The Danish outsourcing market has entered a new phase: CIOs want full control
A number of specific factors are setting the agenda right now for the outsourcing market in Denmark, and it is important to take stock if you are both a supplier and a user.
Read the article in Danish Computerworld.
The headlines in the market right now are about normalisation and stabilisation, says Henrik Ringgaard, PA partner and sourcing expert to Computerworld.
His conclusions reflect the 2023 edition of the Nordic region's largest IT outsourcing report, Whitelane Research, prepared by the consulting firm PA Consulting Group and the research firm Whitelane.
Ringgaard, who for the past 11 years has collaborated with Whitelane Research on measuring customer satisfaction with outsourcing and cloud contracts, explains that another trend is that many of the large companies are, to a significant degree, starting to review the level of outsourcing they need.
"It is also a little more differentiated. In the past, many companies were either fully outsourced or fully insourced. Those who outsourced had often chosen either several suppliers for everything, or one for everything," he says and continues:
"Now they are starting to land somewhere in between, where they have a few long-term agreements and relationships with some suppliers, and otherwise constantly adjusting the details and figure out what needs to be done by their suppliers and what they themselves should be responsible for to meet company needs for control, " he says.
One of the reasons for change is precisely the desire for control.
In the past, companies have outsourced so much that they have lost some competences, some control and have been governed by very rigid contracts based on predictability.
The problem is that the world has not been and has not become predictable.
Therefore, companies no longer have the time to make or discuss long, advance contracts, he says.
However, there will still be plenty of contracts to be put out to tender, and there will be changing suppliers for some of the large customers, explains the sourcing expert.
"But basically, I see a market that stabilises and adapts around the small things more than a big movement," he says.
Three things characterise the top performers
According to Henrik Ringgaard, there are three things that characterise the top performers in the Whitelane report.
The first thing is that both suppliers and customers are good at finding the right match.
Whether it's an efficient, stable and cost-effective partner who needs to operate and maintain something, or a transformation partner to implement major digital changes in one's business, he explains.
"Those who perform well are those who are good at finding their strengths to deliver on and match with customers, and don't try to deliver everything," he says.
Another thing that characterises the top performers is that they have understood flexibility and other needs.
"This means that they can react fairly quickly and easily. They are not over-rigid in terms of contracts and agreements while finding solutions," he explains.
The third characteristic is that they are suppliers who have a very good understanding of the industry.
"They understand, for example, that you work in a regulated industry. It can be a bank, a pharma company or the government, and they understand the dynamics and the legislation and the business climate and they can adapt to it."
Immature market for cloud platforms causes fluctuations
If you look at the satisfaction with cloud platforms, it is Google's cloud platform that particularly stands out.
Compared to 2022, the search giant's infrastructure cloud platform has jumped up 14 percent in the satisfaction survey.
An immature customer market is one of the explanations, says Henrik Ringgaard.
This is because customer needs are changing at the same time as technology is moving as fast as it is.
"For me, it's much more about the ability of these suppliers – and in this case Google – to continuously publish and adapt to new things," he says and continues:
But also customers' improved ability to use the right tools. It's very much about suppliers like Google, Microsoft and Amazon being able to advise their customers well on how to be successful with their products."
The requirement for good and competent advice is fundamental due to the almost endless possibilities that customers cannot see for themselves.
It's sometimes about making it much more simple and accessible than having a lot of items on the shelves, he explains, comparing it to a supermarket that has 25 varieties of the same items.
"It's easier to choose when you only have three options," he says
While it is getting closer at the top, the competition is also increasing, says Henrik Ringgaard from PA Consulting.
"There has been a little bit of consolidation in some areas over the last few years. But conversely, new players have also joined. Some of the acquisitions that have taken place have been international companies being bought up," it reads.
Here he highlights, among other things, Basefarm in Norway, which has been acquired by Orange, while IBM has moved on after the divestment of Kyndryl. But the competition is fierce, he says.
"We see many of the suppliers, especially the international ones, making significant investments in the Nordic region and fighting for customers," he says and continues:
"When you look at the ranking of suppliers from last year to this year, it has become closer at the top. And when you dive into the different countries and areas, it's not just one company that is at the top."
Fewer Danish companies expect to outsource this year
This year's Whitelane report also shows that fewer Danish companies expect to outsource this year.
According to Henrik Ringgaard, this is partly due to a desire for more stability, so that things do not become too confusing for companies.
"There are a lot of other things that are changing. Maybe you are changing partners or finding new ways to deliver things. It can be a bit confusing if you have so much change," it reads.
At the same time, it is also due to the fact that some of these exercises cost money and create inertia in the IT department and perhaps also the rest of the business, Ringgaard explains.
"And then it's about the market maturing. You are starting to be in a better place than you were a few years ago in terms of how many and which suppliers you need," he says and continues:
"There is still a lot of maturation needed in the market. Especially in the companies' competence levels on a number of key topics."