whitelaneresearch

• Over the next two years outsourcing will continue to increase in the United Kingdom with 71% of organisations planning to outsource at the same rate or more, with the percentage of organisations planning to outsource more increasing by five percentage points in comparison with last year. For the first time since 2015 the number of clients planning to outsource less (insource) has decreased dropping from 22% to 16%.
• Clients indicate the main rationale for insourcing is driven by “the need to retain and own their own intellectual property” (75%) together with a shift towards more “agile ways of working” (75%).
• The adoption of agile has become mainstream, however ability to implement and sustain remains patchy, particularly in traditional organisations. Challenger organisations increasingly using agile to improve speed to market.
• Entry barriers are reducing for digital age service providers. Organisations are increasingly open to work with smaller players, particularly those offering niche products and solutions.
• Cost reduction is the most important outsourcing driver for the fourth consecutive year, followed by focus on core business and access to resources. Service providers place even more importance on cost reduction and almost twice as much importance on business transformation as reasons for why their clients outsource their IT services.
• An increasing number of organisations are finding ways to decrease the run budgets to invest in change.
• Despite a decrease of 4 percentage points since last year, the service provider community continues to show a strong overall satisfaction level with 84% of the clients being somewhat to very satisfied of the 766 evaluated IT sourcing relationships.
• Hexaware and Amazon Web Services (AWS) are the joint highest-ranking providers with a general satisfaction score of 78%, followed by NIIT Technologies (76%) and TCS (75%).

Across the four different IT domains, the highest ranking providers are:

• For application development, maintenance, testing and SaaS: Hexaware, NIIT Technologies and TCS
• For data centre managed infrastructure and hosting: TCS, Amazon Web Services (AWS) and Capgemini
• For network & telecommunications: Orange, Vodafone and BT
• For end-user services and collaboration solutions: TCS, HCL and Microsoft

Manish Khandelwal, IT Transformation expert at PA Consulting, says: “Technology driven challenger organisations are transforming the way services are delivered and consumed across sectors. Technology investments are growing, presenting significant opportunities for established service providers and new entrants with differentiated offerings. Service providers that are able to transition from traditional delivery and commercial models without compromising the service quality are looking at an exciting future ahead.”

• More than two out of five organisations (42 percent) in the Netherlands are planning to outsource more of their IT in the next two years, with most outsourcing to be expected from the financial services sector (53%). Eleven percent of Dutch organisations are planning to increase insourcing in the coming years.
• The primary reasons for Dutch organisations to outsource their IT services are focus on core business, improvement of service quality and cost reduction. Overall, more than 90 percent of organisations cite that they have (partly) achieved their outsourcing objectives.
• Innovation is an increasingly more important factor for clients (cited by 43% as a key driver), but four out of five participants state that they are not achieving the expected innovation through outsourcing.
• Cloud continues its growth with cloud providers such as Amazon Web Services (AWS), Microsoft (Office Suite and Azure), Salesforce.com having over 80 contracts that have been evaluated in this year’s study.
• 70% of clients indicate that security and privacy concerns are the main barriers to further cloud adoption; service providers do not share this concern as only 30% of providers indicate security and privacy is a barrier.
• The service provider community continues to show a strong overall satisfaction level with an increase in general satisfaction (2% for the whole market compared to last year) and an impressive 88% of the clients being somewhat to very satisfied with the 554 evaluated IT sourcing relationships.
• On the overall ranking for general satisfaction, Amazon Web Services (AWS) is ranked number 1 with a satisfaction score of 84%, followed by Centric (79%), TCS and Accenture (both at 78%) and Salesforce.com (76%).

Across the 4 different IT domains, the highest ranking providers are:

• For application development, maintenance, testing and SaaS: TCS, Accenture and Salesforce.com
• For datacenter managed infrastructure and hosting: Amazon Web Services (AWS), Centric and Microsoft (Azure)
• For network & telecommunications: Vodafone, Orange Business Services and KPN
• For end-user services and collaboration solutions: Centric, Microsoft (Office Suite) and Cegeka

• Over the next two years more outsourcing is predicted for Germany, with 43% of all organisations citing that they are planning to outsource more. The percentage of companies that are planning to insource has also gone up from 14% to 20% since last year. On a European level, Germany (together with the United Kingdom) has one of the highest levels of insourcing.
• We have asked the 20% of organisations that plan to outsource less what factors are driving more insourcing. The primary reason to insource is the need to drive business transformation (cited by 80%) followed by the need to increase the speed/quality of delivery (67%).
• Service providers need to better understand why their clients outsource. From a client perspective, the main objectives are focus on core business, access to resources and cost reduction. Service providers in Germany however place more importance on cost reduction, business transformation and innovation while they undervalue the importance placed by their clients on focus on core business and improvement of service quality.
• The service provider community shows a strong overall satisfaction performance with an impressive 84% of the clients being somewhat to very satisfied with the 602 IT outsourcing relationships evaluated.
• TCS continues to be ranked as overall number 1 with a general satisfaction score of 77% and is followed by NTT Data (Itelligence) (76%), Data Group (75%), new entrant Google and HCL (both at 74%), Amazon (72%) and Cognizant and Wipro (both at 71%). The average satisfaction score drops by 2% with the majority of providers experiencing decreases in satisfaction in comparison with last year.
• Robotics and Artificial Intelligence are increasingly more adopted in Germany with 54% of organisations citing that they are currently using these new technologies and 90% citing the benefits as significant or even very significant.

• Over the next two years more outsourcing is predicted for Switzerland, with almost 50% of all organisations citing that they are planning to outsource more. Interestingly also the percentage of companies that are planning to insource has gone up from 7% to 12%.
• From a client perspective, the main objectives to outsource are cost reduction, focus on core business and access to resources. Service providers in Switzerland place more importance on business transformation while they undervalue the importance placed by their clients on innovation and focus on core business as objectives to outsource their IT services.
• Overall, respondents are satisfied with their IT service provider(s), with 85% of the 304 IT sourcing relationships being evaluated as satisfactory.
• TCS is the highest ranked provider with a general satisfaction score of 74%, followed by SAP and new entrant Amazon (both at 73%), Cognizant and T-Systems (both at 71%), Microsoft (70%) and HCL and Verizon (both at 68%). Average satisfaction drops by 4% in comparison with last year while satisfaction across each of the IT domains also decreases with few providers improving upon last year’s scores.
• More than half of organisations are already using Agile as the preferred delivery model while another 30% of participants plan to adopt it. There is however still uncertainty about how exactly the agile methodology can best be incorporated, as we see organisations that no longer believe they require a traditional planning and justify any delays as well as organisations that are afraid that the costs and planning cannot be controlled anymore.
• Robotics and Artificial Intelligence are increasingly more adopted with almost 58% of organisations citing that they are currently using these new technologies. Most clients expect their service providers to keep up to date with the latest developments in this area and integrate this into their service offering in order to further improve the service delivery and at the same time lower costs.