EU MARKET SURVEY 2005

Software, IT servicesand outsourcing

EU MARKET SURVEY 2005

Software, IT services and outsourcing

Compiled for CBI by: Facts Figures Future

In collaboration with:

L. Klucs

May 2005

Disclaimer CBI market information tools Although the content of its market information tools has been compiled with the greatest care, the Centre for the Promotion of Imports from developing countries (CBI) is not able to guarantee that the information provided is accurate and/or exhaustive, and cannot be held liable for claims pertaining to use of the information. In the case of the market publications, neither CBI nor the authors of the publications accept responsibility for the use which might be made of the information. Furthermore, the information shall not be construed as legal advice. Original documents should, therefore, always be consulted where appropriate. The information does not release the reader from the responsibility of complying with any relevant legislation, regulations, jurisdiction or changes/updates of same. In the case of the Internet tools, CBI aims at minimising disruption caused by technical errors. However, CBI cannot guarantee that its service will not be interrupted or otherwise affected by technical problems. CBI accepts no responsibility with regard to problems incurred as a result of using this site or any linked external sites. The information provided is aimed at assisting the CBI target group, i.e. exporters and business support organisations (BSOs) in developing countries. It may, therefore, not be used for re-sale, the provision of consultancy services, redistribution or the building of databases, on a commercial basis. For utilization of the CBI market information tools by the CBI target group on a non-commercial basis, the condition applies that CBI is referred to as the source of the information. All other use is prohibited, unless explicitly approved in writing by CBI. Photo courtesy: Facts Figures Future

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TABLE OF CONTENTS REPORT SUMMARY 4 INTRODUCTION 6 PART A EU MARKET INFORMATION AND MARKET ACCESS REQUIREMENTS 1 PRODUCT CHARACTERISTICS 9

1.1 Product groups 9 1.1.1 Software products 9 1.1.2 IT services 10 1.1.3 Outsourcing 11 1.2 Customs / Statistical product classification 13

2 INTRODUCTION TO THE EU MARKET 14 3 INDUSTRIAL DEMAND 16

3.1 Market size 16 3.1.1 Belgium 20 3.1.2 France 21 3.1.3 Germany 23 3.1.4 Netherlands 24 3.1.5 Spain 26 3.1.6 Sweden 27 3.1.7 United Kingdom 29 3.1.8 Accessing countries from Eastern Europe 30 3.2 Trends 36 3.3 Internet 37

4 PRODUCTION 39 4.1 Total production 39 4.2 Production by EU country 39 4.2.1 Belgium 39 4.2.2 France 41 4.2.3 Germany 42 4.2.4 Netherlands 44 4.2.5 Spain 44 4.2.6 Sweden 45 4.2.7 United Kingdom 46

5 OUTSOURCING 47 5.1 EU (offshore) outsourcing market 48 5.2.1 Belgium 51 5.2.2 France 52 5.2.3 Germany 53 5.2.5 Spain 57 5.2.6 Sweden 58 5.2.7 United Kingdom 59 5.3 Outsourcing sector comparisons 60 5.4 Trends 62

6 OFFSHORE LOCATIONS 63 6.1 Overview offshore locations 63 6.2 India 64 6.3 Philippines 65 6.4 China 66 6.5 Russia 68 6.6 Eastern and Central Europe 69

7 TRADE STRUCTURE 73 7.1 EU trade channels 73 7.2 Distribution channels for developing country exporters 75 7.3 Outsourcing decision making process EU companies 80

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8 PRICES 83 8.1 Price developments 83 8.2 Sources of price information 83

9 EU MARKET ACCESS REQUIREMENTS 84 9.1 Non-tariff trade barriers 84 9.2 Tariffs and quotas 88

PART B EXPORT MARKETING GUIDELINES: ANALYSIS AND STRATEGY 10 EXTERNAL ANALYSIS: MARKET AUDIT 93

10.1 Market developments and opportunities 93 10.2 Competitive analysis 94 10.3 Sales channel assessment 95 10.4 Price structure 98 10.5 Product profiles 99

11 INTERNAL ANALYSIS: COMPANY AUDIT 104 11.1 Standards, quality and USP 104 11.2 Marketing and sales 105 11.3 Financing 106 11.4 Capabilities 107

12 DECISION MAKING 108 12.1 Country selection 108 12.2 SWOT- and situation analysis 110 12.3 Strategic options and objectives 111

13 EXPORT MARKETING 114 13.1 Matching services and service range 114 13.2 Building up a relationship with a suitable trading partner 114 13.3 Drawing up an offer 116 13.4 Handling the contract 119 13.5 Sales promotion 120 13.5.1 Trade fairs 120 13.5.2 Trade press 121 13.5.3 Internet 122 13.5.4 Communication / direct marketing 124 13.5.5 Other tools 124

APPENDIX 1 DETAILED STATISTICS 126 APPENDIX 2 USEFUL ADDRESSES 133 APPENDIX 3 LIST OF DEVELOPING COUNTRIES 141 APPENDIX 4 USEFUL INTERNET SITES 142 APPENDIX 5 CHECKLIST SWOT 151 APPENDIX 6 REFERENCES 153

Update of EU Market Survey Computer Software and IT Services (May 2004).

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REPORT SUMMARY Importance for developing countries Participation in the global software market and IT services industry provides developing countries a big opportunity for growth. The advantages they have are very attractive for EU companies that continuously look for a reduction of costs and quality improvements. Objective The purpose of this guide is to assist small to medium-sized exporters of software related services and IT services from developing countries interested in entering or strengthening a position in European markets. This document is a reference tool. The service provider will need to do his own research to determine if Europe is the suitable market and which country is (countries are) the most promising. Do not assume that what works in the United Kingdom will apply to Germany or France. Although there are many similarities, each country must be treated differently. Services and countries covered This study uses the definition for software products and IT services from the European Information Technology Observatory (EITO). Software products include systems software and application software. IT services include consulting, implementation, operations management and support services. Outsourcing is by far the most promising segment for developing countries and is a major part of this survey. IT outsourcing involves an ‘annuity-based contract that includes at least one management service and one or more of the other IT services (professional and product support), except for business process transaction management. The country selection is mainly based on opinions of experts and studies of market research firms. The countries covered in this survey include Belgium, France, Germany, Spain, Sweden, The Netherlands and the United Kingdom. Industrial demand software products The total market for software products in the EU amounted to € 63 billion in 2004, increasing 4.1 percent compared to 2003. This market consists of systems software (€ 33.3 billion in 2004) and application software (€ 30.0 billion). The largest market was Germany, followed by the UK, France, Italy, the Netherlands, Sweden, Spain and Belgium. The software market in the eight accessing countries from Central and Eastern Europe increased 12.3 percent to a value of € 1.9 billion in 2004. Industrial demand IT services The total market for IT services in the EU was worth € 118.8 billion in 2004, which was a slight increase. The EU-15 market is subdivided into implementation (€ 48 billion), support services (€ 31.6 billion), operations management (€ 25.6 billion) and consulting (€ 10.9 billion). The UK was the largest EU-market for IT services in 2004, Germany was second, followed by France, Italy, the Netherlands, Sweden, Spain and Belgium. The IT services market in the eight accessing countries from Central and Eastern Europe increased 10.8 percent to a value of € 3.0 billion in 2004. Outsourcing The UK will account for three-quarters of all European offshore outsourcing in five years’ time and software development will be the main service provided. Offshore service spending in Western Europe will grow from EUR 1.1 billion in 2004 to EUR 3.6 billion in 2009, with the UK accounting for 76 percent at that point. Other countries like France and Germany will increasingly outsource to the Czech Republic, Russia and Tunisia. The most important reasons for outsourcing include access to skills that companies lack in-house, the chance for European companies to focus on the job at hand and guaranteed service levels. Cost control became less important in 2004 .The most important services that EU companies considered for outsourcing were network and data management and user support.

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Outsourcing trends • Transition from an experimental to a consolidation phase. • A search for new locations with a special focus on Eastern Europe. • Continuing growth in the importance of intermediaries. • Extension of offshore outsourcing into increasingly skilled fields. • Increase of regulations for data security and privacy laws. • Entry of small and medium businesses as clients for offshoring as they weigh the

benefits of offshoring due to budget pressures. Offshore locations India is the number one in offshore outsourcing, although other Asian countries and Central and Eastern Europe are emerging as well. They can be judged on government support, labour, infrastructure, education, cost advantage, quality, cultural compatibility, time/distance advantage and proficiency in languages. Production and imports Measuring trade in software and software services for business purposes is very complicated, due to limitations in definitions and challenges in measuring the data. Access requirements / quality Trust and competence are very important in the market. Internationally recognised quality standards could be to the advantage of developing country exporters. The most important certifications are ISO 9000 and CMM. Services are not subject to import duties. In the software and IT services industry, the following general rule applies: VAT is paid in the country where the service is actually performed. This means that service providers from developing countries have a competitive advantage compared to service providers in the EU. Trade structure developing country exporters In practice, there are two most common sales channels for developing country service providers. First, establishing a sales office in an EU member country could be a very good option to overcome the lack of trust and credibility amongst EU companies. Working with brokers/consultants is another good possibility. An example of a broker is the European Information Technology exchange. It focuses on suppliers from developing countries and buyers from Europe. EuroITX (http://www.euroitx.com/) is supported by CBI. Practice The most important tools for developing country exporters to promote outsourcing services are: • Certainly for beginning exporters, it could be wise to focus on one area and to

specialize in this in order to be able to supply the client with an outstanding service. • Focus marketing on core sectors and niches and look to visit specific outsourcing

events and seminars rather than big events. • Always explore cooperation possibilities with other companies, trade and/or

promotion organisations. • Going online is fundamental for companies in the IT sector. A website proposing well-

defined services, clear prices, competitive advantages (e.g. USP, cost reduction and service quality) and a client reference list helps create a trustworthy environment.

• Service providers could establish strong linkages with overseas diaspora networks, universities, private sector leaders and foreign trade authorities. A foreign national within the client company in the EU could very well favour outsourcing.

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INTRODUCTION CBI’s EU Market Survey ‘Software, IT services and Outsourcing’ is built up in the following way:

Market Survey

Part A EU Market Information and Market Access Requirements

EU Market Information (Chapters 1-8)

Product characteristics

Introduction to the EU market Industrial demand and production

Offshore outsourcing Offshore locations Trade structure

Prices

EU Market Access Requirements

(Chapter 9)

Non-tariff trade barriers Tariffs and quotas

Part B

Export Marketing Guidelines: Analysis and Strategy

External Analysis (market audit)

(Chapter 10)

Opportunities & Threats

Internal analysis (company audit)

(Chapter 11)

Strengths & Weaknesses

Decision Making (Chapter 12)

SWOT and situation analysis: Target markets and segments

Positioning and improving competitiveness Suitable trade channels and business partners

Critical conditions and success factors (others than mentioned) Strategic options & objectives

Export Marketing

(Chapter 13)

Matching services and service range Building up a trade relationship

Drawing up an offer Handling the contract

Sales promotion

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Chapters 1 to 8 of Part A profile the EU market for software products, software related services and IT services. The emphasis of the survey lies on those products/services that are of importance to developing country suppliers. The major national markets within the EU for those products/services are highlighted. Furthermore, statistical market information on industrial demand, production and outsourcing, and information on trade structures and opportunities for exporters is provided. Chapter 9 subsequently describes the requirements which have to be fulfilled in order to get market access for the services sector concerned. Having read Part A, it is important for an exporter to analyse target markets, sales channels and potential customers in order to formulate export marketing and strategies. Part B therefore aims to assist (potential) exporters from developing countries in their export-decision making process. Having assessed the external (chapter 10) and internal environment (chapter 11), the (potential) exporter should be able to determine whether there are interesting export markets for his company. In fact, by matching external opportunities and internal capabilities, the exporter should be able to identify suitable target countries, market segments and target product(s)/services within these countries, and possible trade channels to export the selected products/services (chapter 12). Chapter 13 subsequently describes marketing tools that can be of assistance in successfully achieving the identified export objectives. Participation in the global software market and IT services provides developing countries with a big opportunity for growth. The advantages they have, are very attractive for EU companies that continuously look for a reduction of costs. The availability in developing countries of technically trained people and improvements in infrastructure give them business opportunities in exports. Many firms in developing countries are increasingly able to offer skilled IT staff against competitive prices. An appropriate time-zone difference between the customer and vendor and an on-line environment can allow for around-the-clock work, resulting in fast turn-around times. Thanks to state-of-the-art satellite links and wired communication, companies in developing countries can become 'virtual labs'. The survey is interesting for both starting exporters and exporters already engaged in exporting (to the EU market). Part B is especially interesting for more experienced exporters starting to export to the EU and exporters looking for new EU markets, sales channels or customers. Starting exporters are advised to read this publication together with the CBI’s Export planner, a guide that shows systematically how to set up export activities. Moreover, a new interactive tool is available on the CBI website (http://www.cbi.nl/), a document builder through which you can write your own export marketing plan online. The document builder will assist you by offering an outline, instructions, and examples.

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PART A

EU MARKET INFORMATION

AND

MARKET ACCESS REQUIREMENTS

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1 PRODUCT CHARACTERISTICS In this chapter, definitions and the most interesting varieties in the software and IT services market for developing country exporters will be defined. Section 1.1 discusses the classification of software and IT services. Special attention is paid to offshore outsourcing, the most interesting opportunity for developing country exporters in the industry of software and IT services. It is followed by the customs/statistical classification in section 1.2.

1.1 Product groups There are many definitions and classifications for software products and IT services. This study uses the definition for software products and IT services from the European Information Technology Observatory (EITO). It is a well-reputed source in the industry that has very detailed and up to date information available. Table 1.1 presents the several product groups for software products and IT services. Table 1.1 Product group definition software products and IT services Software products • Systems software; system infrastructure and application tools

• Application software IT services • Consulting

• Implementation • Operations management • Support services

Source: EITO (2005)

1.1.1 Software products

According to EITO, software products are ‘commercially available packaged programmes for sale or lease from systems services and Independent Software Vendors (ISVs). Value includes the packaged software fees plus related non-consulting revenue, such as fees for maintenance and/or support. It includes licence fees partially earmarked for software maintenance, services, and/or support’. Other forms of software support would be counted within the support services category. As mentioned in table 1.1, software can be categorized into: • Systems software • Application software. Systems software Systems software includes system infrastructure software and application tools: • System infrastructure software includes system management software, network

management, security software, storage software, server ware, networking software, and system-level software.

• Application tools include information and data management software, application design and construction tools, application lifecycle management, application deployment platforms, middleware, other development tools and information access and delivery tools. Examples include database engines, 4GL, AMD (Analysis, Modelling and Design) and 3GL.

Application software Application software includes consumer, commercial, industrial and technical programmes and code sets designed to automate specific sets of business processes in an industry or business function. It is to make groups or individuals in organisations more productive, or to support entertainment, education, or data processing in personal activities. The packaged application market includes the consumer, content, collaboration, and enterprise applications sub segments.

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The enterprise applications market is made up of the back-office, engineering, and CRM (Customer Relationship Management) applications markets. The market for software, especially packaged software for the PC, is enormous in Europe. Nevertheless, the opportunities for developing country exporters in this field in Europe are generally minimal. The main problems are credibility and very high marketing costs. In many cases, application software is partly produced in a developing country, but it will be owned and marketed by an (often well-known) American or European company. There are only very few firms in developing countries able to build and market application software themselves. Success in their domestic market was essential and without any local market for packaged software it was almost impossible to finance the export marketing. The major opportunity for success is to develop entry into the market with a niche item (a very specialised item).

1.1.2 IT services

As mentioned in table 1.1, IT services can be divided into the following product groups: • Consulting • Implementation • Operations management • Support services. Consulting This product group consists of a wide variety of IT-related planning and design activities that assist clients in making IT-related decisions on business direction or information technology. IT-related business consulting includes corporate strategy assistance, process improvement, capacity planning, best practices, business process re-engineering and change management services for business. Excluded is consulting involving tax, audits, benefits, financial, and/or engineering issues. IT consulting includes information systems strategy assistance, information system and network planning, architectural and supplier assessments, product consulting and technical designs for information technology, and maintenance planning. Implementation Implementation comprises all activities directly involved with the creation of technical and business IT solutions, specifically with procuring, configuring, installing, developing, moving, testing and managing information technology. Implementation services also include all activities involved with custom application development and work performed on packaged applications. Training and education is also included in this segment. It includes activities required for the transmission of new behaviours, skills or actions that can be used to begin performing job-specific tasks or improve performance in IT-related functions. Operations management This involves taking responsibility for managing components of a client’s IT infrastructure. Specific activities include help-desk services, asset management services, systems management, network management, software update management, facilities management, back-up and archiving and business recovery services. Support services These services include all activities involved with ensuring that hardware, software and networking products are performing properly as a service to clients. Activities include all maintenance contracts for hardware, software and networking products, as well as services, such as telephone support to resolve problems for clients and help with workarounds. Services in this category appear as bundled packages of other services or stand-alone.

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Keep in mind that processing services were removed from the scope of IT services as they are provided increasingly by business services players as part of their Business Process Outsourcing (BPO) activities.

1.1.3 Outsourcing A famous saying states: ‘if you want something done right, do it yourself’. This is still true for many industries, but not for the increasingly cost-conscious and core-focused international business of software and IT services. Companies in advanced ‘high-cost’ economies are continuously looking to contract out low-level, labour intensive software and it services work to companies in ‘low-cost’ developing nations. This service is called outsourcing and is by far the most promising segment for developing countries. (Offshore) IT outsourcing According to market research agency Gartner, IT outsourcing involves an ‘annuity-based contract that includes at least one management service and one or more of the other IT services (professional and product support), except for business process transaction management’. There is no official country classification for offshore outsourcing. In this study, offshore destinations are meant to be all countries further away than neighbouring countries, for example on other continents than Europe. The following outsourcings models are applicable for Europe: Model 1 Onsite contract worker / projects In this model the offshore services company is acting as a staff augmentation firm. They deal with entry visas, ensuring appropriate skills, and repatriation of contract workers. This is the least sophisticated models for offshore services. A variation on this model, onsite projects, the teams provided by the offshore company have experience in working as project teams and are responsible for delivering against contract requirements. Both of these models are fairly common in Europe. Increasingly, European companies new to offshore services are opting to use more sophisticated offshore models instead. Model 2 Offshore project In this model all of the project work is done in the home country of the offshore service provider. The degree of cost savings depends on whether the enterprise contracts directly with the offshore service provider or whether the offshore work is sub-contracted through a local systems integrator. In this model the risk of project failure is large. This model is used by smaller, emerging offshore services companies that lack the resources to provide more than local sales support in the client’s country. Model 3 Onsite-offshore project In this model, the vast majority of work is still carried out by offshore resources, thereby maintaining a significant cost advantage. But some members of the ‘offshore’ team are located on the client’s premises, so they can more easily deal with project management, clients needs and to do so with a much shorter reaction time. This approach is more focused on managing communication and risk. It is best suited to somewhat more complex services than is the pure offshore model. Model 4 Onsite-onshore-offshore model The majority of work is carried out offshore, however, and is supported by both an onsite team and additional development and testing resources at a local office. The onsite team is again focused primarily on project management and requirements definitions/changes, but has the added advantage of additional local resources to provide on-site testing as well as local development on an as needed basis. This model increases response times and reduces the risks. For these reasons, this model is best suited for complex development projects.

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Model 5 Near shore outsourcing Near shore outsourcing is the practice of getting work done or services performed by people in neighbouring countries rather than in your own country. An example is a German company that outsources software programming to Poland. A combination of the different models is also possible. Most popular is the onsite-offshore model. Classification IT outsourcing IT outsourcing may consist of outsourcing of 1) software related services, 2) IT services and 3) IT enabled services. Ad 1) Software related services Software development, large programming projects and maintenance are activities with a high offshore outsourcing potential. Moreover, the real development of software could be outsourced more easily than the design and the specifications and the receiving and testing. Figure 1.1 shows this in a simplified manner. Figure 1.1 Software development process

Offshore

Onshore

Design Specifications

Receive specification

Construct Coding

Receiving Testing

Onshore

Applying

If errors

Source: Van Hee (2004) Ad 2) IT services The core interest comprises of custom development solutions, web application development, system integration, database management and IT consultancy services (re-engineering, localisation, maintenance, testing, coding, IT security services, web enablement, migration). Ad 3) IT enabled services The outsourcing services that are IT driven or require the help of IT infrastructure and resources is called IT enabled services. The major part that is outsourced and has added a value to the IT industry is the IT enabled services. The IT enabled services comprises of medical (legal) transcription, online education, online training, data processing (data entry), data digitization and the call centres. It is important to understand that IT services and IT enabled services have overlapping areas. Some examples are data centres, network management, desktop PC management, helpdesk support, IT facility management, imaging and engineering. In general the following activities can be considered as ICT-activities with a high potential for offshore outsourcing: • Activities with a high degree of commodization • A low degree of customer intimacy This Survey focuses on the first two, outsourcing of software related services and of IT services.

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1.2 Customs / Statistical product classification Measuring trade in software and software related services for business purposes is very complicated, due to limitations in definitions and challenges in measuring the data. There are no well defined classifications in 6 or 8 digits HS-codes, like with trade in goods. Software Although software products are included in international merchandise trade statistics, relevant trade data are difficult to gather. This is because only the trade in the medium which contains the software, is measured. As this mainly concerns consumer products, software for business purposes, as described in section 1.1, is hardly dealt with. Software services In general, international (trade) statistics of services are hard to measure. This goes as well for the imports and exports of IT services. As an indication, IT services are included in the trade in services statistics of the Balance of Payments (BOP) of many countries. Software services appear in the following sections of the BOP-system (source UNCTAD): • Computer services (263) • Royalties and license fees (266). Accent on outsourcing Once again, there are many practical challenges with these definitions. Be aware that the import statistics just give a very rough indication and detailed statistics are lacking. In fact, outsourcing could be regarded as a way of importing software related services by the EU-countries. For this reason and because of its high potential for developing country exporters, this market survey is about outsourcing in particular.

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2 INTRODUCTION TO THE EU MARKET The European Union (EU) is the current name for the former European Community. Since 1 January 1995 the EU has consisted of 15 member states. Ten new countries joined the EU in May 2004. They are the Czech Republic, Estonia, Slovak Republic, Cyprus, Latvia, Lithuania, Malta, Romania, Poland and Hungary. Negotiations are in progress with a number of other candidate member states. In this survey, the EU will be referred to as the EU25, unless otherwise stated. Country selection This study will cover the market for software, IT-services and outsourcing in the EU. Out of a possible 25, seven member states are researched more deeply. The challenge, however, is to find reliable import statistics for these services. Most statistical sources as Eurostat and national offices for statistics in the EU deal with products only and do not keep detailed trade data for services. Only some (often general) data is available and should be regarded as an indication. The opinion of experts in the industry and market research from Gartner / Forrester / Berger / CBI consultants therefore weighs even more in selecting the seven most relevant member states. Based on especially current and expected industrial demand, they indicate the following seven countries as most interesting for the CBI developing country exporters: • Belgium • France • Germany • Spain • Sweden • The Netherlands • The United Kingdom. For these seven highlighted countries, population, age and GDP per capita are presented in table 2.1. Besides the seven selected countries, attention is paid to main developments in the accession countries. Table 2.1 Population and GDP of selected and new EU countries, 2004 Countries Population

(million) Age 15-64 (%)

GDP per capita (€)

Selected EU countries

Belgium 10.3 65.4 27,100 Germany 82.4 67.0 26,400 France 60.4 65.1 26,300 Spain 40.3 68.0 19,300 Sweden 9.0 65.2 31,200 The Netherlands 16.3 67.8 28,500 UK 60.3 66.3 28,400 New EU countries Poland 38.6 70.0 5,100 Estonia 13.4 67.5 6,500 Czech Republic 10.2 70.9 8,500 Hungary 10.0 69.0 8,100 Slovakia 5.4 70.8 6,100 Lithuania 3.6 68.4 5,100 Latvia 2.3 69.2 4,700 Slovenia 2.0 70.6 13,000 Cyprus 0.8 67.4 16,900 Malta 0.4 68.5 11,100 Source: The World Factbook (2004) and Eurostat (2005)

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EU Harmonisation The most important aspect of the process of unification (of the former EC countries) to affect trade is the harmonisation of rules in the EU countries. As the unification allows free movement of capital, goods, services and people, the internal borders have been removed. Goods produced or imported into one member state can be moved around between the other member states without restrictions. A precondition for this free movement is uniformity in the rules and regulations concerning locally produced or imported products. Although the European Union is already a fact, not all the regulations have yet been harmonised. Work is in progress in the fields of environmental pollution, health, safety, quality and education. For more information about harmonisation of the regulations visit AccessGuide, CBI’s database on European non-tariff trade barriers at http://www.cbi.nl/accessguide Monetary unit: Euro On 1 January 1999, the Euro became the legal currency within twelve EU member states: Austria, Belgium, Finland, France, Germany, Italy, Ireland, Luxembourg, the Netherlands, Spain, and Portugal. Greece became the 12th member state to adopt the Euro on January 1, 2001. In 2002, circulation of Euro coins and banknotes replaced national currency in these countries. Denmark, the United Kingdom and Sweden have decided not to participate in the Euro. In this market survey, the € is the basic currency unit used to indicate value. The information used in this market survey is obtained from a variety of different sources. Therefore, extreme caution must be taken in the qualitative use and interpretation of quantitative data, both in the summary and throughout the text, as also in comparisons of different EU countries with regard to market approach and distribution structure. The yearly average exchange rates can be found in table 2.2. Table 2.2 Exchange rates of EU currencies in US$, 1999-2004 Country Currency 1999 2000 2001 2002 2003 2004 European Union Euro (€) 1.063 0.920 0.900 0.946 1.125 1.244 Cyprus CYP 1.846 1.613 1.563 1.655 1.943 2.156 Czech Republic CZK 0.028 0.025 0.026 0.030 0.035 0.039 Denmark DKK 0.143 0.124 0.120 0.127 0.152 0.167 Estonia EEK 0.068 0.058 0.057 0.060 0.072 0.079 Hungary HUF 0.004 0.003 0.003 0.003 0.004 0.005 Latvia LVL 1.704 1.651 1.600 1.627 1.766 1.870 Lithuania LTL 0.250 0.250 0.250 0.273 0.327 0.360 Malta MTL 2.510 2.291 2.228 2.353 2.549 2.861 Poland PLN 0.252 0.230 0.244 0.246 0.257 0.276 Slovakia SKK 0.242 0.216 0.207 0.221 0.273 0.031 Slovenia SIT 0.005 0.004 0.004 0.004 0.004 0.005 Sweden SEK 0.121 0.109 0.097 0.103 0.124 0.136 United Kingdom GBP 1.617 1.517 1.441 1.503 1.635 1.833 Source: Oanda http://www.oanda.com/ (March 2005) For more information on the EU market, please refer to the CBI’s manual Exporting to the European Union.

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3 INDUSTRIAL DEMAND Section 3.1 presents the current and forecasted industrial demand in the EU and per selected country. All data of this section are included in appendix 1 as well. Section 3.2 discusses the main trends in the software and IT services market. It is followed by section 3.3 on the opportunities that the internet offers for developing countries in this sector.

