DACH IT Outsourcing Markets – Industry Tendencies For 2007

Throughout 2007, the information technology and telecommunication market in EU-countries is expected to demonstrate 2,9 % increase (668 billion Euro value) as compared to the previous year. This data is verified by BITKOM (German Association for Information Technology,

Telecommunications and New Media e.V.) and recent research by European Information Technology Observatory (EITO). Dr. Bernhard Rohleder, CEO for BITKOM forecasts positive market dynamics for 2008 at the same growth margins. The guiding industry segments encompass Software (6,5% per cent growth) and IT Services (5,5% growth).

When supply meets demand: the case of IT outsourcing

Nearly two thirds of the interviewed firms declared their intent to employ extra personnel in 2007. In this sense, the shortage of the highly qualified IT resources is being considered as a substantial challenge to the long-continued development of the information technology industry. As far back as in 2004, Gartner consultants estimated that before 2010 up to 25% of the traditional IT jobs in the Europe will be outsourced to more cost-effective locations. However, taking into consideration the current outsourcing growth rates, the quantitative dimension of this trend will be even more impressive.

According to BITKOM research, 43 per cent of German IT-firms experience problems with staffing. During the coming years this trend will become even more visible due to demographic decline, shortage of highly qualified personnel and yet good IT market opportunities. Approximately 20,000 job positions in German IT sector are currently unoccupied. Most popular job offerings include well-trained software developers, IT project managers and IT consultants. outsource 

At the same time, the growing demand in the IT personnel market brings about corresponding proposition from the foreign outsourcing vendors and consequently toughens the competition among the IT providers from abroad. Approximately 58% of the Schwartz Public Relations interviews have expressed their willingness to outsource the activities associated with IT Services domain to nearshore and offshore locations like CEE, China and India. Unlike the nearshore competitors, Indian IT-specialists are unwilling neither to work on onshore contracts nor apply for German Green Card.

IT outsourcing: attractions and concerns

As outlined in recent publication in CIO magazine, the main driving force behind outsourcing remains cost reduction, this aspect gains additional significance for larger enterprises. Additional reasons for outsourcing encompass betterment of services, achieving flexibility and conformity to industry standards.

Judging from the outcomes of CIO-Online Survey, 77 per cent of the interviewees outline loss of know-how as the major risk of outsourcing. It has demonstrated visible opinion shift as compared to 2005 poll: professional know-how loss constituted significant concern “only” to 36 per cent of surveyed professionals, while inappropriate quality caused substantial problems to 48 % of the interviewees. Additional arguments against outsourcing included overwhelming dependence from the provider, loss of primary competence, security issues and lack of adaptable processes. overhead, non-transparent business models and failing to meet deadlines.

 

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