interest to Austrian SMEs. |
| minimization of client’s dependence from single | | | | Carlo Wolf, CEO of Cisco-Austria estimate the SME |
| source of outsourced software development and | | | | segment growth at 20% margin (overall market |
| occupies prominent niche within the fastest growing | | | | potential approx. 300 mln.), although this market share |
| trends. The outsourcing clients are getting more and | | | | seems to be relatively small. |
| more equipped to manage multiple vendors | | | | Currently, partial outsourcing is a popular trend among |
| simultaneously. | | | | Austrian IT companies. Albert Felbauer, CEO for |
| The IT market experiences the second wave of | | | | Siemens Business Services Austria, shares his industry |
| outsourcing, with contract renewals and greater | | | | look-out: “Nowadays Austrian enterprises, which |
| acknowledgement of strategic partnerships being on | | | | are engaged in outsourcing relations, subcontract |
| the top of the agenda. Outsourcing providers are | | | | approx. 20 – 30% of their IT activities”. |
| modifying their offerings in sense of increased client | | | | DACH outsourcing market: a look beyond |
| expectations and emerging new technologies. Broadly | | | | To conclude with, the IT outsourcing market in |
| speaking, the price and service offerings of the | | | | DACH-region is going through impactful |
| outsourcing providers in most cases do not have | | | | transformations: mega-deals becoming a rare occasion |
| tangible difference. The most important aspect | | | | and nearshoring and multisourcing gaining more |
| remains, particularly for German-speaking market, | | | | prominent positions. The outsourcing agreements are |
| individually tailored client approaches and working | | | | being concluded for shorter periods, with selective |
| towards satisfying the needs of customer’s | | | | outtasking becoming a viable trend. |
| business. As for the Swiss IT outsourcing market, | | | | While the IT budgets within the companies are not |
| nearly three fourth of all contracts with IT service | | | | substantially pushed up, the IT analysts anticipate stable |
| providers are renewed. However, according to data | | | | outsourcing market growth (7 – 10 %) in the |
| publicized by Active Sourcing, during the third quarter | | | | years to come. Branch-specific services are winning |
| of 2006 the newly signed contracts dominated on the | | | | dominant market share, with Finance/Banking solutions |
| market. | | | | taking the lead. The new outsourcing era will be |
| German outsourcing landscape: even more benefits | | | | marked by the powerful wave of merges and |
| for larger enterprises? | | | | acquisitions, especially among CEE outsourcing |
| Throughout 2004 – 2006, the German | | | | providers and DACH IT corporations. SME market, |
| outsourcing market has grown by 8 per cent, totalling | | | | including start-ups, would also generate constantly |
| EUR 12 billion. Starting from 2006, the market dynamics | | | | growing demand for outsourcing services, toughening |
| has accelerated, amounting for 11 per cent annually; the | | | | competition between outsourcing multinationals and |
| figures for 2007 are expected to reach more than 15 | | | | nearshore providers. |