3.1 Market size Software products According to figure 3.1, the total market for software products in the EU amounted to € 63 billion in 2004, increasing 4.1 percent compared to 2003; it is expected to reach a solid growth of 5.4 percent in 2005. This market consists of systems software (€ 33.3 billion in 2004) and application software (€ 30.0 billion). The market for systems software was the largest growing segment, increasing 5.3 percent compared to 2003. The application software increased 3.3 percent compared to 2003. The recovery in software spending will rely mainly on the acceleration in licence upgrades and renewals. Sales in system infrastructure software will be particularly strong, due to continuing demand for security, storage and integration software. The total EU market for software is predicted to reach a value of € 70.9 billion in 2006, increasing 5.9 percent compared to 2005. The market for system software is expected to grow 6.5 percent to € 37.7 billion in 2006. It is slightly outpacing the growth in the market for application software, which will increase 5.3 percent to € 33.2 billion in 2006. Figure 3.1 EU software market in € million, 2002-2004

Source: EITO (2005) Germany was the largest EU-market for software products in 2004, amounting to € 15.4 billion in 2004. This is an increase of 3.5 percent compared to 2003. It was followed by the United Kingdom (UK), with a total of € 13.5 billion in 2004, increasing five percent compared to 2003. Ranked third was France (€ 11.2 billion in 2004, increase of 4.6 percent), Italy was fourth (€ 4.8 billion in 2004, increase of 2.6 percent) and the Netherlands had the fifth place in 2004 (€ 4.7 billion in 2004, increase of 3.7 percent).

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Refer to figure 3.2 as well. Sections 3.1.1 up to and including 3.1.7 contain more details on the software market by each highlighted EU country. Figure 3.2 Software market by EU-15 countries in € billion, 2004

Source: EITO (2005) IT services Figure 3.3 shows that the total market for IT services in the EU was worth € 118.8 billion in 2004. Growth in IT services is anticipated to reach 5.0 percent in 2005, following a more moderate growth of 3.5 percent in 2004. Outsourcing continues to show the trongest momentum, still attracting new investment and interest from the large

enterprise market. While having a positive impact on the level of activity, the popularity of outsourcing also reflects a continued desire to reduce costs, outsource complexity, and better anticipate future technology costs. More detailed information on (offshore) outsourcing in the EU has been included in chapter 5 of this survey.

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Figure 3.3 EU IT services market in € million, 2001-2003

Source: EITO (2005) EITO only supplied these IT services figures divided by the segments implementation, consulting, operations management and support services for the EU15. The EU15 IT services market is subdivided into implementation (€ 47.7 billion in 2004, an increase of 1.8 percent compared to 2003), support services (€ 31.6 billion in 2004, increase of 2.1 percent), operations management (€ 25.6 billion in 2004, increase 8.6 percent) and onsulting (€ 10.9 billion in 2004, decrease 1.8 percent).

The IT services market is growing with almost the same speed as the software market in the EU. The total increase is expected to be 5.6 percent for the period 2005 – 2006, valuing € 132.1 billion in 2006. EITO only supplied these figures divided into the segments implementation, consulting, operations management and support services for the EU 15, refer to figure 3.4. The largest growth rate is to be noted in the segment of operations management, which is predicted to be 8.2 percent, reaching a value of € 30.2 billion in 2006. The largest segment of the IT services market, implementation, will have a growth rate of 4.7 percent and reach a value of € 51.9 billion in 2006. Support services will have a total value of € 34.4 billion in 2006, increasing 4.3 percent. The fourth segment, consulting, will represent a value of € 12.0 billon in 2006, increasing 5.6 percent.

c

18

Figure 3.4 EU 15 IT Services market in € million, 2005-2006

Source: EITO (2005) The UK was the largest EU-market for IT services in 2004, amounting to € 27.1 billion, an increase of 4.4 percent compared to 2003. Germany is the second largest market (€ 25.6 billion in 2004, an increase of 2.4 percent), followed by France (€ 23.9 billion, increase of 2.9 percent), Italy (€ 9.8 billion, increase of 1.3 percent) and the Netherlands (€ 6.3 billion, increase of 3.4 percent). Figure 3.5 shows more details. Figure 3.5 IT services by EU-15 country in € billion, 2004

Source: EITO (2005)

19

3.1.1 Belgium The Belgian software and services sector depends to a large extent on large companies and multinationals, which means that decisions are not necessarily made in Belgium. According to figure 3.6, the Belgian market (Luxembourg included) for software totalled € 1.7 billion in 2004, increasing 3.5 percent compared to 2003. The market for system software increased 4.9 percent since 2003 to a value of € 804 million, growing at a larger rate than the market for application software, which increased 2.3 percent to € 900 million in 2004. The market is expected to represent € 1.86 billion in 2006, representing an increase of 4.7 percent compared to 2005. The segment application software is larger than the segment system software, contrary to the situation for the EU as a whole. The application software will reach a value of € 967 million in 2006 (+3.9 percent), with a predicted € 894 million for system software (+5.6 percent). Figure 3.6 Software market in Belgium in € million, 2002-2004

Source: EITO (2005) The total IT services market in Belgium (figure 3.7) was worth € 3.5 billion in 2004, increasing 2.7 percent compared to 2003. This growth was mainly driven by the increasing demand for operations management (+5.0 percent compared to 2003 to € 692 million in 2003. Consulting (€ 286 million) and implementation (€ 1,541 million) only showed growth of more than 2 percent. Support services grew modestly (+ 1.9 percent to € 954 million).

20

Figure 3.7 IT Services market in Belgium in € million, 2002-2004

Source: EITO (2005) The market for IT services in Belgium will grow at a faster rate than the EU-average. The total market is expected to increase 6.4 percent to € 3.9 billion in 2006. This is mainly driven by the increase in operations management, which will grow at a rate of 9.1 percent to a value of € 814 million in 2006. Implementation will have a value of € 1.7 billion in 2006 (+5.6 percent), support services will grow to € 1.0 billion (+5.3 percent) and consulting will have a value of € 324 million (+7.0 percent). This growth in the services industry is confirmed by the Belgian ICT industry trade association, Agoria (http://www.agoria.be/). They believe innovation is the key for success.

3.1.2 France The region North and Pas de Calais offer good opportunities for the sector, since these regions have changed into one of the most digital parts of France. Figure 3.8 shows that the total software market valued € 11.2 billion in 2004, increasing 4.6 percent compared to 2003. Both the segments system software (€ 6.1 billion) and application software (€ 5.0 billion) showed the same growth level. The total software market in France will represent a value of € 12.7 billion in 2006, increasing 6.6 percent compared to 2005. The market will be subdivided into system software, representing a value of € 7.0 billion (+7.0 percent) and application software, valuing € 5.6 billion (+6.1 percent). Software sales will remain buoyant in 2005, with applications spending strengthening due to demand coming from the mid-market, and strong growth for integration, storage and security software in the infrastructure area.

21

Figure 3.8 Software market in France in € million, 2002-2004

Source: EITO (2005) According to figure 3.9, the total IT services market in France showed an increase of 2.7 percent compared to 2003. The market increased to € 23.9 billion in 2004. Operations management grew a strong 7.1 percent to € 4.9 billion in 2004. The other segments grew modestly (support service 2.4 percent to € 6.8 billion, consulting 2.3 percent to € 2.2 billion and implementation 1.0 percent to € 10.0 billion). Figure 3.9 IT Services market in France in € million, 2002-2004

Source: EITO (2005)

will reach a value of € 26.1 billion in 2006, increasing 4.6 percent

competencies and cut costs.

The total marketcompared to 2005. As some IT projects are restarting, the consulting and implementation services markets are expected to show a positive development. However, most of services growth will come from operations, as French companies increasingly accept outsourcing as a viable way to focus on core

22

In conformity with the general EU state of affairs, operations management is primarily

Resumption of investments in application software products

responsible for this growth. It will increase 7.0 percent to € 5.7 billion. The other segments will increase at a lower rate: implementation will grow 3.3 percent to € 10.6 billion, support services will increase 4.4 percent to € 7.3 billion and consulting will grow 5.7 percent to € 2.5 billion in 2006. In addition to these forecasts, the French industry association Syntec Informatique observes the following trends: •

• Continued development of facilities management • End of the decrease in price of embedded IT • Embedded price effect.

3.1.3 Germany

The software market slightly increased to € 15.4 billion in 2004, which was an increase of 3.5 percent compared to 2003 (figure 3.10). The system software segment showed an

crease of 4.0 percent, reaching a value of € 7.9 billion in 2004. The application

Germany will remain the largest software market out of all EU member countries, valuing € 17.1 billion in 2006. This is a growth of 5.5 percent compared to 2005. The expansion is driven by the 6.0 percent increase of the application software to € 8.9 million, slightly outpacing the system software in terms of value in 2006. The value of this segment will increase 5.0 percent to € 8.2 million. The German trade association BITKOM (http://www.bitkom.org/

insoftware grew 3.0 percent to € 7.5 billion in 2004.

) is of the same opinion, forecasting a growth for 2005 and 2006, indicating the structural recovery of the industry after the recent downfall. Software is expected to be the fastest growing IT segment. Most of the growth will be in the infrastructure area, since companies are still trying to improve their existing systems for more efficiency. However, demand is also increasing in the applications area, with a renewed interest in Enterprise Resource Planning (ERP), and new demand for Business Performance Management (BPM), analytic applications, Radio Frequency Identification (RFID) logistics and Supply Chain Management (SCM)/ Supply Relationship Management (SRM). Figure 3.10 Software market in Germany in € million, 2002-2004

Source: EITO (2005)

23

The IT services market in Germany is the second largest in the EU and grew with 2.4 percent in 2004, reaching a value of € 25.6 billion, according to figure 3.11. Small growing segments were support services (1.0 percent to € 7.2 billion), implementation

4 billion) and consulting (0.5 percent to € 2.3 billion). In accordance (2.0 percent to € 11.with the general development in other EU-countries, the segment operations management showed a considerable increase (+6.5 percent to 4.7 billion). Figure 3.11 IT Services market in Germany in € million, 2002-2004

Source: EITO (2005) The future market for IT services in Germany is forecasted to reach a value of € 28.1 illion in 2006, which is an increase of 4.8 percent compared to 2005. The importance of

the segment implementation emerges, totalling € 12.5 billion in 2006 (+5.0 percent). The largest growing segment is, once again, operations management, growing 8.0 percent to € 5.5 billion in 2006. Other segments are support services (€ 7.5 billion, +2.0 percent) and consulting (€ 2.5 billion, +5.0 percent). As with other countries, demand for services will be stronger in operations management. Here outsourcing is included. However, some signs of recovery are also evident in the consulting and implementation areas.

b

3.1.4 Netherlands The total market for software products in the Netherlands increased 3.7 percent to € 4.7 billion in 2004. The strongest growth was realized by the segment system software, which increased 5.2 percent to € 2.5 billion in 2004. Application software noted a plus of 2.1 percent, reaching a value of € 2.2 billion. Refer to figure 3.12 as well for more details. The Dutch market for software will reach a total value of € 5.2 billion in 2006. This is an increase of 4.5 percent compared to 2005, subdivided into system software (€ 2.8 billion, +5.0 percent) and application software (€ 2.4 billion, +3.9 percent). According to ICT Mark Monitor 2004-2005, growth will most prominent in the business market. Recent developments for 2005:

Wireless Computing

Electronic service (e business)

• Broadband •

• Radio Frequency Identification (RFID) • Application service Providing (ASP) • Voice Over Internet protocol (VoIP) • Open Source software (OSS) •

24

• Enterprise Content Management (ECM) • Customer Relationship management (CRM) • Domotica • Outsourcing • Information planning Figure 3.12 Software market in the Netherlands in € million, 2002-2004

Source: EITO (2005) The IT services market increased 3.4 percent to € 6.4 billion in 2004, noting increases in support services (+0.7 percent to € 1.2 billion), operations management (+7.3 percent to € 2.7 billion) and implementation (+1 percent to € 1.7 billion). As shown in figure 3.13, the segment consulting (€ 722 million) remained almost stable in 2004. Figure 3.13 IT Services market in the Netherlands in € million, 2001-2003

Source: EITO (2005)

25

The IT services market in the Netherlands will increase to € 7.3 billion in 2006. ompared to 2005, this constitutes an increase of 7.3 percent. Operations management the largest segment, both in terms of growth (+9.7 percent) and value (€ 3.3 billion).

ntation is usually e largest segment. In the Netherlands, this is the second largest segment, representing

a value of € 1.9 billion in 2006 (+5.9 percent compared to 2005). Other segments are 3 billion, +4.0 percent) and consulting (0.8 billion, +6.4 percent).

he best opportunities in this segment can be found in desktop and network

CisThe latter deviates from most other EU member states, where implemeth

support services (€ 1.Tmanagement, outsourcing, security services (assessments, scans), software maintenance and training, network consulting and integration and all types of Internet and e-commerce related services.

3.1.5 Spain Figure 3.14 shows that the total software market valued € 2.2 billion in 2004, increasing 5.3 percent compared to 2003. Both the segments system software (€ 1.2 billion) and application software (€ 1 billion) showed the same growth level.

re nd applications, as Spanish companies are undergoing major modernisation projects

The total software market in Spain will represent a value of € 2.5 billion in 2006, increasing 5.9 percent compared to 2005. The market will be subdivided into system software, representing a value of € 1.4 billion (+6.7 percent) and application software, valuing € 1.2 billion (+5.1 percent). Software growth will be strong both in infrastructuaalong their value chains. Figure 3.14 Software market in Spain in € million, 2002-2004

Source: EITO (2005) With reference to figure 3.15, the total IT services market in Spain showed an increase of 3.6 percent compared to 2003. The market increased to € 4.3 billion in 2004. Operations management grew strongly: +6.8 percent to € 953 million in 2004. The other segments grew modestly (support service 2.6 percent to € 1.2 billion, consulting 3.3 percent to € 399 million and implementation 2.5 percent to € 1.8 billion).

26

Figure 3.15 IT Services market in Spain in € million, 2002-2004

Source: EITO (2005) The total market will reach a value of € 4.8 billion in 2006, increasing 6.3 percent compared to 2005. Operations management will increase 10.1 percent to € 1.1 billion. The other segments will increase at a lower rate: implementation will grow 4.8 percent to 1.9 billion, support € services will increase 5.2 percent to € 1.3 billion and consulting will

ompanies are demand for IT

grow 6.7 percent to € 0.5 billion in 2006. As mentioned, Spanish cndergoing major modernisation projects which is translated into a high u

services.

3.1.6 Sweden

The market for software in Sweden increased 4.1 percent to € 2.5 billion in 2004, according to figure 3.16. Both the segments application software (+5.9 percent to € 1.2 billion) and system software (+2.4 percent to € 1.3 billion) realized a growth. One of the xplanations is that Sweden has a relatively high number of multinational companies.

ware will grow even faster, 5.9 percent, reaching a value of almost € 1.4 billion in 2006. In general, Swedish users

technology, which makes Sweden a good test market for new

ets. Swedish companies have, for

e The market for software in Sweden will be worth € 2.8 billion in 2006, which is an increase of 4.9 percent compared to 2005. Application software is the largest segment, valuing over € 1.4 billion in 2006 (+3.9 percent). System soft

are early adopters of newIT products. Traditionally, business systems have been an important part of the Swedish software

dustry. Chances lie within niche software markinexample, built up a world leading position in the games and gambling software. Other good opportunities can be found in the aerospace industry software support, production critical software and IT security software with biometrics, and also strong segments such as software for wireless applications, intelligent home communications and applications for the health-, process control-, automotive (i.e. telematics)- and forestry sectors.

27

Figure 3.16 Software market in Sweden in € million, 2002-2004

Source: EITO (2005)

illion) and implementation (€ 1.7 million) showed negative growth figures, refer to gure 3.17 as well.

igure 3.17 IT Services market in Sweden in € million, 2002-2004

The total Swedish IT services market increased 2.6 percent to € 4.9 billion. This was mainly due to the growth in operations management (+10.3 percent to € 1.3 billion) and in support services (+2.4 percent to € 1.3 billion). The segments consulting (€ 609mfi F

Source: EITO (2005) The Swedish market for IT services will reach a value of € 5.4 billion in 2006. Operations management is the main drive for this increase, growing 8.7 percent to over € 1.5 billion in 2005.

28

Other segments are implementation, the largest one, with a value of € 1.8 billion (+3.8 percent), support services (€ 1.5 billion, + 4.5 percent) and consulting (€ 663 million, +4.8 percent). Spending in the services industry in genera, will lag 3-6 months behind a general economic recovery.

3.1.7 United Kingdom

he total software market value for 2006 is expected to be € 15.2 billion in 2006. This

IT priority according to a cent IT decision makers survey in the UK.

According to figure 3.18, the software market increased 5.0 percent to 13.5 billion in 2004. This can be subdivided into system software (+6.3 percent to € 7.3 billion) and application software (+3.6 percent to € 6.2 billion). Tvalue makes the UK the number two software market in the EU. Compared to 2005, the market increases 6.4 percent. Growth is driven by an increase in the demand for system software, 7.0 percent, reaching a value of € 8.4 billion in 2006. The growth in application software is expected to be 5.6 percent, to € 6.9 billion. Spending in software will be stronger compared to the other IT areas; demand will be stronger in system infrastructure, especially for security software, which is the topre Figure 3.18 Software market in the United Kingdom in € million, 2002-2004

Source: EITO (2005) The total IT services market, according figure 3.19, increased to € 27.1 billion in 2004. Operations management grew strongly: +11.2 percent to € 6.1 billion. The other three segments support services (+3.2 percent to € 7.5 billion) consulting (+ 3.0 percent to € 2.4 billion) and implementation (+ 2.2 percent € 11.0 billion) contributed to this growth.

29

Figure 3.19 IT Services market in the United Kingdom in € million, 2002-2004

Source: EITO (2005) The IT services market in the UK is forecast to remain the number one in the EU,

of € 30.4 billion in 2006. This is an increase of 5.9 percent ompared to 2005, mainly driven by a 8.5 percent increase in operations management

representing a valuec(total value € 7.3 billion in 2006). Other sectors are expected to experience smaller growth rates. Implementation will reach a value of € 12.0 billion in 2006 (+4.6 percent), support services will have a value of € 8.4 billion (+5.5 percent) and consulting will have a value of € 2.7 billion in 2006 (+5.4 percent). Outsourcing continues to grow fast in the UK, even if in the longer term the market is expected to soften as it will reach maturity first compared to the other Western European countries. In the short term, operations are set to remain the fastest growing services segment.

3.1.8 Accessing countries from Eastern Europe

are applications is boosted by a number of factors, such as a ecrease of software piracy and a growing appreciation of software as a business tool to

improve operations, to obtain better returns on investment and to better manage the cost of ownership of IT infrastructure. Enterprises in the region are now investing in more sophisticated software tools and related services to prepare for competition in the EU marketplace, and to improve business process efficiency. The software market is also benefiting from a rise of office and network applications in the SME segment. The dynamics of the ERP market are now changing, particularly in the region’s more advanced markets such as the Czech Republic, Hungary and Slovakia. As a consequence of saturation among the region’s large corporate accounts, spending is moving from basic modules to extended applications such as CRM, business analytics, data warehousing and other add-on functionality. Moreover, major ERP vendors increasingly target the mid-market in an effort to expand sales and retain revenue levels.

This section provides the highlights of the markets for software and IT services of the accessing countries to the EU from Eastern Europe. All data concern only the eight countries from this region that actually accessed the EU in May 2004. Software products Higher spending on softwd

30

The market for applications related to technology management, such as tools for systems anagement, agement and job and output management, is still in an early

st ge of development. However, more international vendors are now entering this ing demand in major sectors such as banking/ financial services,

lecommunications and manufacturing. Efforts at establishing IT infrastructure are facilitating sales.

e management and plication applications to properly manage increasingly complex network storage

e success of E-government initiatives, the implementation of EU data privacy and

m network mana

segment due to growteplaying a key role in Spending on content and document management solutions is largely limited to the government and financial services sectors. A number of large projects were carried out in 2004 as CEE governments introduced reforms for public administration and launched EU-supported initiatives to improve public services and put them online. Concern over effectively protecting and managing data as the volume of information increases, as well as greater investment in packaged applications, networking appliances and servers, is driving demand for storage hardware and related storage management applications. While backup and archive applications still form the largest share of regional spending on storage management applications, there is a growing emphasis on high availability and disaster recovery among corporate accounts. This development will create greater demand for more refined tools such as storage resourcreconfigurations. The relatively new security software market has until recently been dominated by Secure Content Management applications, principally Anti-Virus, and firewall/ VPN software. However, a change is now taking place with significant growth in the 3As (Authentication, Authorisation, Administration) application sector. Expansion in this market will be driven by the growing need for companies to do business online, tightening security regulations, thsecurity laws, demand in the SME segment, and the alarming increase in security attacks. Moreover, international regulations such as Basel II have a direct impact on developments in this market to the extent that they are encouraging the CEE financial sector to review its security arrangements. The software market in the eight new EU countries has been increasing drastically, refer to figure 3.20. In 2004 it increased 12.3 percent and reached a value of €1.9 billion. Application software accounted for € 987 million and system software had a value of € 910 million.

31

Figure 3.20 Software market accessing countries Eastern Europe, 2002-2004 in € million

Source: EITO (2005) Of the eight accessing countries from Eastern Europe, Poland was the largest software market in 2004 with a total value of € 684 million. This was a total increase of 13.6 ercent, subdivided into application software (+13.4 percent to € 355 million) and

million).

psystem software (+13.8 percent to 329 million). The Czech Republic was number two with a total market of € 480 million in 2004, of which € 242 million system software (+12.8 percent) and € 237 million application software (+14.7 percent). Number three was Hungary in 2004, with a value of € 407 million, an increase of +10.9 percent, followed by Slovakia (€ 125 million) and Slovenia (€ 91 The growth in the software market in the accessing countries is expected to be 12.1 percent for 2006 compared to 2005 (figure 3.21). The market for system software will grow 11.2 percent to 1.1 billion, while the market for application software will increase 12.7 percent to 1.3 billion in 2006. One area of future growth is the digital archiving software segment which could see a high demand in the government, healthcare and igher education sectors. h

32

Figure 3.21 Software market accessing countries Eastern Europe, 2005-2006 in € million

Source: EITO (2005)

cent of overall IT services spending, and that the demand for advanced solutions is expanding in several vertical segments. Although hardware and software

ent is facilitating greater expenditure on IT services as the focus of companies shifts to improving business performance. Finally, the

lisation of key segments such as telecommunications and utilities, as well

also viewed as a source of IT services rovision for Western Europe. The supply of IT services and increasingly of Business

ces in Central and Eastern Europe exceeds

effi ber of multinational

in outmo

IT services The IT services market has also increased in the eight accessing countries from Central and Eastern Europe. This total market increased 10.8 percent to a value of € 3.0 billion in 2004 (refer to figure 3.22). Organisations, particularly in the business segment, have begun to move away from using in-house resources to cover the majority of IT needs. They are increasingly using outside professional organisations for the delivery of technology solutions. This trend is clearly demonstrated by the fact that implementation categories such as systems integration, application consulting and customisation now represent 50 perITsupport still represented some 24 percent of total IT services spending in 2004, their relative importance within the market is falling. IT outsourcing and managed services are leading to a new phase of market development. After several years of struggling, the outsourcing segment displayed notable growth during the past year. Several factors are contributing to continued growth in the region’s IT services market. In particular, increasing foreign direct investment, resulting in part from EU accession, positively affects investments in technology services and solutions. Secondly, the region’s improved economic and political environm

ongoing liberaas large privatisation deals, are creating favourable conditions for IT services investment. Apart from the demand side, the region is pProcess Outsourcing (BPO) and business servilocal demand as multinational technology companies take advantage of the region’s cost

ciencies to service customers in other countries. Moreover, a numcompanies are establishing centres of expertise for technology and business services/BPO

countries such as Poland, Hungary, the Czech Republic and Slovakia. Indian sourcers have followed, establishing a nearshore presence with a view to servicing re developed markets in Western Europe (see for more information chapter 5).

33

Figure 3.22 IT services market accessing countries Eastern Europe, 2002-2004 € million in

rce: EITO (2005) Sou

oland is the largest market of the eight accessing countries

13.(+1mil The11.billion in 2006. The largest markets region for IT services, according to figure 3.23, will

Slo

ThemaratRep markets with high growth rates. Exato

In this segment as well, Pfrom Eastern Europe. Its total market value was € 999 million in 2004, an increase of

2 percent. The Czech Republic is again second, representing a market of € 875 million 0.1 percent). It is followed by Hungary (€ 596 million, +7.6 percent), Slovakia (€ 197

lion, +13.3 percent) and Slovenia (€ 141 million, +6.7 percent).

IT services market in the eight accessing countries from the CEE region will grow by 4 percent in 2006 compared to 2005. The total market will grow to a value of € 3.7

be Poland (€ 1.3 million in 2006), Czech Republic (€ 1.1 million), Hungary (€ 0.7 million), vakia (€ 0.3 million) and Slovenia (€ 0.16 million).

growth in the region differs by country and region. On the one hand there are rkets that show signs of maturation with significant spending on services but with her modest growth rates. Examples of these countries are Hungary and the Czech ublic. On the other hand there are emerging mples are Lithuania and Slovakia. More information about the CEE region with regard

offshore outsourcing can be found in section 6.6.

34

Figure 3.23 IT services accessing countries Eastern Europe, 2005 – 2006 in € million

Source: EITO (2005) Czech Republic The Czech Republic is increasingly becoming a regional centre for value-added services, with a number of international companies having located IT and business operations to the country. Meanwhile, several leading IT service providers have established offshore support facilities and research and development centres in the Czech Republic.

tware is drawing increasing interest as large end users seek

omy in general, foreign direct investment focusing on IT ervices-related spending, and EU accession, which has already started to affect the

ar to a is little potential for further very large ERP st -owned giants which

Sel f the market are increasingly trying to sell extended

The demand for packaged software applications remained strong in the Czech Republic in 2004, supported by higher enterprise infrastructure investments following EU accession and falling piracy rates. Overall spending on packaged software applications reached € 480 million in 2004, representing year-on-year growth of 13.7 percent. The ERP market in the Czech Republic is among the most mature in CEE. With a near-saturated large enterprise segment, sellers are now pushing simplified offerings for the mid-market and putting a renewed emphasis on industry-specific solutions and expertise. Business intelligence and analytics softo maximise the return from their existing investments in ERP by extracting and reporting data more efficiently. Poland With an annual growth of 13.2 percent in 2004 and a similar level predicted for the next two years, the Polish IT services sector is the most dynamic among the more mature IT markets in CEE. Factors that influence spending on IT services in Poland over this period include the growth of the econspublic sector directly in a demand for greater transparency and effectiveness. Furthermore, there is growing competition in the sector as diminishing margins on hardware and software licence sales have attracted more companies to enter the IT services market. The packaged software market in Poland expanded by 13.6 percent year on yere ch a value of € 684 million. There in allations – most of the remaining potential customers are statelack sufficient funds and the business culture to implement complex ERP solutions.

lers focusing on the upper end o

35

modules such as CRM, HRM, SCM and E-commerce to their existing customer base. Other ellers are increasingly try selling to SMEs, a market segment which still offers s

considerable potential, with post-accession EU funds encouraging companies to undertake technology-related investments.

3.2 Trends

This section discusses some main trends for the software and IT services market. EITO cation, for both the application and system

ts and the IT services market.

ain trends application software market

Verticalisation of ERP applications, add-on functionality such as business performance Chain Management (SCM), replacement purchases following

tions and SCM analytics) continuing to be high in demand;

• Regulatory compliance driving increasing demand for BPM solutions. Main trends system software market • The popularity of heterogeneous compute environments and the move towards more

fully functional platforms will help drive replacements in the application deployment market. The demand for business process automation (BPA) functionality specifically tailored according to industry needs and company size will also be a key growth driver for application deployment software.

