2023/2024 European IT Sourcing Study
The 2023/2024 European IT Sourcing Study, conducted by Whitelane Research, represents the largest survey to date. With over 2,000 participants from Europe’s leading IT-spending organisations, the study gathers insights on the top-performing IT and cloud providers, with over 5,000 unique IT sourcing relationships and close to 8,000 cloud sourcing relationships evaluated.
The growth of the IT services market in Europe is expected to continue in 2024, albeit at a slower pace than 2023
The growth of the IT services market in Europe is expected to continue in 2024, albeit at a slower pace than in 2023. Over the next two years, 31% of European organisations plan to increase their outsourcing activities, marking a 5% decline from last year. A majority of 39% intend to maintain their current outsourcing levels, while 15% of clients intend to outsource less. Insourcing is up 2% since 2022/2023 and 4% overall since 2021/2020 – driven by the desire to develop and retain intellectual property (IP).
By industry, the telecommunications and technology sector leads outsourcing intentions at 38%, followed by the public sector at 34%. In contrast, the energy and utilities sector demonstrates a relatively lower intention to increase outsourcing at 21%, with a significant 44% majority planning to maintain their current outsourcing levels. The retail industry exhibits the highest interest in insourcing, with 22% of respondents indicating they will outsource less. Conversely, the public sector shows the least inclination towards insourcing, with only 12% planning to outsource less.
Scarcity of talent and the desire to be able to scale up/down in a more uncertain economy are the main drivers for growth.
The primary outsourcing driver in Europe is access to resources/talent, cited by 55%, reflecting a 6% increase in response to a more competitive labour market. Scalability to business needs falls to second place at 54%, followed by a focus on core business (51%). Cost reduction, no longer a top three driver, retains its top position in France, Switzerland, and the United Kingdom.
Security and Automation top the investment agenda of CIOs in Europe; (Generative) AI not in top 5
Security emerges as the top investment area, with 60% of clients aiming to enhance security measures and cyber defence capabilities in the next two years. Automation follows closely at 57%, while 45% plan to migrate core business applications to the cloud. While a significant number of clients are exploring (Generative) AI, it isn’t among the top five investment priorities for CIOs in Europe.
Clients plan to increase nearshore to complement offshore/onshore; however, capacity may be an issue.
Demand for nearshore delivery is up significantly: 35% of organisations expect nearshore to grow (versus only 7% of organisations who predict a decline). The primary reasons for organisations to look at nearshore are the desire to have a more diversified location strategy (less dependence on India), compliance restrictions (keep delivery within the EU) and tactical benefits (travel time, language, etc.). However, nearshore capacity will not be able to cater to this significant increase in demand. Clients should be aware that pressure on rates and attrition will likely increase, complicating large transitions to nearshore.
General satisfaction: Exceptional Performers
Overall, respondents are satisfied with their IT service provider(s), with 68% of all 5,211 IT sourcing relationships rated ‘satisfied’ or ‘very satisfied’. Notable newcomers like EPAM, EY, and PwC are among the 26 featured providers. The overall satisfaction rate remains stable at 75%.
TCS and EPAM lead general satisfaction with a score of 82%, followed by Hexaware at 80%. The top three providers achieve exceptional performer status.
The exceptional performers by IT service tower are:
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Digital transformation: EPAM, Hexaware, and TCS
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Application services: EPAM, Hexaware, and TCS
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Cloud & infrastructure services: NTT DATA and TCS
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Workplace services: Infosys and TCS
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Security services: PwC and TCS
The European report includes full rankings for the above IT service towers.
This year, almost 8,000 cloud-sourcing relationships have been evaluated. Amazon Web Services (AWS) and Microsoft Azure lead the infrastructure cloud platform ranking, each earning a satisfaction rating of 79%. Microsoft Office 365 secures the top spot in the software cloud platforms ranking with an 84% satisfaction rating and a significant market share based on 1,501 client evaluations.
Purchase the European report
The 2023/2024 European report ranks the IT service providers by five IT service towers and KPIs. The cloud providers are ranked by infrastructure and software cloud platforms. The report also covers the latest sourcing and governance trends. Please contact info@whitelane.com for more information.
