Case Study - Denmark

ContentIntroduction and short characteristics of

Denmark Research description and methodology IT outsourcing : destinations, trends, challenges,

problem solving Client – Vendor relationships Outsourcing costs and cost effectiveness IT outsourcing predictions for future Conclusions Bibliography

Short Characteristics of Denmark Denmark has a number of characteristics that

distinguish it from its northern European neighbours. It consist of 406 islands and has  7314 km of coastline. Official currency of Denmark : Krone - Kr (Crown) Capital : Kopenhag Population : 5.905.500

Short Characteristics of Denmark

The thought that outsourcing is only for large companies has been dispelled in Denmark since 2003.

In Denmark the current economic situation (2009) is heavily influenced by the Global Financial Crisis. Companies seek to free or save resources and costs by outsourcing central functions as IT, Finance, HR and Production etc

Introduction This Intelligence Report is based on the survey of the 150 Danish companies that either outsource their Software Development / Information Technology function(s) to an external service provider onshore (within Denmark), nearshore (within/close to the same time zone) and/or offshore (more than 2 time zones away), or develop their software/IT solutions in-house.

Research Description The Report aims to help Danish outsourcing companies:Get an in-depth understanding of the current IT

Outsourcing demands and trendsSee what challenges are facing their market peers /

competitors and how they respond to themRevise / improve their current IT Outsourcing engagements

/ business models based on the industry best practices

The Report aims to help Danish non-outsourcing companies:Better understand modern software development/IT costs

optimization and/or reduction strategiesSee what challenges are facing the in-house software

development and how their market peers / competitors respond to them

MethodologyAn Online Survey was undertaken between

August and December 2012, with the objective of understanding better, the current IT outsourcing market dynamics in the European Zone and study what are the key decision factors the buyers believe, should be met while sourcing to an off shore IT Service provider.

The questionnaire returned 141 answers from companies ranging from 150 IT users.

Danish IT Outsourcing 2012 Destinations, Trends, Challanges, and Problem Solving

What are the main reasons for your company to outsource IT activities?

Improved quality of service

Cost reduction

Lack of resources

Improved financial control

Strategic decision

Free management time

Increase flexibility

Access to specialist

0% 10% 20% 30% 40% 50% 60% 70%

If you do project outsourcing, what is the value of your project(s) (in €)?

0-49K

50-199K

200-499K

and more

0% 10% 20% 30% 40% 50% 60%

Web & Mail Hosting

Application Hosting

IT-Security services

System / Software

Facility Management

Support / Help Desk

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

What are the most common and successful IT outsourcing types used by Danish SMEs?

Headcounts

If you have an in-house IT team, what size it is? (Headcount)

35%

22%

10%

4%

25%

4%

1 -- 2 3 -- 5 6 -- 7 8 -- 9

10 -- 19 20 +

Percentage

of

Total

responses

Importance levels

Skilled labour

Cost

Security

Domain Experience

Geopolitical stability

Available Local Support

Cultural Compatibility

Infrastructure

Time Zone Proximity

Experience Across Industries

0 20 40 60 80 100 120

Extremely Important Very Important Important

Client-Vendor Relationships

We did online research

We asked peers for references

We were approached by ITO service provider

We released Request for proposal

We hired an outsourcing consultancy

All other responses

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

How companies found their current ITO partner(s)

What business model used in the ITO engagements?

Fixed-price project

Dedicated/Managed/Own team

Offshore/Nearshore Dedicated Center

Joint Venture

Captive/shared Services Center

Vertual Operating Subsidiary

Build-Operate-Transfer

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Who Hires IT Talent To Be Involved In the Outsourced Project Execution?

Our ITO partner

Our company

Both our company and ITO partner

0% 10% 20% 30% 40% 50% 60%

What are the services entrusted to your outsourcing provider?

IT services

Accounting

Human resources management

Supply chain management

Cash management

Sales and marketing

Research and development

Treasury management

Investment management

Other

0% 10% 20% 30% 40% 50% 60%

51%

32%

30%

16%

15%

8%

8%

3%

2%

16%

Actual Savings From ITO

Less than 10%

10%-24%

25%-39%

40%-59%

60% and more

0% 5% 10% 15% 20% 25% 30% 35%

30%

30%

18%

14%

8%

OUTSOURCING COST & COST EFFECTİVENESS

Challenges of the In-House IT / Software Development

Improve/change software development methodology

Extend project deadlines

we do nothing

dedicate more managerial resources

adopted distributed development

we consider outsourcing our development

change business model

encourage internal staff to work overtime

hire foreign IT specialist

improve corporate training function

0% 5% 10% 15% 20% 25% 30% 35%

33%

28%

24%

20%

16%

16%

12%

8%

4%

4%

What are your general impression of the outsourced software development?

Do you plan to continue outsourcing your software development in the next 12 to 24 months?

Yes78%

No 22%

How companies rate the following factors in terms of their importance in the future choice of IT outsourcing

geographical proximity

cultural proximity

language skills

political stability

economic stability

low service rates

available IT talent / resource pool

strong R&D capability

positive referencesfrom peer companies

legal system and IP protection maturity

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

not important somewhat important very important

IT outsourcing predictions for future

Conclusions There is an increasing demand for ITO services from high-tech

startups and enterprises in the SME sector as well as diverse industry niches, both “traditional” such as finance and construction and innovative such as digital media, online gaming and mobile computing

In 2012, the greatest demand for the outsourcing services comes from IT (software development) sector, followed by government and professional services sectors.

Telecommunication companies demonstrate the smallest demand for the external IT resources.

Web remains the most demanded area of expertise and is outsourced by more than 70% of Danish companies.

Mobile development follows being outsourced by 40.5% of companies. In 2012, the top three ITO destinations remain the same as in 2011 Today’s companies still outsource to reduce operating costs and

access IT skills and resources that are hard to find / costly within Denmark.

The survey results underscore that 35% of Danish outsourcers are somewhat satisfied with their current ITO vendors and the quality of services provided.

Bibliography http://www.slideshare.net/itsourcingeurope/danish-ito-

intelligence-report-2011?qid=c77755ad-7312-4de4-9d43-67bb0de8c4e2&v=default&b=&from_search=2