• IT security investments will remain top priority. • Security server appliances are becoming high in demand, influences by increasing

enterprise network edge and SME security requirements. • Business Intelligence (BI) tools continue to show positive growth. However, due to

the emphasis in analytic software from BI tools to analytic application packages, and the price pressure from consumers, the market will not show an extraordinary growth.

• The traditional application platform market has limited potential for growth. However, since high-scale replacement of legacy systems is unlikely, the industry will look to standards based integration to create new functionality and streamline.

• Web services have now reached early mainstream status. Adoption is expected to continue. The use of Services Oriented Architecture (SOA) is still very restricted .

Main trends IT services • Interest in consulting and systems integration services is growing slightly, although

growth in these markets is expected to remain limited. Traditionally, these types of services do not have the general recovery in technology spending. Currently, the focus of IT budgets is on replacing outdated equipment, which requires low levels of consulting and implementation. Companies are still cautious with respect to large scale projects and roll-outs. Only when economic activity significantly picks up will companies be able to increase operations and consider extensive, company-wide IT implementations.

• Although it is still a minor part of the overall market, the Software as a Service (SaaS) model increasingly disrupts the market. While the vast majority of organisations still choose to implement and manage their applications software in-house, SaaS is becoming more and more interesting to reduce the business and technology complexities and costs associated with managing applications in-house.

indicates some key trends in its 2005 publisoftware marke M• Profitability in cross-industry solutions, such Customer Relationship Management

(CRM) and ERP, but large-scale implementations remain limited; •

management and Supplythe year 2000 ERP installations, increased focus on new mid-market opportunities, and new composite applications on top of ERP applications sustaining demand for enterprise applications;

• The CRM segment showing more growth due to a renewed companies’ focus on customer care;

• Analytic applications (CRM, financial, opera

36

Furthermore, a powerful characteristic of SaaS is that it allows companies to focus on s ensuring more efficiency. an impact on the Western European services market.

Nevertheless a large share of offshore spending will be with in-country services providers, leading to more growth of services in the mid-term.

core competencies, thu• Off-shoring also has

More information about technology trends, programming and the most important players in the IT market can be found in chapter 4.

3.3 Internet

This medium is very important in this industry and will be even more so in the future. Many of the current issues faced by the software industry are directly related to the Internet and the possibilities it offers. Therefore, this topic is discussed in this separate section. Some applications of the Internet in the software and IT services industry are for example:

o seen an increasing demand. First of all, the anagement strategy of focusing on core competencies led many companies to

importance. Secondly, the Internet decreased the costs of some types of outsourcing, specially for smaller projects. More information on outsourcing is included in chapter 5.

• The spread o oftware (Fame popular thr operating syste such as L and through Internet

such as the Apache web server. Open Source software can be read, compiled ed by everybody to certain itions. It is lly made available for

nternet and coded by groups of volunteers, who co-ordinate their activities Internet.

UNCTAD has published a study on ‘E-coe advantages:

1) FOSS provides, by definition, an improved approach to security issues and to the need

T services sector which ranks first regarding online purchasing and e-ge compared to the other sectors studied.

• New forms of software delivery Examples: downloading, software services enabled by the Internet, software updates. • Concepts related to Application Service Providing (ASP) Examples: the role of web browsers in the use of software; users will be billed according to usage. • An increasing demand for outsourcing of ICT services. The outsourcing industry has alsmoutsource those parts of their IT infrastructure that they considered to be of no strategic

e

f Free and Open Source S OSS) FOSS bec ough ms inux softwareand modifi , subject cond usuafree via the Iover the The mmerce and Development’. It states that ‘FOSS is here to stay for the foreseeable future’ as it has som

for public and open standards. 2) The increasing adoption of FOSS in the developed world is creating export opportunities for customized software from IT industries in developing countries. Electronic procurement / B2B e-marketplaces According to e-Business W@tch (2004), in a competitive global market, procurement processes and supply chain management systems are of increasing importance. This holds true for the ICprocurement usa SMEs also significantly use online buying from the sector. 80 percent of small companies (10-49 employees) purchase online. However, online purchasing of small and large companies is fundamentally different. In large companies, online buying implies the existence of integrated procurement systems. For instance, when Telecom Italia launches online tenders via its corporate Internet site, it allows suppliers to know about offers and the final results in real time, which makes mutual relations even more transparent between players. In SMEs, online buying is often restricted to a "manual" buying process via websites from suppliers.

37

As in the other sectors, companies use different networks and platforms to purchase online, such as suppliers' websites, B2B marketplaces, extranets or EDI based ordering systems. In the ICT services sector, almost every company (96 percent) that makes online purchases has bought from a supplier’s website. This is a very simple and common way to buy virtual or material goods. One in four companies that buy online use their supplier's extranet. This method is more commonly used by larger companies than by SMEs. About one quarter of the companies purchasing online makes use of B2B

arketplaces on the Internet.

-marketplaces can be described as virtual online markets where buyers, suppliers, exchange information, conduct trade, and collaborate

each othe al and ation to laces could be e-commerce er

ness tools wh ation internal processes are provided. A business-to-business e-marketplace:

s a focus on business to business or business to government ding s or trad

as at least o

There are many marketplaces, industry- and country specif open for e. In th he

following areas: re-rela ledge an

es ies for software and research

ing 4) Online purcha

ort e online purchasing ketplaces

upply chain integration: The ICT services sector is ahead of other sectors in integrating

m Edistributors and sellers find andwith r through a collection of information port s, trading exchangescollabor ols. E-marketp only (when they offtransaction facilitwith other

ies only), but can also be e-busi en solutions for integr

• is open to sev• ha

eral buyers and sellers

• is a traservices

platform, while the e-marketplace itself does ed on the platform

not sell nor buy good

• h ne trading function

ic, fee based oreveryon e IT services sector, the most interesting mark

et places could feature t

1) Softwa ted marketplaces for expert know d software programming servic2) Intermediar3) Purchas

sing channels The most imp ant one of these four is th channel. More informationon mar within the IT services industry has been included in section 13.5.3.

Supply chain integration Selectronic purchasing processes. One in two companies of the sector commonly use online technologies to exchange documents with suppliers, a basic form of integrating processes in the supply chain. Even then, integration of IT systems with that of suppliers and Supply Chain Management is still an emerging technology, which less than 10 percent of enterprises have put into practice.

38

4 PRODUCTIO

N

4.1 Total productiAs with imports stat ard to provide detailed production data on software and IT services. Only some rough indications can be given by for example the distribution of

lated activities in Europe.

he highest numbers of IT employees can be found in the Nordic countries, the

owever, when we examine growth rates in these sectors, a very different picture emerges. With a few exceptions, these results show that the strongest growth has taken place in precisely those countries where employment levels in these sectors are at their lowest. In other words, while the new Member States may be behind the rest of Europe in the proportion of their economies devoted to ICT services, they are catching up fast. The lowest growth rates are, by and large, in the most developed economies. The main goal remains to give the exporters from developing countries an idea of the local capacities. Table 4.1 contains data on the employment of the ICT sector in the main countries and their growth figures. Table 4.1 Distribution of employment in computer and related activities in

Europe, 2003

on istics, it is h

employment in computer and re TNetherlands and more developed economies in northern Europe. The Mediterranean countries occupy an intermediate position, close to the EU average, whilst the new Member States, along with Portugal, have below-average concentrations of ICT service employment. H

Country % of all employment

Absolute figures x 1,000

Growth ‘00-‘03 (%)

Belgium 1.5 61 +16 France 1.4 343 +23 Germany 1.4 506 +27 Netherlands 1.7 135 -3 Sweden 2.2 93 +2 Spain 0.8 134 +17 UK 1.9 529 +2 Source: Labour force survey, Eurostat and Analytica (2004)

4.2 Production by EU country This section contains a short description of the structure of the local software and IT services sector for each of the highlighted EU countries. This includes a selection of major companies for each of the sectors. Exporters from developing countries could use this selection for two purposes: to identify the competition in the EU member states or to find

ential business partners in local companies that might be looking for partners to potoutsource services.

4.2.1 Belgium Belgium's linguistic fracture has contributed to a high degree of openness and competition. Distributors, developers and systems integrators are expected to customize their product to a certain degree. As a result, many have opted to develop products for niche markets such as software for banking, logistics and human resource management. elgium does not have global software developers, but it has about 120 niche plaB

thyers

at develop software, specialising in vertical markets of technical software (network ecurity, technical software). A small number of them are international players, e.g. rinso, Capco, Callataÿ & Wouters, Real Software and Ubizen.

sA

39

Because of insufficient financial resources, many Belgian software houses have been ken over. The country has an extensive network of highly qualified packaged computer

ributors, like fo m Micro and Tech Data. Types of distributors with large rks to small, v

ialized market. Oth annels of dist d computer nd mail-order hous tains a selection of major Belgian software

or Belgia mpanies

taproduct dist r example Ingrarange from those dealer netwo alue-added resellers who focus on a spec er utilized ch ribution are specializeshops a es. Table 4.2 concompanies. Table 4.2 Maj n software co Company Main services Internet AXI Systems in tor (Lotus Notes and E xi.be/tegra RP) http://www.a Bizibit CRM Software /http://www.bizibit.be Callatay & Accounting soWouters

ftware (banking) http://www.c-w.be/

Compex – IT Order processing software (manufacturing) lant

mpex.be/http://www.coP

Computer Associates

Enterprise management, data storage, BI/portal soft

http://www.ca.com/ware

IBS Systems integ http://www.ibs.net/rator (Lotus Notes and ERP) IRIS Document ma ion http://www.iris-nagement text recognit

software.com/ Isabel Multi-bank p iness http://www.isabel.be/ayment platform for bus

applications

Keyware Access control software and security http://www.keyware.com/ LMS Test / analysis software automotive industry

ternational p://www.lmsintl.com/htt

In

Microsoft Operating tools, end-user application, ER

http://www.microsoft.comsystems/ P /Belux/default.asp

Oracle Belgium Database and http://www.oracle.com/ ERP software SAP Belgium Business solut http://www50.sap.com/ions (ERP) Vasco Transaction/n

(financial sectetwork security software or)

http://www.vasco.com/

Source: Facts Figures Future

dustry associat re some 850 IT services 03 with mor Program delivery and systems

ion are by far the mos ompanies. Table 4.3 gives lgian SCS companies. Most Belgian software and computer

ervice (SCS) companies tend to specialise in niches like utilities, HRM software, ERP integration, retailing projects and the public sector, and will often need to enter into alliances. Table 4.3 Major Belgian software and computer service companies

According to in ion Agoria IT-solutions there wecompanies in 20 e than 10 employees. integrat t important activities of these can overview of some major Bes

Company Main services Internet Accenture International IT consultants http://www.accenture.com/ Banksys Card transactions clearing house,

supplier of POS terminals, network operators

http://www.banksys.be/

Compaq Micro computers, printer software http://welcome.hp.com/country/be/language.html

Dolmen Computer Retailers http://www.dolmen.be/ Econocom Group Leading corporate hardware and VAR http://www.econocom.com/EDS International IT consultants http://www.eds.be/ Getronics Belgium ICT supplier of Infrastructure and

Business Solutions http://www.getronics.com/be/en-gb/home.htm

IBM Belgium Hardware software and services http://www.ibm.com/

40

Siemens Business Services

Systems Integrator http://www.siemens.be/

Systemat Corporate VAR and service company, also accounting software developer

http://212.190.223.210/is-bin/INTERSHOP.enfinity/eTS/Store/en_BE/-/EUR/Storefront-Systemat

Unisys Belgium IT services and solutions http://www.unisys.be

Real Software Business applications, ERP systems http://www.realsoftware.com/ integrators

Source: Facts Figures Future ‘Vlaanderen’ has several technology parks where ICT companies work together with universities. Leuven has a technology park that is specialized in digital signal processing. The Flander Multimedia Valley, in between Hasselt and Diepenbeek, specializes in graphical software and multi media. Business park Flanders Graphic valley focuses on the raphical sector. In the Brussels Gewest companies specialize in broad ICT services. g

More information ttp://www.agoria.bAgoria - h e

• Trade association. Select advanced search option. are Industry G

the memberlist and use theBelgian Softw roup pierre.sohl@agoria.be• Trade association represe s

putable Consultancy Gui adviseursgidsnts 60 software companie

Com de - http://www.computable.nl/ / opages.com/Europages - http://www.eur

• Select industry, activity and size of potential business partners. Technology parks • DSP-valley: www.dspvalley.com • Flanders Multimedia Valley: www.fmv.org • Flanders Graphics Valley: www.vigc.be

e Z el/nl/home.htm• Digital ennevallei Brussel: www.agoria.be/Bruss

4.2.2 France e comThere is a fierc petition a h IT companies. Regions

rance ities. Cap Gemini rigin France,

ve in Europe o other cluding St

rtant IT marke , engineerin ural language a, A2IA, Ite s (Infogrames),

j

Other leading players in the French market for IT services and software are numerous; the list includes Accenture, EDS, IBM Global Services, SAP, PeopleSoft, Oracle, Intentia, JD Edwards, CSC Peat Marwick. French software developers have a good reputation in various high-tech fields like defence, aeronautics, telecommunications and nuclear power generation. However, they are weaker in designing packaged software: most software purchased in France is of foreign origin, mostly U.S. Table 4.4, 4.5 and 4.6 contain an overview of respectively major French software companies, major French software and computer service companies and giants that offer all types of products and services.

mong the more than 6,000 Frencin the northern part of F

ung and Atos O and Pas-de-Calais offer good opportun

Ernst & Yo , two world-class IT service companies founded in ance is also home tare in the top fi

erformers inand the top 15 worldwide. Fr

strong p eria, Unilog, Sopra, GFI, Thales IS and Altran. The most impo t segments are CAD/CAM (Catia from Dassault SystèmesLectra), software

elismg (Softeam, Aonix, TNI-Valiosys), nat

ry and video gameprocessing (T soft), geomatics, imageects), management (CCMX, Cegid, Adonix), e-trading (GL decision-making (Business Ob

Trade), and software components (Ilog).

41

Table 4.4 Major French software companies Company Main services Internet Business Objects Many types http://www.businessobjects.com/ CCMX Many types http://www.ccmx.fr/ CEGID Advanced Progs http://www.cegid.fr/ Computer Associates Advanced Progs http://www.ca.com/ Dassault Systems Advanced Programming http://www.dassault.fr/ Microsoft France OS & Desktop http://www.microsoft.com/france/ Oracle France Database http://www.oracle.frSage Financial http://www.sage.fr/ Sap France ERP http://www.sap.fr/ Siebel Systems Xml / Crm http://www.siebel.com/fr/ Source: Facts Figures Future Table 4.5 Major French software and computer service companies Company Internet Econocom http://www.econocom.com/ Sopra http://www.sopragroup.com/ Steria http://www.steria.fr/ Transiciel http://www.transiciel.com/ Unilog http://www.unilog.com/ Source: Facts Figures Future Table 4.6 Giants with all types of products and services Company Internet Accenture http://www.accenture.com/ Ares http://www.ares.fr/ Atos http://www.atos.fr/ Cap Gemini http://www.fr.capgemini.com/ ECS http://www.ecs.fr/ EDS http://www.eds.fr/ IBM France http://www.ibm.com/fr/ Schlumberger http://www.schlumberger.com/ Siemens I and C http://www.siemens.fr Thales http://www.thalesgroup.com/ Source: Facts Figures Future

More information Europages – http://www.europages.com Syntec Informatique - http://www.syntec-informatique.fr/ Invest in France - http://www.investinfrance.org/France/?l=enIT sector in the Lyon area - http://www.lyon-aderly.comIT sector in the Toulouse area - http://www.invest-in-midipyrenees.comFrench ministery of economy, finance and industry, Bibliothèque Dossiers sectorielsdu SESSI www.industrie.gouv.fr - extensive report about the ICT-sector.

4.2.3 Germany

The software market in Germany is very competitive and is dominated by large, multi-service suppliers. At the same time, it offers potential for smaller companies with highly specialized products. The top 25 suppliers hold approximately 40 percent o

arket, mainly with sales of standard software. Medium-sized vendors account for more f the German

sales. Experts estimate that approximately 80 percent of mthan 60 percent of total

42

software products in Germany is imported, mainly from the United States (primarily through their subsidiaries in Germany.) As in other IT sectors, the German software industry is characterized by mergers and acquisitions. The large software companies try

get medium sized companies as customers through the acquisition of medium-sized /Germany, and Microsoft

cquiring Navision and Great Plains.

The software market in Baden-Württemberg is growing strongly. Global players like IBM ewlett Packard and about 5,000 mul dia and software companies are located in

ate is th iggest producer of company software after Valley. The government of the fe l state supports small and medium sized

anies. The ministry of economic affairs developed six software centers in Böblingen, ichshafen, Heilbronn, Lörrach, Mannhe en Pforzheim. A special cluster in Baden-

any software. Table 4. rovides a selection of German suppliers of r & IT services.

Major German suppliers computer & IT services

tosoftware companies such as SAP acquiring DCW/Mannheima

and H timethis region. This German federal st e bSilicon deracompFriedr imWürttemberg is comp 7 pcompute

.7 Table 4

Company Internet Accenture http://www.accenture.de CAP Gemini Ernst & Young http://www.capgemini.de CSC Ploenzke http://de.country.csc.com/de/ Gedas http://www.gedas.net/ PwC http://www.pwcglobal.com/de Source: Facts Figures Future Approximately 60 percent of the IT-services market are attributed to German subsidiaries of U.S. firms. U.S. firms are often perceived as having more experience in the IT environment and as such have a head start in the business. Table 4.8 gives a top 10 of German software companies Table 4.8 Top 10 German software companies Company Internet CA Computer Assoc http://www.ca.com/de/english/ Ixos Software http://www.ixos.com/local/de Mensch u. Maschine Soft http://www.mum.de/mum/default.asp Microsoft http://www.microsoft.com/germany/default.aspx Nemetschek AG http://www.nemetschek.de/ Oracle http://www.oracle.com/global/de/index.html Sap http://www.sap.com/germany/index.aspx SAS Institute http://www.sas.com/offices/europe/germany/index.html SER Systeme AG http://www.ser.de/ww/de/pub/home.cfm Software AG www.softwareag.com Source: Facts Figures Future

More information Bitkom - http://www.bitkom.org/• Select ‘mitgliederliste’ for an overview of companies

BBI Special: usiness Intelligence- http://www.isis-bi.de/Europages – http://www.europages.com

banken oftware-marktplatz.de/germantop500/index_isis.phpISIS Daten - http://www.s• 10.000 IT firm

Top 500 IT fir

sociation ware industry- http://w

s and software products • ms included VSI - As of the German Soft ww.vsi.de/• Select ‘mitglieder’

43

4.2.4 NeIn the softw

therlandare/se the Netherlands has a large number of software and

ro rms and f to consu f the service rovide , nd

ini. While services firms in the Netherlands primarily cater to the Dutch market e, they xpand th e

parti s of Europe. Inous small and medium-sized Dutch services providers that

ffer a unique service or a service targeted to a niche market.

he Dutch government announced a special programme to promote the use of Open and Open Sou re within the govern e government and

s. The business th an increasing need to streamline business also been a significant user. More recently

ge as an attractive n CT suppliers, w has idly in recen d

online gaming.

an ongoing tende other service companies and b le, on 7 March 2005 Getronics confirmed its intended offer of EUR 350 million for PinkRoccade. ICT companies

their core compe 9, are primarily service providers n the Netherlands, holding about 30 percent of the

Table 4.9 Major Dutch computer service companies

s rvices segment,

services firms, f m very small to very large fi rom hardware vendors management ltants. More than 30 percent o s market is in the hands ofthe top ten pCapGem

rs. They include: Atos-Origin, LogicaCMG PinkRoccade, Getronics a

at this tim are looking more and more to e eir business outside of thNetherlands, cularly in other part addition to these large corporations, there are numero TStandards rce Softwa ment. Thfinancial sectors have traditproduct

ionally been major end-use market, wi

rs of all types of software

processes, has the SME market has begun to emer ew market for I hile the consumer market also grown rap t years, due to the increasing use of the Internet, games an

There is ncy for larger Dutch services firecome more international. For examp

ms to merge or acquire

focus on tencies. The top five companies,, based i

as displayed in table 4.

market.

Company Internet Atos-Origin (now Getronics) http://www.nl.atosorigin.com/ Cap Gemini/Ernst&Young http://www.nl.capgemini.com/ Getronics http://www.getronics.com/nl/ LogicaCMG http://www.logicacmg.com/nl PinkRoccade (acquisition Getronics) http://www.pinkroccade.com/ Source: Facts Figures Future

4.2.5 Spain

ost IT services in the market are provided by local firms (or foreign subsidiaries located the local marketplace). Experts estimate that only 7 percent of the IT services are

n firms through the import of services.

More information Computable 100 - http://www.computable.nl/computable100/Computable Consultancy Guide - http://www.computable.nl/adviseursgids / Europages - http://www.europages.com/ • Select industry, activity and size of potential business partners. Software bedrijvengids http://www.bizholland.com/mkb/software.htm

Mindirectly provided by foreig Many companies operating in Spain are subsidiaries of international companies, mostly from the U.S., Germany, Japan and France. Some of the top players in the IT industry are foreign firms (Hewlett-Packard, IBM, Siemens, Compaq, Tech Data, Ingram Micro or Cisco). But some local firms (such as Grupo Informatica El Corte Ingles, Indra or Soluziona, to name a few) are also considered leaders in the local market.

44

The business environment in Computer Services includes both large and small providers. The market for Information Technology Services is concentrated with 10 firms providing nearly 70 percent of the IT services in the Spanish market (table 4.10). Table 4.10 Major Spanish computer service companies Company Market share

2002 (%) IBM 18 Informativa El Corte Ingles 12 Indra 12 H-P 5 EDS 5 Schlumberger Sema 5 Coritel 4 Ibermatica 3 Azertia 3 Gedas Iberia 3 Source: Asociación de Empresas de Electrónica, Tecnologías de la Información y elecomunicaciones de España (20003)

siness s direct clients a public tration and al activities. The IT

r in nia (region aro Andaluci he Basque C

T In the bu egment, most re in the finance sector, adminis general industri most important regions in the sector are eithe Madrid or Catalo und Barcelona). Other interesting regions are

a (Southern Spain), t ountry and Valencia.

4.2.6 Sweden xcels in f ss communic ics nics. The y 500 softwa

Among these pliers of large business systems like Intentia, IFS IBS. Hogia is r of small to s. Swedish

s are well ing in some nic ainment re support, production critical software and IT

etrics. They also have good positions in segments like

stic market, which underlines the importance of dopting the newest technologies in order to be internationally compatible.

Table 4.11 provides a list of the major software companies in Sweden, followed by table 4.12 with a selection of major SCS companies in Sweden. Table 4.11 Major Swedish software companies

Sweden eto

ields such as wirele ations, microelectronics, telematdish SCS and pho

r. re are approximatel re companies in the Swe

secto companies are suplieand the leading supp medium sized system

companie reputed and lead softwa

he markets like the entertindustry, aerospace industryecurity software with bioms

software for wireless applications, intelligent home communications, applications for the health sector, the process control, automotive (i.e. telematics) and forestry sectors. The wedish industry has only a small domeS

a

Company Main services Internet Ericsson Mobile solutions, networks http://www.ericsson.com/ IBS Business systems http://www.ibs.se/ IFS Business systems http://www.ifsworld.com/ Intentia Business systems http://www.intentia.se OM Financial systems solutions http://www.omxgroup.se

More information p:/Europages - htt /www.europages.com/

• Select industry, activity and size of potential business partners. ociación de E ectrónica, Tec rmación y

comunicacioneAs mpresas de El nologías de la InfoTele s de España - http://www.sedisi.es/

45

Industri-Matematik

Distributchain solutions

ion-intensive operations, supply- http://www.im.se/

ProAct IT Group Consultant, systems integrator http://www.proact.se/ TAC Holding Software for process control http://www2.tac.com/se Technology Nexus

Storage, recovery, security, networks. http://www.nexus.se/

Telelogic Solutions software development http://www.telelogic.com/ TietoEnator Overall supplier http://www.tietoenator.se/ Source: Facts Figures Future

ervice companies Table 4.12 Major Swedish computer s Company Services Internet Cap Gemini Ernst & Young

Leading management consultants

http://www.se.capgemini.com

Cell Networks IT Solutions http://www.cellnetwork.se/ IBM Overal supplier http://www.ibm.com/se/ Icon Medialab IT Consultants. Support.

Security. Data Storage. Server Solutions

http://www.dimension.se/

Sigma IT Consultants E-Commerce. http://www.sigma.se/E-Learning. Information Design

Teleca Consultants providing IT Services

http://www.teleca.se/

TietoEnator Major IT consultants http://www.tietoenator.se/ WM-data Leading Nordic provider of

design and IT-related Services http://www.wmdata.se/

Source: Facts Figures Future The combination of wireless system producers, application developers and service roviders, together with sophisticated users has created several internationally p

competitive ICT competence clusters in Sweden. Major centers include Mobile Valley, Telematics Valley, TelecomCity, HomeCom, InternetBay and Öresund IT.

4.2.7 United Kingdoarket leader in IT related products and services 'database

' and multimedia applications based on networks. The UK

m

More information Europages – http://www.europages.com IT-Företagen - http://www.itforetagen.se (Select ‘member’) Invest in Sweden Agency - www.isa.seIT Sweden - www.itsweden.com InternetBay, Distance spanning applications - www.internetbay.nu Mobile Valle lications and services

encecity.sey Wireless technology and systems,mobile app

www.kistasci ehiculaTelematics Valley, V r ti .telematicsvalley.org telema cs, www

ome C ic HomeCom, H ommun ations, www.homecom.org mm atio obi lications and services www.telecomcity.orgTelecomCity Teleco unic n, m le app

Öresund IT, Human-tech www.oresundit.com

The United Kingdom is mackaging', 'visual realityp

software sector is highly concentrated: the top twenty companies account for an important market share. On top of these large companies, about 130,000 smaller software companies operate the market. The top players in the UK software and services market have been included in table 4.13. In the market, European and US companies are active and well represented, both software companies and second-tier providers.

46

Many companies are located in a forty-mile long corridor extending from London in a westerly direction along the M4 motorway. There are many software engineers present in

e UK market, trained by the British Universities. All of them look for a job or start their

bridge, an area known as Silicon Fen for its thriving technology industry.

M, another of the world est re companies, also undertakes wide-ranging s. Hewlett-Packard, also a major worldwide

any, has b d in Bristol.

Major UK software and services companies

thown company, seeking for some niche market opportunities. Universities work closely together with the companies supported by the British government. The UK is known as one of the most innovative and advanced locations within this sector. Major clusters for software and computing services companies can be found in, for example, Silicon Glen (Central Belt of Scotland), Silicon Fen (Cambridgeshire), Thames Valley/M4 Corridor, Greater Manchester and the Midlands. Other UK areas are rapidly developing clusters of software companies. Microsoft, the world’s largest software company, has one of its most important researchcentres in CamIB ’s larg softwaresearch and development at several UK sitesoftware comp a large la oratory in the UK, site Table 4.13 Company Main s service Internet Accenture Project services http://www.accenture.com/ Capita Outsourcing http://www.capita.co.uk/home/ Computacenter Support services http://www.computacenter.com/ Computer Associates

Packaged software, http://www.ca.com/uk/

CSC Support services http://www.csc.com/ EDS Outsourcing http://www.eds.co.uk/ Fujitsu Services Project services, support

services http://uk.fujitsu.com/

HP Support services http://www.hp.co.uk IBM Packaged software, project

services http://www.ibm.com/uk/

LogicaCMG Project services http://www.logicacmg.com select UK

Microsoft Packaged software http://www.microsoft.com/uk/ Oracle Packaged software http://www.oracle.co.uk SAP Packaged software http://www.sap.co.uk Sun Support services http://www.sun.co.uk Synstar Support services http://www.synstar.co.uk Source: Facts Figures Future

Trade Invest partnering service, A possible way of finding a foreign partner is the UKrefer to the websites mentioned below.

