In the media

Outsourcing is out – more and more people want to bring their IT in house

Peter Wardell

By Peter Wardell

Computer Sweden

31 March 2023

Fewer and fewer Swedish organisations are planning to increase their IT outsourcing. Instead, insourcing is growing, i.e. taking your IT back in house.

Read the article in Computer Sweden

Traditionally, the outsourcing market is very active in tough times. To save costs, companies outsource their IT so they can focus their firepower on the core business.

However, this is not proving true of the current recession, at least not so far, judging by this year's large Nordic outsourcing survey from PA Consulting and Whitelane Research.

They have evaluated 750 IT outsourcing deals in the Nordic region and 1400 cloud transactions. In total, 25 outsourcing providers and 12 cloud providers have been evaluated and rated based on customer satisfaction.

What can be seen on the buyer side is that they are not planning to increase IT outsourcing.

"This is a trend that has been going on for the past decade, but it has actually become even clearer this year. There are fewer and fewer people planning to increase their outsourcing in the Nordic region,” says Peter Wardell, sourcing expert at PA Consulting.

Why, then, is the outsourcing market not taking off, even though companies should be interested in driving down costs and are also having difficulty finding the right skills?

“Above all, it is because they want to be more agile, to be able to act quickly if there are changes in the market. Organisations want customer-oriented services internally and they do not want to outsource their knowledge about their customers, products and services.”

Strong trend to focus on security

Another important reason is that organisations want stability in their internal teams.

"You can see that they want to outsource more of the standardised applications, such as logistics, HR and business systems, but also workplace location services and network services.”

In total, 20 percent of Nordic organisations plan to outsource more, compared with 26 percent last year. Just as many, 20 percent, plan to outsource less, that is, to bring services back in house. That proportion, on the other hand, is increasing over time.

“Another important aspect of this is that the security trend is so strong right now," says Peter Wardell. It is striking how companies are prioritising cyber security, which stems from the turbulence in the outside world.

This, too, may mean that interest in more outsourcing decreases.

"Companies want to build up their own skills. In security, you must also have your own skills to be able to be a good customer.

"We can see that organisations are bringing vital parts of their approach to safety home," adds his colleague Peter Davidson, also a sourcing expert at PA Consulting.

Fewer giant deals

In addition to safety, organisations are prioritising investments in automation, according to the survey. Above all, it is about being able to take advantage of the technical tools that exist in areas such as AI and machine learning.

Another clear development in recent years is that there seems to have been an end to mega deals.

"There are several explanations," Wardell says. More people are investing in multisourcing in combination with insourcing. But above all, if you make a major change in the business today, you put it in the cloud. Then there will be less left for the big players who have the biggest operating contracts.

Among the companies that still plan to outsource more, access to skills is the biggest driver. 64 percent say that's their reason to outsource. This is perhaps not entirely surprising in light of the skills shortage that exists in IT.

Scalability is the second most common reason and only after that comes cost reduction.

Nordic suppliers at the bottom

How satisfied are customers with their suppliers? The average is 73 percent, which Peter Wardell and Peter Davidson believe is a good figure. However, there is a big difference between the different providers. TCS, Infosys and Accenture are at the top with a customer satisfaction rating in the Nordic region of 81 percent.

At the bottom are the Nordic suppliers KMD (65 percent), Tietoevry (66 percent) and IBM spin-off Kyndryl (66 percent).

"What characterises the suppliers that have a good ranking is that they perform well in account management or customer management," says Peter Wardell. It is very much about relationships, they take care of their customers and react quickly to new needs.

"Suppliers who are struggling are usually those who have undergone major internal transformations. We have seen this repeatedly. If companies embrace on change, they turn their gaze inward and get a dip in customer satisfaction.”

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