The Nordic outsourcing market continues to grow and mature in terms of outsourcing capabilities, sophistication and the use of global delivery models. Client satisfaction is still very high - with a majority of clients considering renewals of contracts with their existing IT service providers.
Indian heritage providers are not as dominant compared to previous years, but they still score well due to their strong focus on building trust-based relationships.
The 2016 Nordic IT Outsourcing Study, conducted by Whitelane Research in collaboration with PA Consulting Group, investigated close to 1,000 unique IT outsourcing contracts held by over 300 of the top IT spending organisations in the Nordic region. The total combined annual value of these contracts is close to £6 billion and covers all industries. The scope of this research makes it the most comprehensive study covering IT outsourcing and IT service provider performance across the Nordic region.
The Nordic outsourcing market is growing, maturing and the vast majority is satisfied with their service providers. The Indian dominance among outsourcing providers has however been broken - although they still score highly among clients. Application service providers have enjoyed a strong growth over the last few years and are doing very well from a customer satisfaction perspective.
Henrik Ringgaard Pedersen,
PA sourcing expert
Companies will continue to outsource more. 46% of all respondents confirm they will continue to outsource more, indicating that the Nordic market still has significant growth potential.
Cost reduction (cited by 67%) is the main driver for companies planning to outsource more. This is particularly true in Norway (81%) due to macro-economic factors, eg the sharp and continuous decline in the oil price.
Access to resources (cited by 62%) is the second most important driver for companies planning to outsource more based on a need for scalability, flexibility and lack of skills.
The service provider community shows a strong overall satisfaction performance with an impressive 90% of the clients being somewhat to very satisfied with their outsourcing contracts.
TCS is ranked the highest for overall service provider satisfaction. However, there are local differences in service providers' performance between Denmark, Finland, Norway and Sweden.
3 out of 6 at the top of the Nordic ranking in this year's survey are either local or global outsourcing firms (Basefarm, NNIT and Accenture). The Indian dominance among the Nordic outsourcing providers are accordingly broken.
Even though cost reduction remains the most dominant outsourcing driver, it is becoming less important and is increasingly supplemented by non-financial drivers, especially access to skilled resources and the ability to focus on the core business.
Business transformation is the fastest growing driver for outsourcing, but not ranked higher than 5th place among clients. Societal digitisation and automation are, to some extent, creating a need among clients to look at innovation with the help of its service providers.
From a sector perspective, public sector is taking a more restrictive approach to outsourcing than Nordic organisations in general. As a result, only 5% of the respondents state they plan to increase their outsourcing investments in the coming years, and as much as 21% are looking to outsource less.
An analysis of more than 4,000 European IT outsourcing contracts confirms that high quality of the service delivery has the biggest impact on companies' general satisfaction with their IT service providers. Account management and escalation effectiveness come in at 2nd and 3rd place.