MEuropages - http://www.europages.com/

ore information

• Select industry, activity and size of potential business partners. Intellect - http://www.intellectuk.org/• Select ‘member database’ • http://www.intellectuk.org/groups/offshore/Outsourcing_Offshore_V5.pdf Kellysearch - http://www.kellysearch.com/ UK Trade Invest - The Global Partnerships http://www.invest.uktradeinvest.gov.uk/wweurope/site_ire/uploads/pdfs/GP%20Harnessing.pdf• UK programme to help overseas organisations of any size to find partners, especially

suited to smaller organizations operating in a technology or knowledge intensive sector.

47

5 OUTSOURCING This chapter is about outsourcing. As mentioned in chapter 1, reliable and recent

iv tsourcing is in fact a form of importing services from foreign ou EU companies ‘buy’ services in foreign countries, this topic is dealt with in

p to and including 5.4. The total EU outsourcing market, outsourcing by the a ntries, sector comparison and trends are topics in these sections.

statistics on imports of IT services are hardly available, although some indications are g en in section 5.1. As ouc ntries, as sections 5.1 um in EU cou

5 EU (o.1 ffshore) outsourcing market here are currently no reliable statistical indicators of the extent or nature of global utsourcing. It is not possible, either through the trade statistics or the EU occupational

e are vague, specially in relation to outsourcing to smaller Asian countries and eastern European

utsourcing market is booming.

und 61 percent of UK companies outsourcing, ompared with only 15 percent of their German counterparts. More than 80 percent of

ults, reporting cost savings in the range of 20 percent to 40 percent. The full range of services from front office to back office functions is considered for offshoring. IT support is involved in some 60 percent of all current or planned offshoring projects of the European companies interviewed. Forrester Research estimates that the UK will account for three-quarters of all European offshore outsourcing in five years’ time and that software development will be the main service provided. Another Forrester Research report states that offshore service spending in Western Europe will grow from EUR 1.1 billion in 2004 to EUR 3.6 billion in 2009, with the UK accounting for 76 percent of that amount. Other countries like France and Germany will increasingly outsource to the Czech Republic, Russia and Tunisia (Peynot, 2004 and Parker, 2004). Table 5.1 European offshore services revenues,

€ millions, estimations 2005, 2007 and 2009

Toand employment statistics, to track statistics of imports and exports of business services to be able to identify with any accuracy which components of these services represent jobs. Hence, for evidence we must look at the results of market research, one-off surveys and case studies. They may be coloured, either positively or negatively, by the specific interests of the agencies involved. Estimates of the impact on Europestates. Almost all sources agree: the European o The survey conducted in 2004 by the United Nations Conference on Trade and Development (UNCTAD) and Roland Berger Strategy Consultants analyzed the service offshoring strategies of a representative sample of the top 500 European companies. The Roland Berger consultancy, for instance, foccompanies with experience in offshoring are satisfied with the res

Countries 2005 2007 2009 UK / Ireland 1,076 1,882 2,766 Germany / Swiss / Austria

126 185 266

France 111 157 212 Nordics 52 86 138 Benelux 50 83 133 Spain / Portugal 1,476 2,482 3,636 Source: Forrester (2004) According to EITO, Southern European countries are expected to be less keen on

here are already some examples of Italian companies offshoring. Nevertheless, toffshoring to Brazil, and this trend might strengthen in the future. The offshoring model will remain attractive for large enterprises and the high end of the mid market. EITO says

48

that offshore spending by SMEs, which is the large majority of European companies, will be very limited.

jobs will move offshore most rapidly from the UK with continental countries matching level of impact. Across the whole of Europe, Forrester expects

d software implementation, application outsourcing, nd remote infrastructure management. Over time, the displacement of applications

ill be joined by job losses among staff like database administrators,

uropean IT Jobs Moving Offshore By Job Type, 2004-2015

IT that trend but at a lower that almost 150,000 pure IT jobs will move offshore by 2015 (see table 5.2). Maturing offshore users typically move beyond application development and maintenance into related IT disciplines like packageadevelopment work wnetwork administrators and systems architects. Table 5.2 Forecast: E 2004 2010 2015 Information Technology 30,855 85,731 150,304 Computing professionals 24,151 65,951 118,712 Junior computing

ves 6,705 19,780 31,592 staff and operatiSource: Forrester (2004) The evidence shows that even IT managers will face job displacement offshore. These will show up among the 119,000 computing professional jobs that Forrester expects to move offshore by 2015. A number of large European IT services firms are falling to Indian ownership. Dominant Indian services firms like Wipro and Tata Consultancy Services already bear comparison with all but the largest international IT services firms. The IT consultancy firm Gartner estimates an ultimate growth of 40 percent in utsourcing in Europe, with an expected increase of 30 percent in 2004. Furthermore,

2010. But artner also predicts that the new European countries will become popular for

ill pose a r 3).

cost savings achieved by economies of scale through consolidating activities

2004): ‘Quality improvements were cited by large European TNCs as the third most important benefit achieved from offshoring (after

costs and other costs), often exceeding expectations’. While there is

oGartner predicts that almost a third of leading European businesses will include an offshore element in their IT plans by 2005. As a result of this shift of IT services overseas, up to 25 percent of EU IT jobs could go to the emerging markets byG‘nearshore’ outsourcing of some operations, although not on a scale that wth eat to India (Gartner, 200 Driving factors Recent research has identified a range of driving factors for ICT service outsourcing: • cost differentials regarding labour and other costs • availability of labour and access to knowledge •

• corporate restructuring including concentration on core business activities. Closely linked with corporate restructuring are the quality improvements. In fact, quality is seen as one of the single most important drivers of offshoring by the recent World Investment Report (UNCTAD,

reduced labourwidespread agreement on the main driving factors, their actual importance differs. Pressure Point Index (2004) The Pressure Point Index (PPI) is an annual piece of pan-European research into the pressures faced by IT directors. They answered, among others, the following questions:

49

• Which responsibilities and IT functions would be outsourced?

Germany

mailed to IT managers/directors, divided equally between the ll sector, retail and

com s. 700 completed questionnaires formed the

Ad

imp “allows us to vice levels” (24 percent). Cost

out

• What are the main benefits of outsourcing? • What are reasons for not outsourcing? The survey was carried out among IT managers and IT directors in the following regions: • Belgium / Luxembourg • France •

• Ireland • Netherlands • Spain • UK The questionnaire wasfo owing vertical industries: banking, insurance, manufacturing, public miscellaneous. The IT managers selected were located at the head or central office of a

pany with a minimum of 200 employeebasis of the results, representing each country and sector proportionately.

vantages and disadvantage outsourcing Figure 5.1 shows the main reasons for outsourcing for European companies. The most

ortant ones include “access to skills that we lack in-house” (29 percent),focus on the job in hand” (28 percent) and “guaranteed sercontrol has become less important in 2004 (14 percent). More reasons to choose

sourcing are discussed in section 7.3.

Figure 5.1 Benefits outsourcing EU companies, 2004 (in %)

Source: PPI (2004) 34 percent of EU companies feel the loss of visibility and control as a disadvantage of

gement (29 percent) and User support (24 percent). More details are included in figure 5.2.

outsourcing, 19 percent are concerned about the danger of losing intellectual property through outsourcing, 19 percent see difficulty in managing multiple suppliers and 14 percent of EU companies see outsourcing as a threat to job security. Outsourced IT functions The most important services that EU companies would consider offshore outsourcing in 2004, were network and data mana

50

Figure 5.2 Offshore / Onshore Outsourced technology functions in EU, 2004

Source: PPI (2004) Spe

ng is now more likely to be driv system stability and up-time (40 percent) tha

e m integration skills are me

nding and budgets The PPI survey (2004) shows IT budgets remain tight. IT buyi

en by business benefit (39 percent) andn by the need to reduce costs.

IT skills shortage IT ls shortage. 42 percent said directors show mixed feelings on whether there is a skil‘y s’ while 58 percent said ‘no’ in 2004. Security and syste

ntioned the most.

5.2Thi or each of the EU member states. It will ive ions and developments in outsourcing, e.g. IT skills hortage, outsourcing responsibilities and the main benefits and disadvantages of utsourcing.

Outsourcing by EU country urcing situation fs section discusses the outso

a general idea of EU-opingso

5.2.1 Belgium

ccording to Forrester Research (2004) the number of IT jobs predicted to go offshore in elgium would amount to 310 jobs. This number consists of 262 computing professionals nd 48 junior computing staff and operatives. In 2015 the number off offshored jobs was xpected to be more than 1900, of which more than 1600 computing professionals and

to a s Quin ton Redwood (2004) the results of re outsourcing differ. In some cases there is a cost reduction of more than 30

, while in other es prod decreases with more than 100 percent. Again the market is s inf in this country. Quint expects a strong market

ntries f Easte e.

to the PPI su y by 2004), the service outsourced most by Belgian ies was user sup t (28 Other services were infrastructure support and

nce (26 percen and d data nagement (18 percent).

mpanies consi ed tsourcin he following IT functions: rategy (25 perce

percent) • Network data management (18 percent).

ABaemore than 300 junior computing staff and operatives. According recent re earch by t Wellingoffshopercent cas uctivityproof that in it ant stageshare for the cou rom rn Europ According rve Synstar (compan por percent).maintena t), network an ma Belgian co der offshore ou g t• IT st nt)• Staff management (20

51

The most important advantages of outsourcing, according to Belgian companies, included

of visibility and control (33 percent) difficulties in rs (25 percent) and fear of loss of intellectual property (16

t of the IT directors believed that there was an IT skills shortage in tegration (68 percent) are skills that were

access to skills that are not available in house (32 percent), guaranteed service levels (24 percent) and the chance to focus on the job in hand (23 percent). Some disadvantages were loss managing multiple suppliepercent). 46 percenBelgium. Security (70 percent) and system inbelieved to be in short supply.

5.2.2 France

cc ey in September 2003 by SAP AG and Kearney Interactive, it was ench companies that had had experiences with offshore

ut f French IT companies outsourced (some) IT work, of which nl

are adamant that their outsourcers speak French and so France is sending its white collar

ording to EuroITX, French companies regard a near shore alternative as more

hore when outsourcing is considered. Clients often reject companies ore geographies for French companies are North Africa

arket intelligence

et presence (physical) is a must. An office in Paris is also highly recommended. Even French IT companies from Toulouse or Lyon have found it very

It is important to note that most people

sh (and they do not mind speaking English). d CIO level.

The overall cost and salary levels highly differ in various parts of France. A few French

onsidering France, it is quite important to look at companies and opportunities

the (perceived) risks associated with offshore outsourcing (added to government initiatives and market sentiments) outweigh the potential advantages of

utsourcing process. However, companies are quite open to discussing (offshore) outsourcing issues and looking for information sources.

In addition to forecasts mentioned before, the French industry association Syntec Informatique confirms that for offshore outsourcing there is a strong need for close cultural ties and there is a prevailing influence of service centres in the region. According to the PPI survey by Synstar (2004), responsibilities that were ideally considered for outsourcing in 2004 by French companies included mainly infrastructure

According to Forrester Research (2004) the number of IT jobs predicted to go offshore in France would amount to 2,639 jobs. This number consists of 1,287 computing professionals and 1,352 junior computing staff and operatives. In 2015 the number of offshored jobs was expected to be more than 15,447, of which 8,686 computing professionals and 6,761 junior computing staff and operatives. A ording to a survespecially the largest Fro sourcing. 36 percent oo y four percent used offshore vendors. Frost & Sullivan's Study finds that the French

IT jobs to Tunisia and Mauritius.

Accacceptable than offswith offshore operations. Key offshand Central and Eastern Europe, especially Romania. M• Outsourcing at large is lagging 3-5 years behind the USA or the UK. • Due to difficult market entry, offshore service providers often exclude France from

their primary European target markets. • Local mark

important to have, at least, a smaller marketing and support unit in Paris.• Command of the French language knowledge.

in the IT sector speak Engli• Outsourcing decisions are made at CEO an•

companies use the “Near shore outsourcing” term to refer to outsourcing to low cost regions within France.

• When cin the Lyon and Toulouse area.

• IT companies are quite aware of the latest global trends in IT outsourcing. • Often

moving processes offshore. • Companies often do not have the experience, skills and knowledge of managing

global teams and the (offshore) o•

52

support and maintenance (35 percent), user support (21 percent) and network and data management (11 percent). French companies considered offshore outsourcing the following IT functions: • Network data management (35 percent) • IT strategy (23 percent) • User support (14 percent)

dvantages of outsourcing, according to French companies, included

ntegration (72 ercent) and security (61 percent).

The most important aaccess to skills that are not available in house (31 percent), guaranteed service levels (28 percent) and the chance to focus on the job in hand (25 percent). Some disadvantages were loss of visibility and control (31 percent) and fear of loss of intellectual property (18 percent). In 2004, 42 percent of French IT directors agreed that there was an IT skills shortage. Skills in short supply included system ip

5.2.3 Germany

According to Forrester Research (2004) the number of IT jobs predicted to go offshore in Germany would amount to 3,031 jobs. This number consists of 1,108 computing professionals and 1,923 junior computing staff and operatives. In 2015 the number of offshored jobs was expected to be more than 17,091, of which 7,476 computing professionals and 9,615 junior computing staff and operatives. The industry Association ITKOM gives a positive recommendation on offshore outsourcing on their website.

ent say it kes 1 to 3 years. Table 5.3 gives some German software related services outsourcing

maintenance and updating (59 percent).

ly ed offshore (more than 25 percent): • New development of market ready product (41 percent)

iting or reengineering pro rograms (34 percent extra or internet solutions (34 percent)

ntenance of software and legal systems (31 percent) standard software rcent)

support (11 percent)

B Prof. Dr. Regina Moczadlo from the university in Pforzheim predicts a major growth for offshoring activities in Germany. Quite recently, several pilots were successfully implemented, and now companies start scaling up with the offshoring implementation methodology that has turned out to be successful. German companies that outsource offshore are software companies (73 percent), processing companies (8 percent) and others. 63 percent of the companies that offshore outsource software development have a workforce of fewer than 100 employees. Almost 50 percent of the companies say that the whole track for offshore developments is longer than three years. 44 perctaprojects. An offshore programmer is hired mainly in the following development phases: • programming (96 percent) • program development (73 percent) • testing (63 percent) •

• development of the test concepts (59 percent) Which part of software has main been develop

• Rewr duct or p• Intra-, • Mai• Customizing (23 pe• Client

53

Table 5.3 Countries with Germ e related services outsourcing projects an softwar Country Number Country Number India 18 Bangladesh 1 Russia 10 1 Brazil Rumania 8 E 1 stonia Czech Republic 7 C 1 roatia Ukraine 5 Latvia 1 Hungary 4 Portugal 1 Poland 3 Slovakia 1 Belarus 3 Slovenia 1 Bulgaria 2 South Africa 1 Lithuania 2 St Helena 1 Turkey 2 Tunisia 1 Source: Moczadlo (2004) According to EuroITX, companies in Germany are serious about outsourcing. Even SMEs are practicing outsourcing – mostly near shore. Key areas of offshore IT outsourcing are: • Legacy system maintenances • Software development • EIP integration

offshore (India, China, Philippines, Russia, Mexico, anada) and near shore (Central-, Eastern Europe - CEE, Ireland, Egypt, Israel). Indian

guage capabilities European business domain knowledge (for instance automotive and textile) with

isadvantages are:

agement (19 percent) and user support 5 percent).

er ies consider offshore outsourcing the following IT functions: ent)

he most important reasons for outsourcing in Germany were the chance to focus on jobs in hand (27 percent), guaranteed service levels (27 percent) and cost control (22 percent).

• SAP/ERP development and customization • Data warehouse and document management • Migration The distinction is very clear betweenCfirms are buying smaller companies in Germany in order to create a “language interface” as well as use them as support, marketing and contracting platforms. Companies in Germany have experienced serious cultural issues in India and SEA. Outsourcing companies from Central and Eastern Europe have the following advantages: • Cultural affinity • Geographical distance • Lan•

historical foundation • Universities and research institutions are participating in IT outsourcing as well as

branding their respective country. DHigher costs than in India or SEA. Lower overall process maturity level and less experience with offshore processes and management issues. According to the PPI survey by Synstar (2004), German companies considered the following to be the responsibilities outsourced the most: infrastructure support and maintenance (45 percent), network and data man(1 G man compan• Desk top support / maintenance (18 perc• User support (16 percent) • Network data management (15 percent). T

54

Some disadvantages were the loss of visibility and control (31 percent), difficulties in managing multiple suppliers (31 percent) and fear of loss of intellectual property (18 percent). 37 percent of the IT directors in Germany thought in 2004 that there was an IT skills

0 percent) and IT business strategy (72 percent) shortage in the country. Security (9were believed to be in short supply.

5.2.4 Netherlands According to Forrester Research (2004) the number of IT jobs predicted to go offshore in The Netherlands in 2005 would amount to 1,652 jobs. This number consists of 557 computing professionals and 1,095 junior computing staff and operatives. In 2015 the umber of offshored IT jobs was expected to be more than 9,236, of which 3,763

G Group, KPN Telecom, KLM, Baan and Phillips outsourced ubstantially. Also, Versatel currently has some outsourcing activities with South Korea

erlands have been using foreign IT-suppliers for more than 20 ears. India is the market leader by far and is very successful as an outsourcing services

s projects xe estimated that more than 75 percent of Dutch offshore ct is the most important destination, software

n developing countries, like Pakistan, Bangladesh, epal, China, Indonesia and the Philippines. Compared with India however, these

lthough Asia was the most important destination region for outsourcing projects in

le 5.4 contains an overview of countries at performed outsourcing projects for Dutch companies.

able 5.4 Countries with Dutch outsourcing projects

ncomputing professionals and 5,473 junior computing staff and operatives. An estimation of GPI of the Dutch outsourcing market amounted to € 100 million. About 5,000 IT employees from developing countries were working for about 200 Dutch companies. This number would grow in the future. The large companies would outsource more projects and the small and medium sized companies would start outsourcing. Companies like Getronics, INsand Telfort works with Chinese workers. Companies in The Nethyprovider. More than 200 Dutch organisations have had software related servicee cuted in this country. It isa ivities are located in India. Although Indiaorders have also gone to other AsiaNprojects are much more limited in size and in number. An important reason is that the IT-sectors of most of these countries are not (yet) well-recognised in Holland. A2004, the importance of Central and Eastern Europe was rising as well, as IT companies in e.g. the Czech Republic, Romania, Bulgaria and Russia already had tens of Dutch clients. Moreover, service providers from Latin-America, North-Africa and the Middle-East were now also targeting The Netherlands. Tabth T

Central and Eastern Europe Developing countries

Ireland Turkey Lithuania Iran Latvia South Korea Czech Republic China Slovakia Pakistan Hungary India

More information Branchenbuch Outsourcing Deutschland - http://www.way2business.de/b8652• German outsourcing companies Archiv Industrienet - http://archiv.industrienet.de

rade magazines in IT industry. Very powerful, but in German language. • Archive t

55

Poland Sri Lanka Romania Bangladesh Bulgaria Nepal Yugoslavia Thailand China Malaysia Belarus Vietnam Ukraine North-Korea Philippines Indonesia Egypt Lebanon Ghana South Africa Suriname Colombia Source: GPI Consultancy (February 2004) Opportunities outsourcing IT companies in The Netherlands were expected to turn more and more to external resources as well. In 2004, most IT budgets of large companies were expected to be cut slightly compared to 2003, although no significant changes were expected. This was supported by a research by Giarte, based on 160 decision makers, stating that internal IT epartments of companies would continue decreasing in size. Furthermore, Dutch

he competition in the market was increasing, as mergers continued to take place. There

e Netherlands could offer pportunities for service providers.

following responsibilities that were considered for

dcompanies would strive for protection of their Return on Investment (ROI) and added value of IT, increase efficiency and lower costs. (Offshore) outsourcing fits very well in this and could help to reach these objectives. The growing demand for external services, and outsourcing of ICT activities in particular, was strongest from financial organizations, the telecommunications industry, central government, Dutch multinationals and the public utility and healthcare sectors. Twas a trend not to place all outsourced activities in the hands of one services company, but to use various service providers for different tasks. Especially the well developed ICT infrastructure and liberalized telecommunications market in tho Dutch companies were expected to spend more on outsourcing and software packages and less on custom software development and new IT staff. However, there were differences by sector and per company. Investments and new projects were expected for 2004 in the areas of ERP and EAI. Many companies still use older systems and will most probably switch to newer platforms and systems. CRM projects would not gain high priority, as adaptation of new technology, like VoIP or wireless applications would be slow. Overall, there are good opportunities for foreign IT service providers, as the advantages of global IT outsourcing are still not well-known in the Netherlands. Many large and medium-sized companies are not sufficiently informed on the opportunities that outsourcing offers to them. Synstar (2004) mentioned the outsourcing by Dutch companies: infrastructure support and maintenance (36 percent) and network and data management (28 percent). With offshore outsourcing, software development is still the most important subject, not only including administrative software but technical and embedded software as well. Other possibilities with offshore outsourcing are:

56

• Data entry

(40 percent), guaranteed service levels (22 percent) and chance to focus on the job in hand.

utch companies considered offshore outsourcing the following IT functions: s con p

ork data agemeategy ( t).

main disadv es wer l (33 percent) and fear of loss of property (22 percent). 36 percent of Dutch IT directors believed that there

age in included system integration (80 sec (64 pe

• Internet (web design and e-commerce) • Geographical Information Systems • Computer games, animations and cartoons • Infrastructure management (relatively new). Dutch companies had their services outsourced because of access to specialized skills that were not available in-house the D• Busines tinuity (33 ercent) • Netw man nt (33 percent) • IT str 32 percen The antag e loss of visibility and controintellectualwas an IT skills short 2004. Skills in short supplypercent) and urity rcent).

5.2.5 Spain

number of IT jobs predicted to go offshore in r consists of 116 computing professionals

g staff and operatives. In 2015 the number of offshored jobs

ccording to the market research firm DBK, the IT (Information Technology) outsourcing

ercent) and fear of loss of

According to Forrester Research (2004) the Spain would amount to 304 jobs. This numbeand 188 junior computinwas expected to be more than 1,132, of which 521 computing professionals and 611 junior computing staff and operatives. Asector in Spain saw a growth of 18 percent in 2003, and this trend was expected to continue through 2004 and into 2005. The study reveals that, although the sector comprises of 20 companies, the big five -IBM, Indra; Accenture, EDS and T-Systems - make up 63 percent of the entire turnover. The most important customers that use these services are the banking and insurance sectors, followed by industry, telecommunications and Public Administrations. According to the PPI survey by Synstar (2004), the most ideally outsourced service by Spanish companies was infrastructure support and maintenance (45 percent) and user support (28 percent). Spanish companies considered offshore outsourcing the following IT functions: • User support (44 percent) • Network data management (43 percent) • Business continuity (33 percent). The most important advantages of outsourcing, according to Spanish companies, included the chance to focus on the job in hand (32 percent), guaranteed service levels (22 percent) and cost control (20 percent). Some disadvantages were loss of visibility and control (38 pintellectual property (24 percent). 49 percent of the IT directors believed that was is an IT skills shortage in Spain. System integration (80 percent) and security (64 percent) are skills that were believed to be in short supply.

57

5.2.6 Sweden According to Forrester Research (2004) the number of IT jobs predicted to go offshore in weden would amount to 906 jobs. This number consists of 474 computing professionals

he market for offshore outsourcing in Sweden offers good opportunities. As in other EU

em would have difficulties to separate software design (high added value ctivity, which they would not want to outsource on the first instance), coding (low added

s a serious with a number of organizations.

ctors. First, the Swedish economy has also uffered from an economic slowdown. Second, outsourcing has become more and more

lly, ince they need to cuts costs. This is confirmed by the Swedish business weekly

ven forecasts another trend, as smaller companies will also follow,

ce these local roviders to review total offerings and conditions. For example, vendors such as HP, IBM

re have already added an offshore component to their outsourcing offering to

of IT services, including for example business services.

ng of off-shore IT outsourcing shows a mixed icture. Companies get most information from IT magazines, the general press and from

nd the Eastern European Countries (Baltic States, Bulgaria,

the ubject. An area of particular interest is information on the risks involved in off-shore

ave mentioned that they are frequently approached by

Sand 431 junior computing staff and operatives. In 2015 the number of offshored jobs was expected to be more than 5,358 of which more than 3,201 computing professionals and 2,157 junior computing staff and operatives. Tmember states, companies are looking for possibilities to reduce costs. According to market research company IDC, the Swedish IT outsourcing services market will grow at an average rate of 11 percent per year from 2002 up to and including 2007. Especially the demand from companies with more than 5,000 employees and from county councils is expected to increase. The expected increase for the whole Nordic region is even higher, about 17 percent in that period. Many of thavalue, labour intensive process), customer service and support. This indicateproblem with process maturity This expected growth is caused by several fascommon and is more and more accepted by small and medium-sized organizations. Finally, large Swedish companies are expected to move their IT departments externasAffarsvarlden. It ehereby creating a new service, called ‘out-tasking’. This means that small companies will buy various services, e.g. financial systems per use and storage per megabyte. Some services will be charged on a monthly basis. The top vendors in Swedish IT outsourcing are IBM, WM-data, and EDS, refer to table 5.5 for some examples of outsourcing deals in Sweden. There is room for growth, as the top 10 cover only about 60 percent of the market, compared to 89 percent in neighbouring country Finland. However, the developments in the offshore market forpand Accentube able to offer competitive prices. Traditionally, custom application development services have been the most outsourced area in Sweden. At the moment, the offshore market is expanding and offers a wider range

The level of knowledge and understandipeach other. India, China aPoland) are mentioned as known outsourcing destinations. Information is not available on countries and opportunities. Companies often do not know about specialized online information sources on off-shore IT outsourcing. However they are very positive on learning about such an information source and receive regular information onsoutsourcing. Many companies hcompanies from low income countries with an IT outsourcing offer. However, the information they get is based exclusively on the positive aspects of outsourcing and the countries providing this. Only a few companies have structured and reliable information on the risks involved and the way risks can be mitigated.

58

Banking and insurance market IT-production in the banking and insurance sector is, generally speaking, a standard ervice and i ou cisions.

Application t p e an ing companies is ing on the core iness an ould n e ou rced. Howe , some rts in

opment process are standard and could be outsourced if the company can build d and compe n. O the other nd, ap ation pment is very complex and t s why a joint ve re with an I upplier could be

in the futurees

panies are experien diffi com g. Out rcing iderable time to sew together with quite a number of people

outsourcing services, a deal worth ro

ourcing deals in Sweden

s easy to spec fy in contractand develo

s, which hment of in

ave an esuranc

ffect on outsd bank

rcing de managemen

borderthe devel

bus d sh ot b tsou ver pa

a goo titive purchase organisatio n ha plicdevelo hat i ntu T-spreferred . ExamplSwedish outsourcing coeals usually take cons

m cing culties in petin soudinvolved full-time. Investment figures per deal are worth around € 700,000 to well over a € 1 million for potential suppliers. As an alternative, local companies are looking for niches where they can compete or sometimes partner with large companies. The Swedish government pharmacy chain, Apoteket, procureda und € 116.8 million (2003). Table 5.5 Examples outs Company Supplier Value (€) Nordea 2. er tenIBM 3 billion ov years Ericsson 442-531 million HP, IBM ABB IBM 1.1 billion over ten years ISS CSC 5 million ov en years 38 er tElectrolux IBM 8 million 23The Post Office IBM 8 million ov ix years 23 er sVin & Sprit CSC million ove years 27 r tenTelia Sonera Tieto million 26

Enator Source: http://www.zdnet.com/ (2004)

5.2.7 United Kingdom

According to Forrester Research (2004) the number of IT jobs predicted to go offshore in the United Kingdom would amount to 19,439 jobs. In 2015 the number off offshored jobs

as expected to be more than 87,000.

business and IT services. Another tudy of the impact of offshoring on the UK was carried out by the Evalueserve onsultancy, sponsored by the Indian IT trade body, the National Association of Software nd Service Companies (NASSCOM). This study estimated that 272,000 UK jobs will have een moved offshore to countries such as India by 2010 at a cost of £5.7 billion to the K economy in unemployment benefits and retraining costs. The study predicted that round 19,000 consulting, legal and management jobs will be created as a result but that ere will be a net loss of approximately 253,000 jobs. This study also attempted to

re outsourcing. Evalueserve laims that the cost to the UK of not offs ng d be fi mes histimated to a growth.

McCue, 20 q cast by Deloitte Research, found that 2,000,000 al service jobs will be outsourced from western countries to India by 2008. It also

that 1,000 UK jobs a week are lost to offshoring and that 200,000 UK jobs, lly in IT supp will be of ed by 8. Am s further ed th 5,000

nce October 2003 (Amicus, 2004).

w In the UK, a survey of 150 member companies of the Confederation of British Industry (CBI) in 2004 found 51 percent reporting that pressure to offshore had increased over the past two years, with 21 percent describing these pressures as ‘very great’, 30 percent reporting that they had already relocated some activities overseas and almost a quarter considering doing so in the future (CBI, 2004). It should be noted, however, that this study included production activities as well as scabUathoffset the employment losses resulting directly from offshoc hori

tput and woul

subseqve ti

uent slowinggher than the

of GDP e loss, due a drop in ouuoting a fore04 Amicus,

financiestimatedespeciajobs had been offshored si

ort, fshor 200 icu claim at 1

59

Outsourcing obviousl s some benefits for the outsourcing company. However, some still have t overcom specially companies that have a turnover of € 300

r more are fi g that off tso ing is always a eap as might be

• hidden overheads include management time; allenges (refer to section 7.3);

these challenges are exceeded by all the advantages of, for a

The2005. There are industry and government plans to help SMEs with education on out hermore, NOA says trade unions and organisations will ro

Acccombuscomweperlossper Brit•

2 n IT skills shortage. i

CoRecuse offshore software & services. It was initiated by Intellect's Offshore Group. ho

a b a formal complaint to Intellect. tellect will then play a role in helping to resolve the issue. In extreme circumstances,

y hachallenges o be e. Emillion o ndin shore ou urc not s chexpected, due to:

• cultural ch• lower productivity; • more expensive communications links. But most experts agree that ex mple, lower costs and specialized skills.

National Outsourcing Association (NOA) predicts that SME outsourcing will grow in

sourcing and offshoring. Furtp bably work better together.

ording to PPI (2004), responsibilities that were ideally outsourced by British panies in 2004 included infrastructure support and maintenance (30 percent), iness continuity (26 percent) and network and data management (23 percent). British panies that chose to do outsourcing did so because of access to specialized skills that

re not available in house (32 percent), the chance to focus on jobs in hand (both 32 cent) and the guaranteed service levels (23 percent). The main disadvantages were of visibility and control (43 percent) and fear of loss of intellectual property (22 cent).

ish companies considered offshore outsourcing the following IT functions: User support (40 percent)

• Business continuity (33 percent) • Network data management (27 percent).

4 percent of the IT directors in the UK believed that there was aSk lls in short supply were security (86 percent) and system integration (76 percent).

de of Practice ently, an Offshore Code of Practice was created, supporting all users and potential rs of

S uld a client of any of the Group members feel that a vendor's actions are in any way reech of this Code, they have a recourse to lodge

InIntellect may ask a member company to give up its membership of the Association. More information: http://www.intellectuk.org/. Furthermore, this website presents 120 outsourcing companies in the United Kingdom (select member database). Examples The Scottish Parliament and the National Health Service (NHS) looked overseas for IT skills in 2004. Members of the Scottish Parliament use office software and internet facilities, provided by a small group of IT specialists from the company Wipro Technologies, based in Bangalore. New projects have started in modernising the NHS as well.

5.3 Outsourcing sector comparisons

Outsourcing per sector According to Datamonitor, outsourcing will increase more and more in the years to come. The confidence in outsourcing is rising in the financial services sector. The whole application outsourcing segment will experience significant growth. Moreover, the expenditure on outsourcing in the insurance sector will be propelling the growth.

60

Outsourcing responsibilities between manufacturing, public sector, retail, ponsibilities that are preferably outsourced in the

U for each of these sectors. In all sectors, infrastructure support/maintenance is the

Table 5.6 shows a sector comparisoninsurance and banking. It shows the resEmost popular outsourcing responsibility. The highest preference for this is found within manufacturing, insurance and retail. User support and network data management are in places number two and three. Table 5.6 Outsourcing responsibilities (in %) Infrastructure

support/ maintenance

Network / data management

Business continuity

User support

Staff management

IT strategy

Manu-facturing

40 24 15 15 5 4

Public sector

34 16 17 22 5 6

Retail 36 22 18 20 2 2 I urance 40 23 12 ns 16 10 - B king 33 an 16 16 20 15 - Source: Synstar (2004) Advantages and disadvantages of outsourcing The survey also gives the main advantages of outsourcing, refer to table 5.7. In all sectors the following benefits more or less apply: • Guaranteed service level; • Access to skills that we lack in house; • Focus on the job in hand. Table 5.7 Main benefits of outsourcing (in %) Cost control Guaranteed

service level Greater visibility

Access to skills that we lack in house

Allows us to focus on the job in hand

Manufacturing 11 27 2 30 30 Public sector 14 24 8 28 26 Retail 14 20 8 38 20 Insurance 23 19 2 30 26 Banking 20 7 30 24 19 Source: 2004)

h important advantage is ‘access to skill that we lack in house’. er im t benefit is the possibility to focus on the job in hand.

all sectors some factors apply that put IT directors off outsourcing, including the most porta he loss of vis and control.

fsho ons ble 5 a sector between manufacturing, public sector, retail,

ran ing. It shows the IT functions that in the EU are preferably offshore our ch of these rs. In manufacturing, the public sector and insurance, top and maintenance is the IT function that is considered to be the most

orta retail, it is T strategy and in banking it is user support which are mos nt offshore o urced IT functions.

Synstar ( In all t e sectors, the most

ufacturing, anothIn man portanIn im nt one: t ibility Of re IT functiTa .8 shows

ce and bankcomparison

insuouts ced for ea sectodesk support imp nt one. In the Ithe t importa utso

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Table 5.8 Offshore Outsourcing IT functions (in %) Desktop

support / maintenance

Network / data management

Business continuity

User support

Staff management

It strategy

Manu-facturing

29 27 15 21 5 14

Public ctor

23 se

18 11 20 11 13

Retail 25 6 7 22 25 36 Insurance 30 13 13 23 8 7 Banking 22 24 14 27 13 14 Source: Synstar (2004)

5.4 Trends

According to the European Foundation for the Improvement of Living and Working Conditions (2004) and Neo IT, the following trends can be found in the offshore outsourcing of ICT services. • Transition from an experimental to a consolidation phase.

The major offshore suppliers have developed rigorous quality standards. Once a critical mass has been achieved, the process is propelled forward by competitive pressures.

as viable competitors in high-end niches. Partly as a result of historical and geographical ties, there are already established

service links between, for instance, Sweden and Estonia, and between

killed fields.

eigh ring due to budget pressures.

• A search for new locations. • There is a continuing dynamic movement of employment to new locations. European

experts say the most dramatic developments would be those taking place in Eastern Europe. Several of the new Member States, including Hungary and the Czech Republic, have already established a solid position in IT services, as have Bulgaria, a candidate country, and Russia, which remains outside the EU. Russian and Polish cities will effectively position themselves

offshoreAustria and Slovenia. Chinese firms will enter the offshoring space in a big way in 2005 by strategically acquiring into the market. Many firms will also expand their existing product manufacturing sourcing presence into services. Governments work to position their countries strongly as destinations for offshore services. New entrants include South Africa, Argentina, Brazil, Thailand, Ghana, Spain, Mexico and others.

• Continuing growth in the importance of intermediaries. • Intermediaries develop into brokers, advisers, training providers, troubleshooters,

location finders, staff recruiters or local facilities managers. Extension of offshore outsourcing into increasingly s•

• Suppliers move up the value chain, and there is an increasing tendency for more skilled and high value-added activities to be offshored.

• Regulations will increase: Established supplier markets will take a serious look at enacting additional standards to meet client demands for data security and privacy laws. Small and medium-sized businesses will finally be clients for offshoring as they w•

the benefits of offsho All major research companies like Gartner, Forrester Research, Giga Information Group, IDC and Nucleus Research say offshore outsourcing is still hot.

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6 OFFSHORE LOCATIONS

fast. The main characteristics of not only India, ut also of China, the Philippines, Russia, and the Eastern European countries will be

er 6. Exporters from developing countries could use this information to

This section provides an overview of the leading and emerging offshore countries for software (related services) and IT services. India is number one in the offshore market, but many other locations are emerging bdiscussed in chaptdetermine their competitive environment in an indicative manner. In the sections 6.2 up to and including 6.6, the most important offshore locations will be discussed. Although Canada and Mexico are important offshore locations, they are not included in this section as these are mainly supplying services to companies in the United States.

6.1 Overview offshore locations

05. This survey captured the views of CEOs and management issues like labour costs, labour skills, labour

sed in deciding where to locate: final country selections will ble shows the highlights of the study and is not meant to

fshore locations, it could give mining their competitive position. To do

ons to be answered are:

uccess factors of competitors and avoid their fail factors!

This subsection shows a global overview of offshore locations by providing • Global ranking of the Economist Intelligence Unit • The offshore map from NeoIT. Table 6.1 shows a global overview of the main offshore countries, based on a study of the Economist Intelligence Unit in 20other senior executives onregulation, proximity to major sources of investment, political and security risk, macroeconomic stability, regulatory environment, tax regime, and infrastructure. The index is not the only tool uvary for each company. The taprovide a full and complete overview of all possible ofdeveloping country exporters assistance in deterso, two important questi

How do these locat• ions compare to each other? • Who are your direct competitors and what can you learn from your competition? In other words: Learn from s Table 6.1 Global ranking of top locations for offshoring Rank Country Score 1 India 7.8 2 China 7.3 3 Czech Republic 7.3 4 Singapore 7.3 5 Poland 7.2 6 Canada 7.2 7 Hong Kong 7.2 8 Hungary 7.2 9 Philippines 7.2 10 Thailand 7.2 11 Malaysia 7.1 12 Slovakia 7.1 13 Bulgaria 7.1 14 Romania 7.1 15 Chile 7.1 Source: Economist Intelligence Unit (2005)

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Asia increases its offshoring dominance. India is by far the most attractive offshoring eaking graduates, very

w labour costs and its developed legal system. China comes second, owing to its cheap supply and fast-improving infrastructure. Singapore is a favoured

urope currently attracts only a small number of offshoring projects, but the

-cost skilled labour force, an attractive regulatory environment, as well as lose proximity and cultural ties to Western Europe.

uyers will increasingly look beyond weighing the omparative cost advantage to also focus on competitive and value advantage. New

Romania, Argentina, and South Africa will use this new ocations as a part of their ongoing

ourcing strategies.

e most important offshore locations on their strengths and weaknesses. Each cation was judged on thirteen criteria and the level of their availability. The following

attractiveness of the most important offshore destinations. can learn from them. The

A.T. Kearney’s offshore location Attractiveness Index is another possible tool to get an interesting overview of offshore destinations.

destination. Reasons for this are the high percentage of English-sploand large labour destination for regional service functions due to its excellent education and language skills, superior infrastructure and pro-business tax environment. Overall, Asian companies dominate the rankings. Eastern Eranking indicates that the region will become a major offshoring centre in the future. The Czech Republic leads the way, taking third place behind India and China because of its relatively lowc While market analysts do not predict a dramatic change in course for 2005, it is becoming increasingly clear that bcregions like Singapore, Malaysia,opportunity as companies globally seek new sourcing ls As an addition to this ranking, NeoIT developed the ‘offshore location map’ for 2004. It compared thlosections describe the global You can learn who your direct competitors are and what you

6.2 India

As described in section 6.1, the overall climate in India is very good, with its exports in software (related services) and IT services increasing 30.5 percent in 2003-2004. Indian oftware companies initially concentrated their efforts on providing low level design,

coding, testing, maintenance and support services for the export market. Now, Indian ue chain into areas such as systems integration,

s

companies have moved up the valnetwork and infrastructure management and system planning and design. Core competencies of Indian companies are application maintenance and support, application development and packaged software implementation. The Indian software and services industry comprises around 3,000 companies and is characterized by players of varying sizes. The industry is mainly clustered around Bangalore, Hydarabad and Mumbai. According to trade association NASSCOM, (http://www.nasscom.org), the most important vertical segments include banking and

surance, health, retail, telecom, manufacturing, utilities, government and travel.

try by etting up a Ministry of Information Technology. Indian state governments have also

he development and promotion of the software services industry

in Government support The central government has given top priority to the software services indussplayed an active role in tin India. Software Technology Parks of India (STPI, http://www.stpi.soft.net) provides infrastructure services in over 15 cities around the country. Labour The Indian software industry employs 460,000 IT graduates each year. Infrastructure Infrastructure reliability varies depending upon the region and supplier. For example, the infrastructure is adequately supported and very reliable in IT parks. However, outside the

64

parks, power and telecom are not dependable and may cause interruptions in service

h at University level (the six dian Institutes of Technology) and through its technical schools and IT training

as NIIT and APTECH.

he wages for Indian software engineers are low compared to those of their Western . A salary for a programmer with 2-3 years experience range from almost €

ace the threat of lower cost oftware developers from developing nations such as Romania, China and Russia. India

elecom and infrastructure costs.

d, CMM (refer to section .1 beside a well-known standard like ISO. It is a model which prescribes standards in

stages of software development. All the top-tier Indian vendors are certified at

ompatibility is good in the major metro areas of the country but may cause problems in s

ime / distance advantage nce with Europe.

nglish proficiency xcellent in the major metro areas but may cause problems in the

is expected that economic policies would delineate from political overtures in the

levels. Education One of India's core strengths is its education system, botIncompanies, such Cost advantage Tcounterparts5000 to almost € 10,000. However, Indian firms now fshas relatively low t Quality In software development, there is globally recognized standar9different CMM Level 5, the highest level. Over 50 Indian companies have been awarded CMM-5, out of a total of 74 around the world. Cultural compatibility Cthe more remote location TThere is a 4-5 hour time differe EEnglish proficiency is emore remote locations Geopolitical environment Itfuture.

More information NASSCOM – http://www.nasscom.org

urce2india.com/Outsource2india - http://www.outso

6 Philippines .3he he Philippines is medium for IT.

o rt ov support consists of tax favours and flexible labour and union rules.

abhe country has a labour force of over 75,000 people focused on IT and BPO exports with

Infrastructure Special IT parks support the IT export industry. The past presence of USA military bases left behind a solid telecom infrastructure.

T overall rating of t G vernment suppoG ernment L our T15.000 new entrants focused on technology each year. Large scale technical training programs that are being started in the country are expected to enhance this labour pool in the future.

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Education The university system is very good and includes top universities. Cost advantage Average IT salaries are relatively low compared to those in Europe and the USA. Average salaries for a programmer with 3-5 years experience range from more than € 5,000 to

most € 9,000 per year. The travel cost is lower from Europe.

eopolitical environment olitical insurgency and lack of uniformity in policies.

al

Quality Not many Philippine companies have focused on SEI-CMM, although some ISO certifications do exist. The government is setting up a program to offer incentives for certification. Cultural compatibilityAs with the telecom infrastructure, influence from a USA presence since the 1930s has enabled good cultural compatibility. Time / distance advantage There is a 3.5 – 4.5 hour time difference with Europe. English proficiency Influence from a USA presence since the 1930s has also resulted in very good English proficiency. GThere is p

More information Digital Philippine Foundation – http://www.digitalphilippines.org

utsourcephillipines - http://www.outsourcephilippines.org/ vice Center (EITSC) – http://www.eitsc.com

OEuropean I.T. Ser

6.4 China

The overall climate is low at this moment, but expectations for the future are very good. or 2005 the outsource software services sector market is expected to be worth €1.2

has a large supply of low cost workers and a huge internal market.

outsourcing projects from international companies. China's related ervices industry's main international success has been in obtaining software related

utsourcing contracts from Japan.

eside this, China is also a software consuming market with a population of more than than 15,000 small and medium-sized domestic firms that are

ly since China became a member of WTO.

tional security. 15 software arks have been opened so far and in November 2003 the China Offshore Software

OSEP) was launched. Its target is to provide outsourcing services

the problem of widespread piracy of software.

Fbillion. The sectorChina has a lack of domestic experience in designing complex software systems. This directly results into a lack of experience in undertaking large international software related services sservices o B1.3 billion and with moreadapting to the world market, particular Government support The government support for the IT sector is low. However, the Chinese government has identified software as essential to economic progress and napEngineering Project (Cfrom China to overseas corporate customers. The COSEP program will select a number of Chinese software companies from regional software parks. Another important issue that the government will have to address is

66

Labour China has a resource of 200,000 IT professionals, with approximately 50,000 new entrants each year. The country has a limited reserve of project managers who are experienced in large software project management and even fewer professionals that are ble to combine technologies with industry experience.

Infrastructure Infrastructure in major IT centres such as Beijing and Shanghai is very good. Second tier cities are in the process of significant infrastructure build out. Education Universities graduate very competent technical graduates.

ultural compatibility

ment has invested more than € 5.0 billion in English education in Universities.

ZTE Corp

sson Beida Founder

oftware, control about 60 percent of China's software market.

a

Cost advantage Labour rates are very low. Typical IT salaries range from almost € 5,000 to € 8,000 per year for a programmer with 2-3 years experience. Compared to other outsourcing destinations, China has the lowest real estate and power costs. Quality Chinese companies have not established formal procedures, processes and quality control systems that, for instance, Indian firms have. Nevertheless, close to 58,000 ISO 9000 certifications have been handed out. China has just one company that has reached CMM Level 5, but has a number of companies certified to CMM Level 3. CChina has no strong affinity with the western culture. Time / distance advantage China operates on a single time zone. The time difference with Europe is 6-7 hours. English proficiency One of the biggest barriers that Chinese companies face is the English language. The Olympic Games in 2008 will probably boost a solution to this problem. The Chinese govern Regional IT cluster and suppliers In China, software firms and employment in the software industry are heavily clustered around Beijing, Shanghai and Guangdong regions along the eastern coast of China. China's top 10 software companies: • Huawei Technologies •

• Eastcom Group • Digital China • Beijing Eric•

• Microsoft China • Neusoft • CS&S • Datang Telecom. Of China's 8,000-some software services providers, only five have more than 2,000 employees, it says in the first 2005 McKinsey Quarterly report. Two firms, UFSoft and Kingdee S

67

More information China Software Industry Association (CSIA) – http://www.csia.org.cn China’s software industry – current status and development (PDF file) http://zlin.ba.ttu.edu/papers/Outgoing/GITM-ITC-3.pdf

6.5 Russia

te for Russia is medium to high. Russia is a promising new entrant in the urce software services sector has grown

llion at an annual rate of 60 percent.

stead of providing valuable support, like India or China, Russia hinders development by cracy and restrictive tax, customs and immigration laws. Corruption

ave been sitive signs in the last few years: the federal program Electronic Russia and the

written into the onception of the IT Market's Development in the Russian Federation, which was adopted

a the world's second country in the IT outsourcing market after

ed and low-cost workforce. It has one million specialists sector and who have excellent skills.

ussia has about 20,000 professionals focused on IT exports.

mains relatively high and the infrastructure is poor except in oscow and St. Petersburg.

op universities and top research firms.

ost advantage abour costs are moderate and infrastructure costs are high. Salaries for an IT rogrammer with 2-3 years experience range from more than € 6,000 to more than € 1,500 per year.

ime / distance advantage

languages is low.

The overall climafield of offshore outsourcing. The Russian outsoto € 422 mi Government support Ina complex bureauand a lack of protection of intellectual property is still an issue. Yet, there hsome pofirst IT park Vasilevsky Island. Furthermore, in 2005 the development of offshore software programming has become a state priority task in Russia. Participants in the Russian IT market believe that the implementation of measuresCrecently, can make RussiIndia. Labour Russia has a large well-educatavailable who are capable of quickly joining the ITR Infrastructure The cost of bandwidth remajor cities such as M Education Russia has t CLp1 Quality ISO adoption is widespread but there are only 3 SEI/CMM certified companies. Cultural compatibility Cultural compatibility is still a problem. TRussia has 9 different time zones. The time difference between Europe and European Russia is two hours, independent of summer or winter time. English proficiency Russia has a short supply of English-language skills. Top managers have a level of proficiency in English, but mid-level and lower-level staff have less proficiency. Proficiency in other

68

Regional IT Cluster and suppliers The vast majority of Russia's offshore software services firms is located in three major cities which are geographically and culturally close to Europe: Moscow, St. Petersburg and Novosibirsk.

More information Outsourcing-Russia - http://www.outsourcing-russia.com/ • Select ‘database of Russian Offshore Software Development companies’ for an

overview of companies. Offshore software - http://www.russoft.org/

6.6 Eastern and Central Europe

In 2004, the European Union (EU) expanded to allow 10 new members: Cyprus, the zech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and

ribed in section 3.2.8, most of these nations, along with Romania, re related

ervices industry. Combined, they exported almost € 460 million in offshore software jority of these exports come from Romania, Hungary, the Czech

8 to 70 million nnually. These countries focus entirely on low-level maintenance and coding of software

areas, the price is a very important decision factor. Core roduct development and application

aintenance.

development business. In EU-candidate Romania, technology ompanies are in the process of building a website called ttp://www.outsourceromania.com

CSlovenia. As descBulgaria and the Ukraine, make up the Eastern and Central European offshosservices in 2003. The maRepublic, Poland and Bulgaria. Each of them approximately exports € 5aon a contract basis. In these competencies are application development, pm In Latvia, IS Cluster, a group of 20 software companies, is working with the university of Latvia (the Riga Technical University) and the Baltic Computer Academy to attract offshore software ch that promotes the country's software-development kills. Eastern and Central European countries have a big incentive for bringing in oftware development business from abroad, since most technology companies do not ave enough resources to physically expand internationally and domestic markets are ny.

eside the ten new EU-countries, some experts believe Romania is the future European India's outsourcing crown. Romania's well-educated and multilingual

n near shoring.

at the three most promising outsourcing countries in Eastern

sshti Bfrontrunner for labour pool, competitive property costs, and time zone and infrastructural advantages easily make it Eastern Europe's top IT services location in 2005. According to Eito (2005), in the long run EU acceding countries are expected to become more expensive, with a potentially negative impact o Table 6.1 has shown thEurope are the Czech Republic, Poland and Hungary. They are discussed in the following subsections. 6.6.1 Czech Republic

ns for organisations concentrating in the European markets including Germany and K. The IT services export market was close to $26 Million in 2003 according to NeoIT

cation is perfect for handling processes that require constant interaction aintenance

nd enterprise application integration and maintenance. Intellectual Property security is a

The Czech Republic offers great opportunities to set up near shore shared service locatioUestimates. The lowith principals. Core Competencies are application development, application maproblem.

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Government support

35-50 percent for training and up to 50 ercent on business expenses.

zech software services companies have access to a talented supply of low-cost nts graduate with an IT specialization.

nfrastructure ure is good.

n he education is very good.

ost advantage he average annual salary for a programmer is approximately € 6.000 a year.

Quality Companies are becoming more and more aware of the importance of certification, and are starting procedures to be certified or have been certified already. Cultural compatibility The region is located close to Western Europe and people are relatively familiar with Western culture. Time /distance advantage Within Europe, there are minimal time distances.

Most people have European language skills, primarily German and English. However, the level and quality varies! Regional IT cluster The industry itself is concentrated mainly in the Prague area with smaller clusters in Brno and Plzen.

The Czech Republic, number three in the EIU ranking (refer to table 6.1) is offering other than tax incentives subsidies to the tune of p Labour Cengineers. About 14,000 stude IThe telecommunications infrastruct EducatioT CT

English proficiency / language

6.6.2 Poland Poland has been the fastest growing offshore/near shore location for IT outsourcing, even though India has been the single largest recipient of IT job imports, according to a new study from Frost & Sullivan (2005). For the three years from 2002 through 2004, Poland had a compound annual growth rate (CAGR) of 40 percent for outsourced IT workers in captive companies, where the employers still own the employees. The CAGR for outsourcing service providers in Poland was 59 percent during that period. The sheer size of Poland compared to Czech Republic and Hungary ensures a large labour pool. In recent times, Poland lost out on foreign investments and the economy was near stagnant. However, competent labour, linguistic skills, telecom infrastructure, political stability and proximity to Western Europe are some of the positive factors that could boost the IT industry. Core Competencies are application management, web-based application development and maintenance. The IT services export market was close to € 20 million in 2003.

More information Czech Republic - http://www.asocpor.cz/

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Government support ome incentives for local entrepreneurship and flexible estments. However, these are not as high as in other

uropean countries.

has a very high number of Universities and colleges.

The Polish government provides sFDI policies with incentives for invE Labour About 40,000 IT graduates leave the Universities every year. Infrastructure Poland has a liberalized telecom policy and a well developed public infrastructure. Education Poland has a strong and fully developed educational system and

Cost advantage The average annual salary for a programmer is approximately € 6,000 a year. Cultural compatibility Poland has a strong cultural affinity to Germany and the rest of Europe. Time /distance advantage

ithin Europe, there are minimal time distances. W English proficiency / language English is widely spoken as the second language in the country. A large proportion of the qualified manpower is proficient in German while Spanish, Italian and French languages are also prevalent. 6.6.3 Hungary Hungary offers good opportunities for organisations in Western Europe. Its core competencies are application development and application maintenance. The IT export market was estimated to be almost € 18 million in 2003. The industry itself is concentrated mainly in Budapest.

overnment support

More information American Chamber of Commerce in Poland - http://www.amcham.com.plPolish Chamber of Information Technology and Telecommunications -http://www.piit.org.pl

GThe government has established a separate task force and has provided several tax and direct incentives. abour L

There is a limited number of IT and engineeringyea

graduates leaving the universities every

InfHun Eduhe on institutes of which 30 are niversities.

r.

rastructure gary has a liberalized telecom structure and good real estate availability.

cation educational system consists of 89 higher educatiT

u

71

Cost advantage The average annual salary for an IT programmer with 2-3 years experience ranges from approximately € 11,500 to € 12,500 per year. Cultural compatibility Hungary has a strong cultural affinity to Germany, France and the rest of Europe. Time /distance advantage Within Europe, there are minimal time distances. English proficiency / language English is used as a medium in higher education. Other languages used are German and French.

More information Hungarian Software Alliance (HSA) - http://www.h-s-a.hu

More information More information about offshore locations can be found at: AT Kearney ‘Making Offshore decisions’ http://www.atkearney.com/shared_res/pdf/Making_Offshore_S.pdf EuroITX - http://www.euroitx.com/content/countries.phpNeoIT – http://www.neoit.com/pdfs/whitepapers/OIv2i6_June_04_Mapping_Offshore_Markets.pdfShared Services and Business Process Outsourcing Association (SBPOA) – http://www.sharedxpertise.org/ Select ‘locations’

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7 TRADE STRUCTURE Section 7 discusses the EU trade structure for software, software related services and IT services. Section 7.1 is about EU trade channels in general with a focus on software products and IT services, section 7.2 contains information on the trade structure for developing countries in particular with a focus on software related services and IT services. The distribution channels for software, software related services and IT services av ugh in practice these channels mix. This is

both software and services to their customers. or

country exporter an idea of the possible distribution channels.

h e been separated in this chapter, althobecause some major companies provide F the purpose of this survey, both channels have been separated to give the developing

7.1 EU trade channels Figure 7.1 displays the general trade structure for B2B software products in the EU. It is very diverse, because of the large number of varieties and players in the market. Moreover, the situation differs per EU-country and sometimes even per region within a country. Although the Internet is displayed in the figure, it is not a trade channel as such. It plays, however, an increasing important role in trade. It is a very important information source for potential prospects in the EU. Exporters can present themselves to these prospects with a good and professional website. The distribution channel starts with companies that develop the software. They can use

anies could set up a sales

istributors/importers could either supply the software products to the end user or supply omputer

tores that supply the end user with products. The Value Added Reseller (VAR) and the System Integrator are other possible links to the end user. hey are middlemen, selling a number of products from different sources as a system to the end users. Both could more or less be regarded as dealers. The Internet plays an important role in the distribution process, as it is used by almost all of the links mention the distribution channel, both as a direct sales channel and as a sales supporting channel. Refer to section 3.3. In order to remain competitive, most parties are providi alue. For this they need to be well informed about their customers and market, making use of information sources and the available infrastructures. Some added value could include, for example: • Quality assurance • Sourcing knowledge • Transfer of knowledge • Project management with sub-contracting implementation (software development and

other IT services) • Offering different methods of financing.

both direct and indirect channels to outlet the products. The direct channel includes a direct link to the B2B end user or the educational users (schools/governments). The internet and direct mailing are some important instruments in this channel. Exporters from developed countries are set next to the software companies in the scheme, as their place in the distribution channel on a logistical level is more or less equal to that of software companies. The indirect channel has many possibilities. Software compoffice in the target country, supplying the end-user, or employ some other indirect channels. Most global companies do so, e.g. Microsoft and IBM. Agents and dthem to another link in the distribution channel. Retailers include specialty cs

T

ed in

ng added v

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Figure 7.1 EU trade structure software products

EU software companies / Exporters developed countries

IT services are supplied either directly by services providers or by sales offices, refer to figure 7.2. It is common practice to co-operate with other service companies when the vailable resources within the own organisation fall short. ICT specialists working for an

nt service companies and/or recruitment

aend-user while representing several differeagencies are no exception. It is obvious that margins slink fast in these cases, unless the end-user is willing to pay the price. The Internet is important here as well, as it could be used as a sales channel. One could think of direct sales via the website of a service provider or offering services by using marketplaces. Figure 7.2 Trade structure ICT services, Europe

IT services provider / exporter

Sales office

B2B

Internet

Schools / Government

B2B

Sales office

Distributor / importer

Agent

VAR / System

Integrator

Retailers (Specialty Computer

Stores)

Internet

74

75

7.2 Distribution channels for developing country exporters In general, the best possibilities for developing country exporters definitely lie in outsourcing. Supplying software products in the EU market would demand such a huge investment of resources and marketing costs that no company or group of companies could afford this. It is very difficult to build distribution and support channels. There is one small exception to this. In the software industry lie some chances based around niche supply. A specialist firm that can supply a specific piece of software for a key sector could have a chance of success. Even then, marketing costs will be huge. Some important success criteria would include: • Specialised software for a niche market • Solid and proven global client base

heoutsourcing software related services and outsourcing IT services. First, the level of

wh r IT services. Furthermore, language proficiency is a

dem guages such as German and French is increasing. xa ion rvices (e.g. medical notes that are poorly handwritten may require some degree of

testing. lmost every project is unique, requiring the same time-intensive attention. This is

igure 7.3 Distribution channel outsourcing software related services

ook to enter the EU market generally have four options. Establishing a sales office in an EU member country is the first option. It could be wise to do this in a joint effort. For example, the government or

• Competitive (price, features, quality, reliability, etc.) against global market leaders in their own category

T re is a distinction to be made in the trade structure for developing countries in

education differs. Developing software generally requires advanced technical knowledge, ile only basic training is needed fo

requirement in IT services. Although English is the primary language in demand, the and for outsourcing services in lan

E mples of the need for language proficiency are on-line support and transcriptsefamiliarity with different scripts of the local language). Second, the nature of both areas of outsourcing differs. Outsourcing is a communication intensive business; some programmers spend about 50 percent of their time interacting with others. It involves an interactive process of building, checking, revising and Adifferent for IT services, of which the complexity is in the start-up process. Once the process had been established, there is far less need for communication. Trade structure outsourcing software related services Figure 7.3 shows the most common distribution channel for developing country outsourcing service providers in the software industry. F

Outsourcing service providers in developing countries that l

Software related services company DC

Own office

Broker / consultant

Any industry

European software company

Internet

the industry association contributes to such a presence, allowing several companies to profit from the office and facilities at the same time. Another possibility is to cooperate with a middle man, a specialized broker and/or outsourcing consultant. In practice, there may be a difference between these two, as rokers more or less focus on matchmaking. They typically establish relationships with b

multiple offshore providers, and then channel work to these firms as they acquire business. These solution providers tend to have a deep knowledge of the outsourcing business, as well as extensive business networks that they utilize to secure new contracts. Beside matchmaking, consultants advise and provide a wide range of support services on the whole outsourcing process as well. More information on brokers and consultants can be found in section 10.3. These first two options are most common in practice. In addition, there are two more options. The first would include working with EU software companies directly. Although almost any industry could be a potentia

l outsourcer of software development projects, uropean software companies themselves are the most interesting target group for the

countries. Industries in Europe do not turn directly to service roviders in developing countries very often. Most commonly, EU industries contact a EU

software company, which sometimes outsources the project partially or fully to developing countries. Refer to chapter 4 and appendix 4 for websites in order to localize possible partners. The second option is that European software companies set up businesses in developing countries themselves. In this model, European companies establish subsidiaries abroad. This is useful if large amounts of software need to be created. Enterprises such as Philips, Vanenburg and Invensys/Baan have set up subsidiary companies in India for this purpose. The ABN Amro Bank operated a software facility in Lahore (Pakistan). Another IT-firm recently set up an office in Kathmandu (Nepal). Trade structure IT services outsourcing Figure 7.4 shows the most common distribution channels for developing countries within the IT services outsourcing industry. The same options are possible, although some differences and extra possibilities exist. For outsourcing IT services, local presence through the use of your own office or using brokers/consultants are the two most common channels as well. For example, Tata Consultancy Services, one of the big five Indian firms, has offices in many European cities (and more). Refer to the case study of Preciss Patrol Kenya as well.

precisspatrol.biz/kenya.htm

Eexporter from developingp

Case study: Preciss Patrol Kenya (http://www. )

rol was to open a small y specialized in

ing and specialized research on the internet. The existence of an office in greatly facilitated various operations such as marketing, banking and

s. In four or five months, PrecissPatrol was able to

veloping countries to enter into m integrators) in Europe directly, such as

One of the key success factors of the Kenian company Preciss Pataison office in Massachusetts (USA). In the beginning, it was a companli

simple data minassachusetts M

communicating with potential clientcover its operating costs. Source: Unctad (2003) In general, it has been difficult for companies in departnerships with large service providers (systeCMG and Cap Gemini or other large professional services companies like Accenture, Ernst & Young, Dimension Data, EDS, IBM, PwC Consulting, Unisys and Xansa. Although these companies may not actively promote their offshore capabilities, they will certainly make use of them in order to reduce project costs and shorten delivery time scales.

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Contrary to the software related services outsourcing industry, exporters of services from

outsourcing field, since most European companies enter into their utsourcing relationships through a European-based company. This is especially true for

section 5.3 for a sector comparison on the responsibilities

The Large caps (> 300 mln euro) do business with offshore suppliers, local or local suppliers.

Large to medium sized companies (> 100 mln euro) do business with local l suppliers.

into contact with its other offices at are spread over the world. For example: once a service provider has worked for

, it could do the same job for Shell in EU country Y.

ant mark here is that the Internet appears to have largely failed in the software market,

nter into

reqsho

developing countries could contact the end-user organisations such as banks and financial institutions directly. This is the fourth option. Some of these organisations already use services from developing countries. These include, for example, companies that outsource data entry and other services. They also tend to be larger and are frequently multinational corporations. However, this is probably not a viable model for new entrants into theosmaller companies. Refer to that EU companies would like to outsource and in what way this differs per sector. According to Sampath (2004) and exhibitors from CeBIT 2005, the following pattern can be distinguished in the purchasing strategy of European companies divided by size: • The Fortune 1000 do business directly with offshore suppliers or have heir own

company. •

intermediaries •

intermediaries and loca• Medium sized companies do business with local suppliers and local intermediaries. As an addition, outsourcing service providers of software related services and IT services could use the following model as well. Local offices of multinationals in the home country of the service provider could be used as a bridge to getthShell in developing country X The Internet plays an important role in this process, being an intermediary in business-to-business contacts between European clients and foreign providers. An importredue to the complexity of software development and all the other factors that ethe decision-making process. It could work for many other IT services where the

uirements are relatively straight. But be aware: even though online software sales uld increase substantially, the majority of European firms desires local support.

Figure 7.4 Distribution channel outsourcing IT services

European IT company

Own office

Broker/ consultant

End user organisation

Internet

IT service provider DC

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Over the last decade, frontline IT services firms relied on organic growth. Through the 1990s, the IT services firms set up global delivery centres bit by bit, on their own, across the world. Over the last four years, the IT services firms have changed tack and are caling up these centres to provide customers with a blended model: an on-shore, near

An interesting example of a broker is the European Information Technology exchange. It

sshore and offshore capability, depending on what customers want.

is a European one-stop-shop that provides information for both buyers and suppliers of offshore IT (enabled) services outsourcing. Their website http://www.EuroITX.com has three units: Intelligence, Marketing and Supply-Demand. The Intelligence unit contains, creates and maintains all the information, papers, external resources and news. The Marketing unit promotes the associated service providers from developing countries. The Supply-Demand unit manages and develops the database of company profiles. This database contains both suppliers and buyers. It focuses on suppliers from developing countries and buyers from Europe. EuroITX is sponsored and supported by CBI (http://www.cbi.nl), refer to figure 7.5. Figure 7.5 Euro ITX

Source: http://www.euroitx.com (April 2005)

tion this model, the onshore team (e.g. in the EU) will provide a daily oversight of an

eam of resources). This model requires a great deal of

this model, the customer identifies a specific project which needs completion and -customer then retains an

ose.

Models Ventoro discusses the following models for offshore outsourcing. BUY MODELS 1. Offshore Staff AugmentaInoffshore resource (or tcommunication between onshore and offshore teams and demands an incredible overhead. That is why this model is not recommended. 2. Project Outsourcing Inprepares all necessary project-related materials. The EUoffshore vendor to deliver the project. At the completion of the project, the relationship ends. If a project lasts 3 months or more, and the customer does not have a consistent forecast beyond the initial project, this is an appropriate model to cho

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3. Offshore Dedicated Centre (ODC) In the dedicated centre, the vendor assigns a fixed number of people to the client for a series of projects. In this model, the EU-client is responsible for the HRM cost and will be responsible for downtime between projects. The advantage for the customer of this model is that if he has a series of related projects, the vendor will keep the same people n each project, eliminating the startup time and will not end up paying for additional

fferings now being developed by outsourcing vendors around the world, this model is

d permits, hiring all employees and anaging the daily activities of each employee once the team is assembled. Of all the

fshore team, this is the most expensive and least

the Build-Operate-Transfer model the client hires a local offshore outsourcing vendor ce the offshore facility is up and successfully

incredibly low risk model. If, at the end of the startup period, business needs change, the client is not stuck with a long-term offshore obligation. Depending

simply hand the vendor the keys and walk

st and time required to generate a positive ROI by 30 percent!

itions (M&A) strategies. This approach seems to be sound and buying or merging ith a mature offshore team has given several onshore companies a lightening-fast

hore strategy.

so forth) should consider captive ffshoring, capitalizing on their expertise through in-house automation, and outsourcing electively where they need to fill capability gaps; they may also want to think about lobalizing their businesses, especially if they have unique expertise with complex rocesses or have automated such processes. A captive offshoring company caters to an

offshore clientele.

oteam startup costs. 4. Functional Outsourcing In this model, the customer will outsource a complete function or application. While pay models are occasionally structured on a time and materials basis, most functional outsourcing arrangements heavily leverage a risk-reward model. These arrangements encourage the vendor to bring tools, methods, resources and knowledge to the engagement in order to achieve a greater performing engagement. With the high-quality onow proving to generate the best possible value for customers. BUILD MODELS 1. Do It Yourself (DIY) The Do It Yourself model is what it implies. The client does everything: from finding an offshore office, obtaining all local licenses anmpotential options for building an ofsuccessful with a success rate of less than 35 percent. 2. Build Operate Transfer Into completely build an offshore team. Onrunning, the customer will then buy out the offshore facility under pre-defined terms. Of all the build models, Ventoro founds this model to generate the best results: • This is an

on how he structures the contract, he canaway without future liability.

• Statistically, this model requires lower cost and shows better performance than Do It Yourself. Having a firm that specializes in building outsourcing teams will cut the co

3. M&A More and more, firms that want to build an offshore team are turning to Mergers and Acquiswmethod for initiating an offs Another type of offshoring is a captive operation. A company based in a developed country –the “mother company” – spends entirely for the creation and/or upkeep of a separate offshore company, which in turn provides business process services to the mother company. Companies whose work is standardized yet whose processes are complex (content management and software development, and osgp

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Captive outfits are ideal for corporations requiring high-traffic input/output flow, like data

rocess of selecting outsourcing partners by EU organizations.

encoding. Ideally, such transactions are routed through a high-speed, dedicated Internet connection, to ensure fast project turnover. Section 10.3 contains more information on the assessing the sales channel assessment and the p

7.3 Outsourcing decision making process EU companies

ess. In section 5.2, major reasons for outsourcing have been mentioned for ach of the highlighted EU countries. They include guaranteed service levels, cost

lack of in-house expertise. In addition, this

ry-pecific and 2) vendor-specific elements. They include, among others:

sult, the price is an important factor, although this also epends on the nature of the service. For example, language proficiency is important for n vices e.g. call centres), but it also has to be realized that people

tance. All this has its price. On the other hand, data entry utsourcing is becoming a commoditized market with business moving to the lower cost

industry experts.

sionals oftware related services outsourcing clearly demands a large supply of highly skilled ro software development tasks, however, do not require a college

ammers are quite overqualified for eir jobs. The training involved for most other IT services is even less demanding. Basic

an be taught relatively quickly by

he service providers has grown so much that EU companies are fte ders from various countries, taking away the need to a locations. This underlines (refer to section 7.2) the necessity of a uropean presence for countries/companies seeking to provide an alternative to India

ropean companies are simply not used to al, Sri Lanka and other countries that do not have a

a stry.

Pn important factors driving outsourcing decisions is the existence of a

n between the European client company and a foreign country. A re g

P gement skills and quality certification practice, coordination between the client and the overseas provider is a critical success ctor. Although ISO and CMM (refer to section 9.1) are referred to as critical for the utsourcing provider, flexibility is sometimes even more important.

To give the exporter an idea of how decisions are made by outsourcing EU companies, the following section highlights some major factors that play a role in the decision making procesavings, need for specialized skills and section discusses some more important factors on why EU companies choose to start offshore outsourcing and to which location they do so. They are divided into 1) counts AD I) COUNTRY-SPECIFIC ELEMENTS 1 Cost savings As mentioned in chapter 3, most EU companies look cut costs in order to survive and battle the recession. As a redla guage-based IT ser (at call centres are often the first and only touch point between the customer and the company. Therefore, aspects like the employee’s accent and friendliness over the phone are of paramount imporoproviders, according to some 2 Availability of skilled profesSp fessionals. Most degree in computer science. In fact, most Indian progrthskills training is necessary, but typically these skills cthe companies hiring the employees. 3 European-based operation T number of outsourcing o n approached by service provitr vel to offshore Eand the other well established countries. Eudoing business with Pakistan, Neptr ck record in this indu 4 ersonal connection O e of the most personal connectiofo ign national within the client company in the EU could very well favour outsourcin(diaspora, refer section 13.5.5). 5 roject manaInfao

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The quality factinteraction with

or varies for the several IT services. For the services that do no involve a client company’s consumers (e.g. data entry), the relevant quality

speed. For tasks that involve customer interaction (e.g. call

municate efficiently.

s inputting data for insurance companies are not English speakers.

mple, provide services to French communicate with French customers in their own roviders from India, Ireland, Northern Ireland and

willing to peak German in the Czech Republic and Poland.

ractices and norms.

and data telecommunications services. An EU ider that has the availability of a

li r, the bandwidth and its cost are important factors as e

Intellectual property rights protection or some EU companies this is a serious issue, for some it is a downright condition to

work only with providers from countries that have legitimate Intellectual Property Rights (IPR) protection enforcement regimes. China has seriously problems due to this issue. 10 Political stability & diversification Political stability is an important factor for outsourcing decisions. Especially for IT services this is often a criterion, as the contractual relationships are often for the long term. 11 Time zone difference In projects where communication is important, as in software development projects, time zone differences could be an obstacle. The opposite is true for IT services, where time zone differences are viewed as one of the major benefits. Most hotel reservation and customer service centres are open 24 hours a day. Since operating night shifts is expensive, offshore options have become increasingly attractive. 12 Country image One of the largest barriers (or opportunities) for a developing country to establish a presence in IT services may be its country image.

indicators are accuracy andcentres), language, accent, and other communications skills are the measure of quality (refer to ad II as well). 6 Language & culture Language is important for both the provider and the client to comMoreover, programmers will need to communicate with the client during the project. Furthermore, culture is a very important issue. In the past, differences in culture have led to problems during the execution of projects. As mentioned before, in some IT-enabled services (e.g. call centres) language is a tremendous asset for service providers. For some other IT services it is not an issue at all: Cambodians that digitize the Harvard Crimson and Ghanaian Language skills may determine from which country the western/European clients will come. IT service companies in Romania, for exacompanies. They have the skills tolanguage. English-speaking service pSouth Africa are suitable partners, from a linguistic point of view, for markets in the United Kingdom and the United States. German companies will find outsourcerss 7 Western business practices Closely related to the factors mentioned previously, EU companies tend to select companies whose management is trained and adept at conducting business according to Western business p 8 Telecommunications infrastructure Almost all IT services depend on voice-company would be looking for an outsourcing provre able infrastructure. Moreovew ll. 9F

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13 Government support rcing industry because the ge extent. This ranges from

roviding education, investment (in e.g.) infrastructure facilities and technology parks,

ific software development, the availability of certain soft- or hardware is necessary.

authority as well. Service and flexibility are becoming more and

e creasingly important in the future.

Other elements that play a role, include for example: • Ongoing Research & Development (R&D) • Specialities • Proven offshore methodologies

Large project expertise

ipline and quality certification

Commitment

India has become such an important player in the outsouIndian government has supported and stimulated it to a larpsetting up a Ministry of Information Technology, and promoting the sector in a structured manner. 14 Software and hardware resources The availability of software and hardware is another important factor. For some services, such as spec

AD II) VENDOR-SPECIFIC ELEMENTS Beside these country-specific elements, some elements apply when it comes to selecting the offshore partner (or vendor) in the country chosen. They include, among others: • Experience with global, multi-cultural governance structures One of the major issues that EU companies might consider is where the decision-making authority resides within the offshore company. For example, many Indian firms are still Indian-centric, forcing delays when major decisions must be made. Some customers may consider it necessary to obtain fast decisions under certain circumstances without having

wait for eight or 16 hours. to • Domain expertise Vertical market experience and expertise can be an important asset for some providers. Furthermore, the technology portfolio of a company also plays a role, indicating the technologies it masters. • Superior service delivery

decisionRefer to themore important for the client. • Global presencThis will become in

•

• End-user vs. product expertise • Staff retention • Strategic plan and vision • Process disc• Marketing and sales capability • Financial stability • Customer references • Innovative solutions •

• Size of vendor • Flexibility (on contract terms and the capability to up- or downscale operation size) • Cultural fit which refers to corporate and social culture as well as ‘work ethos’ • References and • Reputation.

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8 PRICES

8.1 Price developments According Neo IT in 2005 pricing of software related services and IT services remains stable: Supplier prices will remain stable overall due to increasing demand competing with qualified firms and resources. As complexity of processes offshored increases, expect price increases in certain IT and business process domains. Offshore supplier growth rates will put significant pressure on wages and talent in mid

nsation and higher attrition. Margin ressure on gross margins as costs

anagement, salary inflation

and senior management. This leads to higher compepressures increase: Suppliers will face significant pincrease. Much of this cost increase will be due to account mnd currency issues. a

Labour prices of software engineers, IT consultants and IT teamleaders for five highlighted EU countries are included in table 10.1.

8.2 Sources of price information

As it is quite difficult for suppliers of software related services and IT services to give exact prices, it is also hard to obtain information about current levels of price.

ts can be broken down into licence prices per module and number of

ound in reports oncerning business software, also giving ranges of costs for software and

Software produccurrent or named users. The licence prices are usually to be found on the websites of the software suppliers. Information on implementation costs can be fcimplementations. Outsourcers / exporters have access to this by using several sources. The main ones are: • Industry associations (appendix 2.3) • Offices for statistics (per country) (appendix 2.2) • Trade press (appendix 2.5) • Websites of competitors • Visiting trade fairs.

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9 EU MARKET ACCESS REQUIREMENTS Section 9.1 discusses non tariff trade barriers in the EU, in particular the two most important quality standards in the software related services and IT services industry: ISOO 9000 and CMM. Another aspect the exporter has to consider is the concerns from politics in the EU from losing IT jobs to developing countries and European legal uidelines. Section 9.2 contains information about tariffs and quotas and the Value Added g

Tax (VAT).

9.1 Non-tariff trade barriers

Chapter 9 discusses non-tariff trade barriers in the EU such as possible EU legislative and non-legislative requirements. Exporters in developing countries wishing to access the European Union should be aware of the requirements of their trading partners and EU governments. Standards that are being developed through legislation, codes, markings,

stand rds Trust and competence are very important in the market and therefore it could be to the exporter’s advantage to have some form of internationally recognised quality certification. E ery exporter from developing countries could consider looking at the quality standards required in the potential target market(s) in the European Union. There are many quality standards, but the two most important quality standards in the

r Standardization, the ISO 9000 family of tandards represents an international consensus on good management practices with the

five standards are ISO 9000, ISO 9001, ISO 9002, O 9003 and ISO 9004. A new ISO standard for software development is ISO 15504.

labels and certificates with respect to environment, safety, health, quality, labour conditions and business ethics are gaining importance. Exporters need to comply with legislation in the EU and also have to be aware of the many market requirements. For the market sector software related services and IT services industry the main requirements are quality and social related – read the following paragraphs. Quality a

v

European Union are: 1 ISO 9000 2 Capability Maturity Model (CMM) Ad 1) ISO 9000

According the International Organization fosaim of ensuring that the organization can time and time again deliver the product or services that: • Meet the customer's quality requirements and • Applicable regulatory requirements, while aiming to • Enhance customer satisfaction and • Achieve continual improvement of its performance in pursuit of these objectives. These good practices have been transformed into a set of standardized requirements for a quality management system. The ISIndustry experts confirm that in the European software and IT services market, ISO is a very important quality standard. It may save exporters in developing countries many hours and efforts in proving their capability to EU clients.

84

The ISO 9000 programme highlights management and system deficiencies and will improve the capability to produce a quality service. An often made mistake is, however, that is mainly a useful framework for guiding quality improvement, but it is an

adequate measure of the quality level of an organisation. Many software companies, he tools and

fer

inwrongly, focus exclusively on the production side of their business and on tmethodologies they use. They ignore the fact that quality is a cultural issue. Please reto http://www.iso.ch and to the CBI publication ‘Exporting to the European Union’ for

The fferent Capability Maturity Models:

e maturity of for

turity es up to these levels, predictability, effectiveness

for vel 1, each level of the CMM is subdivided into several key process areas, they follow

Level 2 Repeatable Basic project management processes are established to track cost, schedule and functionality. The necessary process discipline is in place to repeat earlier successes on projects with similar applications. The key process areas focus on the software project's concerns related to establishing basic project management controls. They are Requirements Management, Software Project Planning, Software Project Tracking and Oversight, Software Subcontract Management, Software Quality Assurance and Software Configuration Management. evel 3 Defined

h management and engineering activities is documented, ess. All projects use an

pp ersion of the organization's standard software process for developing

projects. They are , Training Program,

re Product Engineering, Intergroup

are quantitatively understood and controlled. The key f both the software

rocess and the software work products being built. They are Quantitative Process anagement and Software Quality Management.

evel 5 Optimizing ontinuous process improvement is enabled by quantitative feedback from the process nd from piloting innovative ideas and technologies. The key process areas at this level

cover the issues that both the organization and the projects must address to implement

more detailed and up-to date information on ISO standards. Ad 2) Capability Maturity Model (CMM)

re are two di1 Capability Maturity Model for Software (SW-CMM) 2 The IT Service Capability Maturity Model (IT service-CMM) The Capability Maturity Model for Software has been a model for judging ththe software processes of an organization for many years. It has become a standard assessing and improving software processes. The CMM is organized into five malevels. The more an organization movand control of an organization's software processes are believed to improve. Except lebelow. Level 1 Initial The software process is characterized as ad hoc and occasionally even chaotic. Few processes are defined and success often depends on individual efforts.

LThe software process for botstandardized and integrated into a standard software proca roved, tailored vand maintaining software. The key process areas address both project and organizational issues, as the organization establishes an infrastructure that institutionalizes effective software engineering and management processes across all Organization Process Focus, Organization Process DefinitionIntegrated Software Management, SoftwaCoordination, and Peer Reviews. Level 4 Managed Detailed measures of the software process and product quality are collected. Both the software process and productsprocess areas focus on establishing a quantitative understanding opM LCa

85

continual, measurable software process improvement. They are Defect Prevention, echnology Change Management and Process Change Management.

e aware that the most important part is that your client in the European Union must be in a country, but

ight be unknown for European clients.

nsive. There are, however, some initiatives to obtain ality standards in a less expensive way. Industry associations sometimes , as well as s overnments. A check on this may be worth it!

for Intern dies found some proof that these certifications are less r smaller companies. For them flexibility is the most important issue. The

pany Wipro ed was the first company to obtain both a SEI-CMM and ing. Re t its website http://www.wipro.com/

T The IT Service Capability Maturity Model (IT Service CMM) is a model in progress aimed at providers of IT services, like management of hardware and software, operations, software and maintenance. The structure of the model is equal to that of the Software CMM, its contents, however, are key process areas needed for mature IT service provision. Bfamiliar with the standard. A local standard could be very useful withm These quality standards are expethese qu contribute ome g The Center

oet Stu

important fomIndian c Limit

PCMM level 5 rat fer o for more information.

tware companies in the USA, India, Europe, Asia-Pacific are upgrading he CMMI s dard. It stands for Capability Maturity Model Integration. More

n is to be found at: http://www.sei.cmu.edu/cmmi/

CMMI

Some leading sof

to tcurrently taninformatio .

s of sociall s onsibility of consumers and buyers/importers in the EU, all

the product n from primary producers to final consumers are in need of ased tools t e s social accountability. Social Accountability 8000 (SA8000)

universal management system for companies seeking to guarantee the basic rights is applicable to all industries and is based on the

ternationally accepted ILO Conventions.

eir concern over the issue and set up a commission to threat of companies outsourcing positions. In Germany and France

at this moment as well. Labour unions put to take protection actions. Exporters

rom ing countries could be hit in a negative way if for example protective hibitors of offshore outsourcing on Ceebit 2005 confirms

o sing in importance, is Corporate Social Responsibility (CSR). e ethical behaviours of companies and the

ness, health and social issues are becoming portant, e.g. work space for employees, pension plans and health insurance.

Social issue

rise With the y re pactors in

ket-bchai

maris a

o addr s

of their workers. The standardin The issue of moving jobs overseas has reached much concern in some member countries of the EU as they fear loss of employment in the IT sector. Two British trade unions, Amicus and Unifi, expressed thaddress the growing the discussions about this topic are very hot pressure on the German and France governmentf developmeasures would be taken. Exthese developments in the market. An ther issue that is increaConsumers are more and more conscious of thproducts/services they acquire. In the IT busiim

86

Judy Kuszewski and Kavita Prakash-Mani (2004) highlighted twelve steps companies can take to manage the CSR implications of offshoring, both in the home country and the recipient country: 1. Consult with affected stakeholders before making a decision to offshore. 2. Clearly articulate policy and be honest and transparent about company decisions. 3. Limit or avoid involuntary redundancy. 4. Invest in retraining and skill development for affected employees. 5. Work with communities to help find ways to fill the gaps created by offshoring. 6. Work with suppliers in the recipient country to develop best practice and CSR

awareness. 7. Set standards for suppliers, and monitor their implementation. 8. Train and develop new employees and provide growth opportunities. 9. Help employees deal with psychological and cultural issues that may be involved. 10. Listen to local stakeholders to understand their needs and perspectives. 11. Invest in community, to secure the company’s long-term social licence to operate. 12. Share technologies and skills to enable local people and companies to advance. More information can be found on ttp://www.sustainability.com/downloads_public/insight_reports/good_migrations.pdfh

Occupational health and safety The growing social awareness in the EU may have implications for companies in developing countries in their capacity as trading partners. However, occupational health and safety should not only be important with regard to demands on the EU market. The issue is also essential to get better motivated personnel with respect to productivity, roduct quality, and therefore, a stronger position on the trade market.

European legal guidelines The following European guidelines amongst others play a role: • Data protection In order the EU data protection legislation has been harmonised. The Commission also engages in dialogues with non-EU countries in order to insure a high level of protection when exporting personal data to those countries. More information: http://europa.eu.int/comm/internal_market/privacy/index_en.htm

p

• Copyright There has been significant harmonisation of the substantive copyright law to reduce barriers to trade and to adjust the framework to new forms of exploitation. Directorate-General Internal Market is also responsible for conducting negotiations on industrial and intellectual property within World Intellectual Property Organisation (WIPO) (e.g. databases). More information: http://europa.eu.int/comm/internal_market/copyright/index_en.htm

More information Appendix 3.2 (websites of organizations that provide information on EU standards) Capability Maturity Model for Software - http://www.sei.cmu.edu/cmm/ IT Service Capability Maturity Model - http://www.itservicecmm.org/ Software certifications - http://www.softwarecertifications.com/Corporate Responsibility and Offshoring – http://www.sustainability.com/downloads_public/network/offshoring_summ.pdf

87

9.2 Tariffs and quotas

Tariffs and quotas Software and IT services are serv bmitted to import duties. VAT taxes and outsourcing are a hot tax, levied by the individual member countries in the Europe o the price of products and services and will therefore influence the price consumers and companies have to pay. These ave influe Table 9.1 V

Source: European Union (2004) Electronic services In 2002, the Council of the European Union adopted a VAT directive containing a regulation on the levy of VAT in respect of electronic services. These so called ‘digital goods’ include, among others: • Broadcasting • Web-hosting • Distance maintenance • Software • Images • Databases • News services • Music, films and games • Online gambling • Distance learning

ices, so they are not suissue in the EU. VAT is aan Union. It is added t

VAT-rates differ per EU-country and are shown in table 9.1. It does not really hnce, but gives the exporter an idea of the VAT per EU-member state.

AT-rates applied in the EU-member states (2004)

Country Standard rate (%)

Austria 20 Belgium 21 Cyprus 15 Czech Rep. 19 Denmark 25 Estonia 18 Germany 16 Greece 18 Spain 16 France 19.6 Hungary 25 Ireland 21 Italy 20 Lithuania 18 Luxembourg 15 Malta 18 Netherlands 19 Poland 22 Portugal 19 Finland 22 Slovak Rep. 19 Slovenia 20 Sweden 25 UK 17.5

88

Under this regulation, effective from 1 July 2003, electronically supplied services are taxed in the country where the service is consumed. The regulation affects suppliers of electronic services both in EU countries and in non-EU countries.

This concludes part A of this study. Having analyzed the information about the industrial demand, trends, outsourcing

More information B uk/download/index.htmelastingdienst - http://www.belastingdienst.nl/buitenland_C•

•

•

Digital Sales and the European Union (PDF)

lick the following: Directive 2002/38/EC;

Regulation 792/2002; Services. Guidelines on Electronically Supplied

http://www.ford-peacock.com/inc/content/files/Digital%20Sales%20032603-42f68.pdf Directive relating to VAT on certain electronic services - http://europa.eu.int/comm/taxation_customs/taxation/ecommerce/vat_en.htm

and access barriers of the software related services and IT ervices market in the EU, exporters will have to be able to make decisions in the export s

process. Part B is about this topic and will present some guidelines on entering the EU market.

89

PART B

EXPORT MARKETING GUIDELINES : ANALYSIS AND STRATEGY

90

To export or not to export to the EU? Should developing country exporters of software so, how should they do stions.

ats in the EU-markets could help the

The ul in conducting the ana t strategy. Where applicable, reference will be made to the secti

related services and IT services get involved in the EU trade? Ifthis? Part B of this study assists exporters in answering these que Exporters should be able to determine: • What are the best opportunities within the EU; • The most promising destination countries within the EU; • The best sales channels; • Their market position; • Their possibilities to assess their competitiveness; • A possible export strategy to the EU; • Whether or not to export.

An analysis of the existing opportunities and threexporter with the process. This will be the subject of chapter 10. The internal possibilities and limitations of the company and how they influence the export process are described in chapter 11. Having completed this analysis, the exporter is able to make a decision whether or not to export. If he decides to export, the SWOT matrix could assist the exporter in setting his strategic options and objectives (section 12.3). Chapter 13 gives exporters information on the marketing tools they could use in order to build successful relationships, once an entry strategy has been chosen. This whole decision-making process is shown in figure I.

information provided in Part A of this study could be helpflysis and formulating a well defined expor

ons concerned in Part A.

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Figure I Decision-making process developing country exporter

1) External analysis (chapter 10)

2) Internal analysis (chapter 11)

3) Product- and country selection (section 12.1)

4) SWOT-analysis (section 12.2)

5) Strategic options and objectives (section 12.3)

6) Market Entry Strategy (MES)

7) Export marketing plan (EMP) (chapter 13) Marketing tools

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10 EXTERNAL ANALYSIS: MARKET AUDIT A good preparation is very important for a successful penetration of the EU-markets. Market research plays a key-role in this, since it gives a clear idea of the chances and limitations there are in these markets. This chapter hands exporters a structure for analyzing the external environment and gives procedures and sources based upon which they can do this all themselves. Section 10.1 is about market development and opportunities, the competitive analysis is the subject of section 10.2. The assessment of relevant sales channels follows in section 10.3, while the price structure is discussed in section 10.4. Section 10.5 concludes this chapter with two product/service profiles.

10.1 Market developments and opportunities

Part A has described the actual and future market situation for the EU market for software products, software related services and IT computer services. From the data of chapters 3, 4, 5 and 6 some main conclusions can be drawn. For exporters from developing countries, industrial demand and the market for outsourcing in the member countries of the EU are very important indicators. There has to be a certain market and acceptance of the service, as exporters from developing countries generally cannot create a demand themselves. Some important developments can be seen in the software and IT services business: • There is a market recovery for the whole European IT industry • There is a trend for cutting costs in EU • (Offshore) outsourcing is on the increase

BPO is booming There are more emerging offshore locations (refer chapter 6)

Central and Eastern Europe (refer section 6.6)

t to ave data on:

d I) The Market for software and IT services in an EU country gives an idea of the market

for example an increasing market offers more opportunities than a tagnating or decreasing one. These data can be used as indicators of the market ot services.

udy. dustry associations could have specific data as well, including important trends.

•

•

• There is severe competition from Market research For exporters of developing countries, an analysis of the opportunities and threats in EU-markets is very important before making decisions. Exporters would at least wanhI The market for software and IT services II The outsourcing market EU III The outsourcing market by member state AThe market for software and IT services size for outsourcing, as it is a derived demand. Perhaps even more important is its development, as sp ential for outsourcing Moreover, exporters would like to have information on the type of IT services that are popular in the EU and in each country. Some of these data and projections are available in chapter 3 and appendix 1 of this study. More details are available in the EITO stIn

More information • Chapter 3 • Appendix 2 and 4 • EITO (http://www.eito.com/, cost € 80) • Industry associations (appendix 2.3)

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A II) The Outsourcid ng market EU

that are outsourced and a sector omparison for outsourcing. Information on the selection criteria can also be found in this ha ll this gives exporters the opportunity to analyze main market developments

d sourcing market by EU member state

functions that are outsourced and the main advantages and disadvantages of

is information to look at the competitive environment, or to find potential prospects terms of outsourcing.

Chapter 5 of this study gives data on the outsourcing market and includes some projections as well. Moreover, the main reasons for EU companies to outsource are highlighted, as are the main technology functions cc pter. Aand motivations for EU companies to choose outsourcing.

More information •

• Chapter 6 (offshore locations) • A

Chapter 5 (market and trends) ppendix 4 (websites on outsourcing)

A III) The OutBeside the general EU figures, data on outsourcing by each member state would be welcome too. It enables exporters to compare the highlighted member countries. Again, chapter 5 gives information on motivations for outsourcing by member state, main technology outsourcing. Chapter 4 could be used to find some data on the production by each country and the main players in the local markets. Developing country exporters could use thin The new CBI Manual ‘Your guide to market research’ gives exporters information on conducting market research and how to find reliable sources.

10.2 Competitive analysis

want to have ion etiti ll. Whe gt, n om pan other o o

to look at, Ce Eas opean regio dprice important. Other factors such as

, education level, infrastructure, quality, ultural compatibility, proficiency in languages within the EU and time/distance also play

re locations, could be valuable as ell by providing information on trends and member lists, for example.

Exporters would informat on comp on as we n lookin at the offshore outsourcing marke ot only d estic com ies, but ffshore l cations are also important since the ntral and tern Eur n an Asian

More information • Chapter 4 (main players (potential prospects) by EU member state)

airs) Appendix 4 (websites on outsourcing)

• Chapter 5 (outsourcing market) Appendix 2.3 (industry associations) •

• Appendix 2.4 (trade f•

areas are emerging as well. Not only is the government support, availability of labourcan important role. Chapter 4 highlights the main players within the IT industry by each EU-country and chapter 6 profiles the main offshore locations and their pros and cons. Furthermore, visiting trade fairs could supply an exporter with very useful information. Trade associations, both in the EU and in other offshow

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Questions A - Determine direct competitors 1) Which other developing countries and/or from Central and Eastern Europe have

ct/serviceas well?

lyze these co titors are their ma ing policies? t informatio their price-, product-, promotion- and distribution policy.

e rea for the (non-)success of their services?

C – Determine your own strengths and weaknesses (refer chapter 12)

comparable software or IT computer services? 2) What are other companies in your country that offer a comparable produ

B – Ana mpe3) What rketTry to ge n on 4) Which are th sons

5) Use this information to compare: exploit the strengths and eliminate theweaknesses. 6) Prioritize strengths and weaknesses; some are (far) more relevant than others.

More information • Analysis offshore locations (chapter 6) • Find websites of competitors (chapter 4 for EU and chapter 6 for offshore locations) • Visit trade fairs (appendix 2.4) • Trade associations (appendix 2.3)

10.3 Sales channel assessment

The choice for the most relevant sales channel is different for each individual exporter as several factors play a role. The outsourcing decision making process by an EU company, as described in section 7.3, gives exporters of developing countries a good insight into what criteria are used to select an outsourcing partner and how important they are. According to the trade structure in section 7.2, the mfor developing country exporters are, generally speak

ost relevant distribution channels ing, having their own sales office in

E r/consultant. The reasons to choose r

country within the U

se

st th an EU partner takes time and can be done u local presence. A local firm might, for example, either have the

n

a U member country and using a specialized brokefo either will be discussed below. Sales office in a EU member country The most important benefits of establishing an office within a memberE follow below. • Improved credibility Local presence gives especially small DC companies more credibility, it helps them overcome a lack of brand recognition and it shows commitment to the market. This is a response to the observation by industry experts that report some reluctance among end-u rs in Europe to foreign firms that want to sell a service without a local presence.

• Strengthening of long-term relationship E ablishing a long term relationship wim ch more easily via a necessary relationships already in the country and/or is better situated in terms of la guage, culture, and logistics to develop new ones. • Improved communication and service Communicating with clients is very important. A local presence simplifies this process, especially if after-sales service should be available 24 hours a day.

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• No time difference A local presence makes current and potential customers more comfortable knowing that they will not need to call the DC (which are sometimes many time zones away) for their questions, problems, technical, or customer support.

arket he local DC company has more and faster access to important knowledge about the

as ell.

all, but still, these figures are an interesting indicator.

salary by job in five EU-countries, April 2004

• Trust As with the improved credibility, local customers tend to trust a local firm more because it is subject to local legal liabilities. • Better understanding of mTlocal market structure, developments, sales cycles, economic trends, regulatory issues, and cultural factors and tastes. • Face to face A local presence is particularly important in Southern Europe as business in these countries is very relationship oriented. Face-to-face interactions are much more important than in, for example, Anglo-Saxon cultures such as the United Kingdom or Germany. Establishing an office in the EU requires an investment in resources. It takes more than money alone. Investment in time and commitment are examples of other conditionsw Starting one’s own office in the EU does, however, not necessarily imply a very large and luxurious office. The most important elements include an office, a relevant IT specialist and an administrative assistant. The costs for these vary per each highlighted member state. The salaries as displayed in table 10.1 vary per job and per country. Be aware that the figures in table are a rough indication. The sample of the population of the research is relatively sm

Table 10.1 Average EUR Salary by job Belgium France Germany Netherlands UK 1 Software engineer /developer / engineer

27,640 33,210 49,534 56,530 40,664

2 Team leader, IT 36,970 75,571 67,294 71,862 67,602 3 Consultant, IT 48,257 33,210 40,498 56,530 70,117 4 Administrative assistant 34,277 27,975 25,431 25,817 25,530 5 Office manager 40,690 35,604 49,548 na 32,790 Source: http://www.payscale.com (April 2004) Exchange rate 24 April 2004 1$ = 0.84 EUR Other interesting costs are the annual office occupancy costs per country. Table 10.2 shows an overview for five highlighted EU-countries. The data mainly cover the most expensive city within a country. An office in London (UK) would be most expensive, costing € 1,478 per square metre in 2003 on average. Table 10.2 Total average annual office occupancy costs, 2003 Country City € PER SQ/M 1 Belgium Brussels 418 2 France Paris 961 3 Germany na 685 4 Netherlands Amsterdam 418 5 United Kingdom London (West End) 1,478 Source: Cushwakeasia (2003)

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Another indicator could be the time it takes to start a sales office within the EU. According to table 10.3, this is completed the fastest in the Netherlands, taking 11 days to complete the process. The same process would require 56 days in Belgium. Table 10.3 Time to start a private limited company (PLC) in EU (2003) Country Days Belgium 56 France 53 Germany 45 Netherlands 11 United Kingdom 18 Source: Institut der Deutschen Witschaft (2003) As stated in section 7.2, it could be wise to set up an office in a joint effort. For example, the government or the industry association might contribute to such a presence, allowing several companies at once to profit from the office and facilities. Before starting such an operation, a thorough marketing plan should be drawn, discussing in detail questions like: what are the expected revenues? What are the costs? Who is responsible for which activities? One of the great challenges is to find the right manager: the human factor is decisive. A good project manager leads the process and makes it run smoothly. Take into consideration as well that it generally takes several years to reach Break Even Point. Part of the process is the decision where to locate a European office. Which country? Which region? Which city? The country selection in section 12.1 could assist in choosing a target country and most suitable region within a country. Broker / specialized consultant If establishing and maintaining a sales office in the EU is not a feasible option, working with a broker and/or consultant could be the second option. In fact, it is an alternative European presence, although there are some main differences. In general, brokers and consultants serve the less experienced or starting EU-customers moving offshore. Consultants provide, among other things, the following range of services, although some may focus on specific areas only: • Advise EU-customers on their offshoring strategy • Help the customers identify offshorable projects • Identify vendors for the concerned project • Conduct vendor audits • Monitor the Request for Information (RFI) / Request for Proposal (RFP) process • Help the customer negotiate the best price from the vendors • Monitor the delivery process for quality and timeliness of delivery. Exporters have to give up some margins as the services of these brokers/consultants have to be paid for, refer to section 10.4 as well. Once again, brokers focus more on matchmaking, although the working area of brokers and consultants sometimes overlap. Some benefits of working with brokers/consultants are: • Improved credibility and trust (probably the most important benefit for developing

country exporters). • Lower sales & marketing costs (compared to one’s own sales office) • Easier access to the global markets • Face to face contact • Good local knowledge of the market • Better visibility when recommended by the broker/consultant, thereby increasing

chances of getting short-listed in the RFP. Often, brokers/consultants advise customers to have several vendor channels for best pricing. Though such brokers/consultants act as the agent of the customer, they often require the vendors to register with them and pass through a pre-qualification process

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involving an audit. Some large outsourcing consultants are neoIT, McKinsey and GartnerConsulting, with an increasing focus on the Indian market. Outsourcing consultants currently facilitate less than 10 percent of the total revenues of the Indian IT sector. The credibility and trustworthiness of the broker/consultant are very important in this process. An example of a broker has been mentioned in section 7.2. It is the European Information Technology exchange. Their website http://www.EuroITX.com aims to bring IT service providers of developing countries in contact with (potential) EU clients. The services offered are for free. The choice for the distribution channel will vary per exporter. As a summary: seriously considering a local presence would be really recommended, regarding the common practice in the market, the market developments and the opinions of experts. If possible, this could be done by combining forces (industry associations or other service providers join the effort). Carefully look at the pros, cons, expected costs and revenues, speak to colleagues/experts and take a decision. Working with a broker/consultant is an option when resources are not sufficient to establish your own sales office and/or a lack of credibility or trust. Although the main goal would be to establish a sales office, a possibility could very well be to start by working with a broker/consultant and gain some experience with the market. If they are good, the next step could be the sales office. As described in section 7.2, other potential sales channels include European software companies, European companies establishing subsidiaries in developing countries, partnerships with large EU service providers and contacting end users directly, although these options are theoretically for most service providers in developing countries. Please refer to section 7.2 for a description and in what situations these options happen. Of course, these target groups are more within range when a sales office has been established.

10.4 Price structure As with prices, it is hard to give a detailed picture of the price structure in the software related services and services industry. The price structure varies by project, per client and per sales channel. Below follows an indication of prices and margins for the two most relevant sales channels. Sales office In general, margins will be higher when a middle man will be cut out. But, once again, price is not the only argument, as credibility and trust play an important role as well. Brokers / consultants The contracts that these brokers and especially consultants negotiate could, generally speaking, have tight pricing and somewhat lower margins than the current industry levels. These brokers/consultants have a clear understanding of the detailed cost structure of the provider and, moreover, have relationships with several vendors. As a consequence, they are in a position to negotiate the best deal for the client in the EU. In most cases, service providers are asked to work out their breakeven costs excluding the sales and marketing overheads), and offer a 20-25 percent mark-up on these costs, meaning a net margin of 17-20 percent on sales. The pipeline of contracts being negotiated through such brokers is expanding. Some examples in practice: in general, consultant NeoIT is known as price aggressive and will negotiate the lowest possible price for its clients. On the other hand, consultants McKinsey and Gartner are more likely to emphasise the qualitative aspects of the vendors. As mentioned in section 10.3, brokers/consultants often recommend clients to adopt a multi-vendor strategy to have at least one leading customer and one mid-size vendor, in order to keep pressure on the pricing from both vendors. Refer to section 13.3

ng up an offer. for drawi

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10.5 Product profiles This subsection gives a structure for setting up a product profile for a Software product,

RM) and Business Process Outsourcing (BPO). For each service, the exporter will find formation on market requirements, market structure and practical tips on improving e quality of the products/services. They are examples and are meant to give the

xporter an idea of how to improve or develop a service.

(Cinthe

PRODUCT PROFILE CRM (focus Germany)

Product name ustomer Relationship Management Solution

Market requirements ropean quality standards O 9000 and ISO 15504

imensions pecify in a table which functionality areas are covered (e.g. marketing, relationshipanagement, sales, service, other), and per area the dimensions and restrictions in thenctionality. Also specify relations of the product with hard- and software platformsperating systems, network architecture etc.) and other software the CRM solution canmmunicate with (e.g. ERP software, business intelligence programmes, productnfigurators). In the CRM software market, it is not only important to have a clea

1C 2EuIS DSmfu(oco

rcounderstanding of the IT market but it is also essential to have a good knowledge of the

siness management process. As a result, outsourcing works best for customerbumanagement processes that enterprises can easily isolate from the rest of their business.

t's great when the requirements are very well known and the process doesn't changeuch and the outsourced application is fairly isolated from the rest of the enterpriseerations."

ize pecify the size in a table, in a minimum and maximum number of users, number o

"Imop S

fSsites and purchase costs related to the modules and the number of current or named

ers.

Market structure ain markets e main EU markets for software and IT services are Germany and the UK. Refer toapter 3 of this market survey for more details. Specify per country the market size,sed on relevant segments in the markets. The total German application softwarearket, among which CRM, remained at

us 3MThchbam € 7.3 billion in 2003. CRM software was

timated at $2.3 billion in 2001, a year considered as one of the most difficult ones inars. One of the causes for the decline in CRM software is considered to be the difficulty linking CRM to the previously installed software systems in companies. Outsourcing o

esye

fofcustomer relationship management is particularly popular. The market research firm

ataquest found in 2001 that 45 percent of Western Europe’s total outsourcing CRMvenues came from Germany.

Dre Average prices: (retail) ince there are many solutions and there are per solution many variations in priceifferent sets of modules, different ranges of users, multi-site environments), we refe

Sr(d

to the Internet sites of the different CRM suppliers for current price information. Softwarempanies are mentioned in section 4, company databases included. Price will continue be a key factor in the German software market. According to analysts, companiescreasin

coto

gly prefer fixed-price projects. in

Market trends Specify for the particular market and market segmentations history and trends in size, demands, successful solutions and distribution, prices and technology. For the coming years, various research institutes are predicting a new boom in the CRM market in Germany. Forrester Research predicts average growth rates of 11.5 percent until 2007. Many companies are still planning to implement CRM. A trend in Germany is CRM outsourcing companies which help business speed up the implementation process. Another trend in end-users behaviour is a niche approach. The enterprise focus on the aspect of CRM that is most important to them. Outsourcing trends are: • A focus on bottom line, return on investment and maximizing financial resources. • Continuing consolidation among suppliers. As the economy strengthens, there will be

more buyers and opportunities. • The requirement of CRM intelligence for eCommerce sites to grow and be profitable End-users The most important end-users of CRM systems have been the manufacturing industry and banking and insurance. Others are the telecommunications industry, utilities, retail, services and public organizations and transportation companies. Major users are very large companies but the SME market is expecting to grow. Decisions concerning CRM are typically made by CEOs, in conjunction with their marketing and IT departments, the latter being responsible for recommendation of the software. One of the most important considerations in determining whether to outsource is the intensity of the customer relationship, which translates to the frequency of contact with the customers and their economic value to the company. Service-oriented companies, such as financial services, that live and die by maximizing the value of their customer relationships shouldn't outsource. Outsourcing is better-suited to small and medium-sized companies that lack the requisite expertise. Larger companies often have more ambitious and complex customer management programs that don't lend themselves to outsourcing. 4 Main suppliers Specify the operating competitors in the relevant market segments. Take a special interest in successful new arrivals in the market. East European developers are emerging in software development. In Germany, more than 120 CRM providers are currently active on the market. The biggest suppliers in Germany can be found in table 10.4. Table 10.4 main suppliers CRM Germany Company Country of origin Market share 2001 1 Siebel USA 32 1 SAP Germany 32 3 Oracle USA 3.6 4 PeopleSoft USA 3.2 5 Applix USA 2.8 5 CAS Pirmasens Germany 2.8 Source: Handelsblatt, 18 September 2002 In addition to the relatively large IT service consulting firms, there is an increasing number of smaller companies, e.g., Syskoplan, KabelTeam4, SHS, and Extraprise, which specialize in this complex area and are expected to have positive growth potential through their product and specific industry knowledge. 5 How to improve the quality CRM implementations Special emphasis should be given to selecting high standard implementation partners, and the communication with them.

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More information BITKOM - www.bitkom.org Limesearch - http://www.limesearch.co.uk/c/r/crm/ Outsourcing center - http://www.outsourcing-center.com/ (search by CRM)

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SERVICE PROFILE BPO (United Kingdom) 1 Service name Business Process Outsourcing 2 Market requirements Quality Building trust by emphasis on high-quality services. ISO and CMM are very good options. Good communication Good comprehension of the tasks to be accomplished is a key factor for succeeding in

viders should make sure that project work requirements are well known,business. Proand success criteria and outcomes are clearly defined, communicated and understood.Furthermore, these should be measurable. Agreement Agreements should include a definition of the actual services to be performed, the

change managementocess, the organizational structures of the vendor and client, and dynamics

e main EU market for BPO is the UK. In 2001 the BPO total market value within the

performance requirements and service levels, the framework of a prmanagement and review meetings. Internet presence A comprehensive website proposing well-defined services, clear prices, competitiveadvantages in terms of cost reduction and service quality for clients, and a clientreference list helps create a trustworthy environment. 3 Market structure Main markets Thtop tier of the British economy amounted to € 9.4 billion in 2001. Banks,telecommunications and oil & gas are the most important sectors. The financial servicessegment is the fastest growing one. According to Data monitor, the UK is by far thelargest market in terms of growth and outsourcing expenditure, followed by France andGermany. Refer to appendix 2 for an example of BPO-services as defined by UNCTAD.

and reward business model is being adoptedby increasing numbers of corporations as they become more adept at managingpartnerships. Deals with a value of

Contract BPO contracts (6.4 years) are relatively longer than ICT-only contracts (5.3 years). Thevalue of the deals varies a lot. A shared risk

€ 50 million dropped from 16 in 2002 to 14 in 2003,while the number of contracts higher than € 200 million increased 83 percent. Dealsvalued at more than € 1 billion were on the rise as well in Europe. Market trends The BPO market will grow fast. Predicted BPO growth will range from 22 percent to 30percent per year. Expectations are that other sectors like pharmaceuticals, aerospace,and food and drug retailers will follow. Smaller outsourcers are winning contracts forspecific services.

Main suppliers 4The UK BPO market includes the following key providers: • EDS • Accenture • Unisys (almost exclusively BPO)

PWC •

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5 How to improve customer satisfaction Security, availability, customer service and overall reliability are key items in the searchfor a high quality of service level.

More information • Appendix 4 (websites on outsourcing) • CW360 Outsourcing report - http://www.cw360ms.com/outsourcing/index.asp

Outsourcing BPO - http://www.outsourcing-bpo.com/ •

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11 INTERNAL ANALYSIS: COMPANY AUDIT Having analyzed all relevant external factors, exporters could assess whether they are able to meet these requirements and will be able to respond adequately to the existing opportunities. Internal factors such as standards, quality and USP (section 11.1), marketing and sales (section 11.2), financing (section 11.3) and capabilities (section 11.4) are discussed in this chapter.

11.1 Standards, quality and USP

Standards Trustworthiness and competence are very important in the market and therefore it could be to the company’s advantage to have some form of internationally recognised quality certification. The two most important quality standards in software related services and IT services industry: 1. ISO 9000 2. Capability Maturity Model (CMM, preferably at least level 3) Section 9.1 discusses these standards in more detail. Quality of service Of course, quality is always very important when supplying services to a client. But in this case it is even more vital as it attributes to the trustworthiness of a developing country service provider. Some EU companies do not know that developing countries offer IT services. In other words: the image of the country could be improved. By providing superb quality, this prejudice is (slowly) removed. Practice shows that an excellent project manager is a critical condition for success. In order to guarantee or even improve quality, providers could make sure that project requirements are well known and clearly defined, communicated, understood and measurable. This could mean clear and concise process requirements, work descriptions and agreements. Furthermore, a contact list and action plan could be drawn in case a problem cannot be resolved immediately. Certainly for beginning exporters, it could be wise to focus on one area and to specialize in this to be able to supply the client with an outstanding service. Once the client is atisfied, the services could be expanded.

lexibility is important as well, although this may sometimes be contrary to ISO or CMM. his is because most standards, by definition, require an exact description of the ethods of the project. This sometimes limits the flexibility of a company, as it is

ttached to the in-house standards.

s

Case: ensuring quality first One of the key success factors of the Cambodian company Digital Divide Data(http://www.digitaldividedata.com/) was a focus on only a few projects to ensure

The staff members have undergone continuous training to providequality results. quality services and ensure client satisfaction. The manager of DDD has undergonetraining at Cyberdata, a BPO company in New Delhi that specializes in dataconversion and digitization. Now, it provides services to many well reputed clients,among which Harvard Crimson. Source: Unctad 2003

FTma

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Data security Worries about data security are another element service providers could take into account. EU organizations evaluate outsourcing vendors on whether they have sufficiently robust security practices and in what way vendors can meet the security requirements clients have in their own organisation. Most EU companies would not risk security breaks or the loss of intellectual property. Exporters should therefore fully address privacy concerns. One way to do this is by documenting the requirements and

e methods, refer to section 13.3 as well.

this USP lies the negotiating power of service providers. Remember, the main benefits of outsourcing are perceived to be: • The ability to measure value for money • guaranteed service levels • access to a greater skills pool • the ability to focus on the job in hand.

th USP The more unique the product or service , the more chance of success and profit exporters will have. If the product has some special characteristics which the competition will have a hard time copying, exporters have an advantage. This is called a USP, a unique selling proposition. Be sure to communicate this to the client, as it is a strategic advantage. In

More information • Refer to section 9.1 for more information on quality standards • Refer to section 5.3 for the differences in perceived outsourcing advantages by EU-

country

Questions quality and standards • Are there any subsidies for getting standards? For example trade associations

and/or government of developing countries sometimes subsidize the process ofgetting certified.

• Does your client appreciate a standard? • Do your competitors (both foreign and local) have standards? If yes, which ones? • Do you have a (or several) very good project manager(s) at your disposal? • Are you sufficiently flexible, if necessary? • Are procedures and project requirements well defined and communicated?

Questions Unique Selling Proposition (USP) • What are typical characteristics of the service compared to the competition’s service

(especially in Western Europe)? • Which of these are not easily imitated by competitors? • How will you communicate this message? • Which of these factors are most important to the buyers and end users of your

business or brand?

11.2 Marketing and sales here are many ways an exporter could make use of marketing techniques. If an xporter opts for a structural export of his services, his organisation has to be adapted to is objective. He has to set a policy and choose instruments to achieve his goals. Some ain items to be evaluated are:

Sales office in EU 4 P’s: price, promotion, place (distribution) and product (service).

Tethm•

•

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Questions sales office in EU • Does the sales manager have sufficient relevant contacts in the target country? • Is he capable of speaking the local language and dealing with the business culture? • Is he able to obtain information on the DMU within the potential client’s

organisation?

The selection of the sales channel (section 10.3) will influence the way these instruments are used. For example, the sales support materials for your own office can differ from the materials f

Questions 4 P’s (price, promotion, place (distribution), and product (service)(section 12.1) ) Price • What is an effective price strategy? Fixed or time and materials contracts ? Refer

13.3 as well)? Promotion • Which main trade fairs do you (have to) visit and are you able do so (refer section

13.5.1)? • What are possibilities for advertisements in relevant trade magazines and can you

afford them (refer section 13.5.2)? • What are the possibilities for free publicity and are you capable of writing a press

release (refer section 13.5.2)? Do you have a good quality website (refer sectio• n 13.5.3)?

details known with referrers like Embassies, Chambers o

• What are Direct Marketing possibilities and can you find the relevant contactpersons (refer section 13.5.4)?

• What are relevant international business events on outsourcing and can you affordthis? (refer section 13.5.5)?

• Are your company fCommerce and trade associations?

• How frequent should your visits to the customer be and can you afford this? • Are you able to localize a foreign national within the potential client company

(diaspora, refer section 13.5.5) Place (distribution)

Can you afford your own sales office? •

• Is a joint effort an option in establishing the office and are you able to initiate this?

or a broker/consultant.

11.3 Financing

he management has to be willing to allocate sufficient funds and create an adequate udget for export activities. Exporters who want to break into exporting will need funds r working capital, product/service modification, medium term credits to overseas

ustomers, and operations such as staffing, communications and travel budgets. If ternal funds are not available, think about securing funds through commercial banks nd other financial services providers who can help you meet your long-term objectives.

Tbfocina

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11.4 Capabilities

Operating foreign markets has consequences for the whole organization. Not only sales and administration are involved, the management plays an important role as well. Typical for the outsourcing industry, there are some requirements on the basis of which EU companies decide to work with an offshore service provider (refer section 7.3 as well).

Questions • What would be the minimum budget to establish a sales office in an EU member

country and would it be available? • Do you need external funds? • If yes, which resources are willing to fund? • Are there any subsidies, in your own or the destination country?

Questions • Do you have sufficiently skilled personnel available? • Is there a personnel connection with you and a potential prospect in the EU? • Are you able to supply the client with a high qu y service (refer section 11.1)? • Is your staff able to deal with foreign languages and cultures? • Has your staff adapted to Western business practices and norms? • Is the telecommunications infrastructure within your company of sufficient

quality? • Do you dispose of a legitimate Intellectual Property Rights (IPR) protection

enforcement? • Does your organization have access to sufficient software and hardware

resources? • Are you able to react fast when a client would demand a decision?

alit

12 DECISION MAKING Having evaluated the external opportunities and the internal strengths or weaknesses, exporters can now determine a strategy. It is time to select a main EU target country with the help of a country selection. This is described in section 12.1. Once this has been et ed thoroughly. In order to do this in a

ths and e will help exporters make

d ermined, this market can be investigatstructured manner, a SWOT-analysis could be helpful. This analysis of strengw aknesses, opportunities and threats (SWOT, section 12.2)their main decisions. Section 12.3 is about the strategic options & objectives.

12.1 Country selection

Exporters should be aware that Europe is a continent and not one market. The EU on tics. For this reason,

could be significant differences. For example, Italy can be divided into two parts (North t from

aro ce of SAP, for xample, has resulted in the birth of thousands of smaller IT firms in this region. In

ris. In fact, nearly all French

account for approximately another 10 percent each.

developing country exporter could prioritise the EU destination countries and then

hen a company chooses a country to export to, extremely trivial criteria often turn out oreign language spoken by the secretary or a coincidental

ese criteria when choosing a suitable exporting country. og question is: is there another, more appropriate way of choosing e e target country

wo tries from all EU-15, followed by an in-depth ur n market(s). A rough country selection (I) is followed by a selection f ntry (II). Figure 12.1 graphically illustrates the country

c sists of 25 individual member states with their own characterismaking a country selection could be very useful. Even within one member state there

and South) and Germany is very decentralized. The 16 states are quite differeneach other. In Germany, large IT firms and software companies have been clustered

und Munich, neighbouring Stuttgart and Heidelberg. The presenecontrast to Germany, France has one business centre: Pacompanies have their headquarters in Paris (60 to 65 percent). Lyon and Marseille

Achoose one main target country. Individual service providers from developing countries could use the following general tips on how to perform such a country selection. EU-country selection Wto play a crucial role. The fmeeting with a foreign importer at a camp site may be decisive factors. In practice, there are many companies that use thL ically, the important th most suitabl We recommend you approach market selection as a two-step process. The first step

uld be to select the most interesting couns vey of the choseo one most promising couselection.

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Figure 12.1 Country sele

m ent

ore service provider, would want to find ut

vices as an indication for the demand for outsourcing llect relevant data on outsourcing (section 5.2 and 5.3)

and 5.4, and perform tion channels for your service

ss climate to establish a sales office image of your country in EU-target country, t);

ction

25 EU-countries

Source: Export anagem (2004) Step I: Selection of five out of 25 EU-countries Apply some very pertinent questions to a broad range of markets – the questions you ask will depend on specific aspects of the software related services and/or IT services you are offering. At this stage you, as an offsho about: • The demand for your service;

- Collect the statistics on industrial demand (section 3.1 and appendix 1) for software products and IT ser

- CoLook a• t the trends for these specific services (sections 3.2 research).The availability of appropriate distribu(sections 7.2 and 10.3);

• The possibilities and busine• The environment for doing business (e.g.

language, culture and political environmen• The opinion of software and IT computer service experts. From these results, narrow your selection down to five markets by comparing data.

Drop out 20

Step I: Selection of

five out of 25 EU-countries

Step II: Select one primary

target country

5 countries remaining

Drop out 2

Ranking of 3 countries choose one primary target country

109

110

elect one primary target country interesting, including a ranking.

To make this final selection,

roduct/service. After data are collected from the countries, the most promising country e are:

The criteria mentioned in step I (again); osts of your own sales office (refer section 11.3)?

able? Competitor research (strengths, success factors, price level). Who would be your

competitor(s)? try (USP) ?

big are they? ins in different parts of the market?

Are there any significant trade fairs or other events where you can promote your

Will you need to translate promotional material and is it culturally acceptable? to compile a quality long list with relevant potential

uring this process, there are some subjects to consider: tering criteria must be quantifiable wherever possible, that is to say expressed

ance of some factors over others.

rom the results of this research, an exporter can make his decision about which EU-country (region). After this has been

one, the selected market can be investigated thoroughly (SWOT, section 12.2). Please ctice it may differ.

ources of information xporters can gather much information from a variety of sources at little or no cost. ources of information include:

Part A of this study; Trade fairs; Talking to colleagues and other service providers; Industry associations of the exporters’ country but also organizations like the CBI (AccessGuide included) (appendix 2.3); Trade journals;

• EITO (appendix 1); Internet. There are many websites and databases available on outsourcing. Refer to appendix 2 and 4 for (web) addresses of these sources.

inally, the CBI has recently released ‘Your guide to market research’, in which low cost market research on EU markets.

Step II: SFrom these five countries, three will remain as most From these three you can choose the most promising one.more in-depth research is necessary, especially in relation with the exported pcan be chosen. Some of the questions you may want to ask at this stag•

• What are the (estimated) c• Are there some specialized brokers/consultants avail•

major • In what way is your service unique in the target coun• Are there any niche markets, and if so, how • What are the prices or marg•

product? •

• In what way is it possible partners like software companies, IT service firms and/or end users?

D• The fil

in money or numbers. • Weigh the relative import Fcountry (or region) is the most promising export dremember that this is a general approach, in pra SES•

•

•

•

•

•

Fmethodologies are presented for performing

12.2 SWOT- and situation analysis A SWOT analysis looks at the company’s: • Strengths (to build on)

Weaknesses (to cover) Opportunities (to capture) Threats (to defend against).

etermining the most important (for instance two or three) Strengths, Weaknesses, ties and Threats items can help exporters in the situation analysis. For easy

dentification, you could list them in four squares, separated by a large cross, e.g. like

•

•

•

DOpportuniithe example in table 12.1.

Table 12.1 SWOT identification Strengths:

……….(to be filled out) ……… (to be filled out)

Weaknesses:

……….(to be filled out) ……… (to be filled out)

Opportunities: ……….(to be filled out) ……… (to be filled out)

Threats:

……….(to be filled out) ……… (to be filled out)

Now, your own internal situation is combined with the external environment in such a way that adequate strategies can arise. As a summary, table 12.2 shows the SWOT-ombinations and the strategies in general (below in section 12.3).

ort and ng term business goals and action plans, a business plan, an export plan and an annual

c A tailor-made checklist could assist exporters in determining the specific strengths, weaknesses, opportunities and threats for their own situation. This checklist for the computer service industry can be found in appendix 5. Mark the box which shows how each issue will affect your organization, and whether it has a high or low influence on the company’s performance. The final analysis should help the exporter develop shlomarketing plan.

12.3 Strategic options and objectives

ing completed tHa he checkimportant (for instance thr

v list in Appendix 5 for your own situation, determine the most and Threats items.

om

ee) Strengths, Weaknesses, OpportunitiesYour own internal situation is now combined with the external environment in such a way that adequate strategies can arise. As a summary, table 12.2 shows the SWOT-

binations and the strategies in general. c Table 12.2 SWOT-combinations and strategies Strengths Weaknesses Opportunities Grow Improve Threats Defend Problems Now, insert them in the appropriate box in the matrix below, in the so-called SWOT-matrix (figure 12.2). The cells S, W, O and T are now completed and appropriate trategies can be thought of in the other cells. s

• Strengths+Opportunities (S+O) Use strengths to take advantage of opportunities. The strategies that result from ombining these two should be exploited as much as possible. It may provide c a ustainable competitor advantage.

xample ssume the following situation for a service provider: = The exporter has a good technological knowledge. = Increasing use of Internet

+O strategy= Develop a quality website

Weaknesses+Opportunities (W+O) ry to improve your internal weaknesses and consequently you should be able to take dvantage of the existing opportunities.

s EASO S •

Ta

111

Example Assume the following situation for a service provider:

= Little knowledge of EU-market and potential partners

ng your strengths.

in EU country

W= Low financial resources T= Lack of credibility and trust W + T strategy = contact brokers/consultants igure 12.2 Example confrontation matrix

WO= Availability of 2 or 3 trade fairs, which are visited by the major part of the industry W + O strategy = Visit relevant trade fair(s), for example the CEEBIT • Strengths+Threats (S+T) Try to defend against threats by usi Example Assume the following situation for a service provider: S= Low labour costs and highly skilled workers T= Lack of credibility and trust

S + T strategy = Establish your own sales office • Weaknesses+Threats (W+T) Minimize weaknesses and avoid threats. This is the worst scenario a service provider could face. Try to avoid this situation or withdraw from it. Example Assume the following situation for a service provider:

F

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(S) Strengths List strengths (O) Opportunities List opportunities

(W) Weaknesses List weaknesses (T) Threats List threats

Threats – T 1 Image / lack of credibility nd trust

2.1 Large IT service companies controlling the market T2.2 Tough competition and very high marketing expenses

Ta T

Opportunities – O O1 Increasing use of Internet O2 Availability trade fairs, visited by major part of industry O3 EU software companies outsource directly

Strengths – S S1 Exporter has good technological knowledge

Weaknesses – W W1 Small player W2 Little knowledge on EU-market and potential partners

S2 Low labor costs and high skilled workers S3 Unique Selling Proposition (USP)

W3 Low financial resources available for marketing efforts

S+T Strategies 1 Establish your own sales office in EU country (combination S2 + T1) 2 …………………………………………… 3 …………………………………………………

W+T Strategies 1 Contact broker/consultant (combination T1+W3) 2 …………………………………………… 3 ……………………………………………

S+O Strategies 1 Develop quality website (combination S1+O1) 2 …………………………………………… 3 …………………………………………………

W+O Strategies 1 Visit relevant trade fair(s) (combination O2+W2) 2 …………………………………………… 3 …………………………………………………

Defining options Having defined his strategies by performing the SWOT-analysis, the service provider can divide them into three categories: 1) strategies which are a must and which are carried out 2) optional strategies, of which some are selected: choices have to be made by the

service provider!

rt ptions, then formulate his business/export objectives and choose his strategies.

re you will go, how fast this goes, what to do to ccomplish your goals and how to deal with uncertainties and change. It does not always

guarantee success, but it helps to face important issues inside and outside the business. It allows developing strategies that should be built on strengths of the company and the opportunities that exist in the market and, moreover, it should reduce the risks. Summarizing, for the decision whether or not to export, the following strategic steps should be reviewed: 1 external analysis (market audit, chapter 10) and internal analysis (company audit,

chapter 11); SWOT (section 12.2);

et entry strategy (MES) is determined after the external and internal

3) combination of several strategies, if possible Subsequently, the service provider can make an overview of his various strategic expooElements of the SWOT can be used as well as an input for the export marketing policy. An export plan gives some necessary guidelines and direction to reach your goals. It helps define where you are now, whea

23 decision making & formulation of objectives (chapter 12); 4 elements which can be used as inputs for the Market Entry Strategy (MES, as eg.

level of risk, price level) and Export Marketing Plan (EMP, next chapter 13). In this situation, the service provider could choose between establishing his own sales office in an EU member country and between working with a broker/consultant as a sales channel. A very good website is a must in this process. Generally, the markanalysis and the decision to export have been made. Then an export marketing plan (EMP) is made. It contains details on how the service provider will export the chosen service to the chosen market(s) and by the chosen channels. For more information on writing an export marketing plan, please refer to the CBI Export Planner at http://www.cbi.nl. The new CBI Manual ‘Your guide to market research’ gives service providers information on conducting market research.

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114

TING

at have been selected in more detail, containing elements like targets, timelines,

d marketing plan is a necessary condition for surviving the

g services and service range (13.1), a long-term artnership with a business partner (13.2), drawing up an offer (13.3), handling the

rmation on export marketing can

13 EXPORT MARKE Having determined the strategic objectives, the exporter has to make an export marketing plan, which includes a selection of marketing tools. It works out the strategies thbudgets and personal tasks. It often requires quite an investment, which is ongoing. A well-structured and detailevery competitive EU market. This chapter discusses matchinpcontract (13.4) and sales promotion (13.5). More infobe found in the CBI’s Export Marketing Plan (http://www.cbi.nl).

13.1 Matching services and service range F t of all, exporters could adapt the servicirs e to the demands of the market and thus the uy MM play an important role t ts. Furthermore, especially for

t issue, refer to section 1.1. As mentioned in section 12.1, it could be wise, certainly for beginning exporters, to

panded

b er. As described in section 9.1, quality standards ISO and Cin his as they will provide credibility to potential clienstarting exporters, the quality of the service is a very importan1focus on one area and to specialize in this to be able to supply the client with an outstanding service. Once the client is satisfied, the services could be ex

More information • Section 9.1 (quality standards) • Section 11.1 (quality of service)

13

Hav t suitable trade channel (section 10.3), it is time to put it to

business partners, it has to be maintained on a long term basis. The approach for the two

the choice of an exporter is to set up an office in the EU, the first focus would be to to section 7.2, these could be both end-users,

ffshore service providers.

he es mentioned in chapter 4 could be a good starting point. Also ave a look at http://www.emich.edu/ict_usa/

.2 Building up a relationship with a suitable trading partner

ing evaluated the mosuse. Business partners have to be found and, if the relationship is satisfactory for both

most common trade channels differs in some areas.

Establishing sales office in EU member country Iffind clients (acquisition). With reference like for example companies in the banking-, telecommunications- or insurance industry, and software companies that might be looking for o T companies and websith . It contains overviews of possible

exporters from developing countries. It has links to, for example, banks, prospects forairlines, telecommunications and other players in the IT-industry.

More information • Chapter 4 • http://www.europages.com • Appendix 2 and 4 for more websites, for EU as a whole and by member country

Finding broker(s)/consultants

.com

Selecting the right partner to be your trade partner in-market is vital to your export success. Inappropriate partners and distribution structures can be very difficult to change once you are in the market. It can take weeks, sometimes months, before exporters find a business partner with whom they are willing to face the future. Obviously, the process is difficult enough to allow sound preparations. As mentioned, the European Information Technology exchange (http://www.EuroITX ) could be a very good broker to work with. It is supported by BI and aims at matching service providers from developing countries and EU clients.

ealing and communicating with business partners in the long term

u want to hear. Cultural traits can ary, even per EU-country. Refer to section 7.3 for this as well.

rance, there are two sorts of diners. The first one is the ne to generally build up a relationship, with no strings attached. The second one is a

-mail, just to let them know that the problem as your full attention and that you are working on the problem. In the German market, -mail and (especially) fax are important. Be on time when visiting the German client; is is extremely important. When targeting the UK market, it could be useful stating

istances in kilometres and miles.

or more information on how to build a business relationship, please also refer to the BI manual ‘Your image builder’.

C More brokers/consultants could be found by asking colleagues in the industry, visiting trade fairs, contacting industry associations and / or using the Internet. For example, as referred to in section 3.3, the UK Trade Invest programme helps overseas organisations of any size to find partners in the UK.

More information • http://www.euroitx.com

Appendix 2 and 4 for websites •

• Business Link - http://www.businesslink.gov.uk/ - Select Learn about Consultants and/or offshore consultants (UK)

• National Outsourcing Association - http://www.noa.co.uk/suppliersdir.html select ‘consultants’ (UK)

DOnce a relationship has been established, it has to be maintained. Personal contact is essential. After establishing a list of possible trade partners you might need to visit the market to meet them and assess their various merits. Take cultural differences into account when communicating with your trade partner. For example, trade partners from some cultures may initially tell you what they think yov Business culture Business diners, as an example are very common in the UK. In Germany, diners are just to enjoy; foreigners will not be invited too quickly to join them. If this occurs, such an invitation indicates a very good relationship between the parties. Contrarily, in Italy a warm welcome is essential. Guests should initially insist on paying the bill, but should finally concede to the host. In Fodiner where transactions are not really concluded, but are discussed, in order to prepare the final deal. Handshakes are common in almost all EU-countries. Especially in France this is important. It is common to shake hands with all the people present in the room. In general business practice, Europeans appreciate a follow-up. Confirm appointments and thank them for attending meetings. The French are impatient, be prompt in answering their requests. Send back an ehethd FC

115

13.3 Drawing up an offer The following section gives an example of how an offer in software development and

es could be made. The example could be used as a framework for in the softwar IT services

re threto software development: Specifying what is wanted (requirements)

2 Ownership

ifying what is wanted (requirements)

to be able to set out what they want and for the supplier to be able to provide detailed price. The purchaser could therefore specify:

e software itself;

•

est for Proposal (RFP) stage. If

ThecomSer his issue including:

In this case the client owns the software and it is used only by his/her company. The

e purchaser's organisation that it has no market value

• haser and the supplier participate in a joint venture to market the software.

Thetwo•

A fmay take. In most cases, suppliers are likely to build in a much more controlled process

owto con

oreover, the service provider, most probably, will charge a premium for a fixed price

k, the lower the premium. Despite this premium, the buyer may still refer the apparent extra cost of the fixed price as it provides a degree of certainty.

software related servicexporters’ own offers, both e related services and in the industry. According to industry experts, there a e specific areas of importance with respect

1

3 Pricing software development. Ad 1) SpecThe definition of what is exactly being purchased is very important. It is essential for the purchaser a• The functionality of th• The standards that the software is required to conform to;

The environment the software will operate in; • The performance of the software in the chosen environment.

These things may have been done already at the Requnot, they need to be identified before a final agreement is established. Ad 2) Ownership

second area of importance relates to the difficult question of ownership of the pleted product. There are a number of options and implications for both parties here.

vice providers have a range of approaches to t• building the software for the purchaser's specific needs. •

software is so specific to thoutside the company.

• the supplier owns the developed software, licences it back to the purchaser and reserves the right to licence it to others.

• the purchaser owns the software and licences it back to the supplier, who is allowed to market it as well. the purc

Ad 3) Pricing software development

third area concerns the methods of payment for the software. There are, in general, common ways to price software development: fixed price

• time and materials

Fixed price ixed price is the price for the whole project, no matter the extra materials or time it

to address changes of any sort to the originally specified system. This is done for their n protection. The supplier will deliver what was contracted for, even if the buyer were decide it is not what he wants, unless the purchaser follows an appropriate change trol procedure. This procedure could be defined in the agreement.

Mrelative to the risks involved. The more defined the project to be delivered, the less the risk. The less the risp

116

Time and materials The second method of payment would be a project based on time and materials. This allows more flexibility, but may lead to a less disciplined approach to the project. The supplier may not be formally bound to produce what the purchaser has asked for within a set cost and time. The risk for the buyer lies in the fact that the supplier may charge some extras, for example by adjusting the original requirements. The purchaser has therefore much more responsibility to ensure that the costs do not grow significantly. It may be wise to include some change control procedures. This could be specified in the agreement as well. Furthermore, the time and materials agreement could deal with other variable issues such as the acceptable level of daily allowances and travelling. Both parties need to consider when payment for services will occur. Will this be in one amount at the end of the project, as the expenses are incurred, or some other staged approach? If this latter method were adopted, then typically the agreement would include a payment schedule that sets out the agreed milestones and the payments that become due upon their achievement. The agreement could also take into account what happens if any of the oftware development key parameters changes. Are there extra payments to be made?

How will the financial issues dealt with?

and the cost-up approach. The price-down method compares prices aid by the client against real market prices paid by other customers who buy similar

services. This method works as long as price data for similar services is readily available. Where price data is available, but for different services, adjustments must be calculated to produce a fair market price. The cost-up method calculates a fair market price by simulating the outsourcer's costs, based on the known costs of organisations delivering similar services in-house. These costs are supplemented by an extra premium to represent the outsourcer's overheads,

complex than the price-down method, but is

s

Most contracts are being written for shorter periods of time now than they were five or 10 years ago. It is now uncommon to enter into a 10-year contract; most contracts are being written for periods of between five and seven years. While it is possible to get contracts for shorter terms, such as three years, this is less desirable for both the outsourcer and the vendor. The long term of a contract may give a feeling of certainty to the service provider. But it has a main disadvantage as well, as markets and the economic climate may change. For example, some contracts signed in the late 1990s have been renegotiated and adapted to the new market situation. Including a benchmark clause could therefore be an idea. This allows reassessing and adjusting contract terms. Selecting price methods In IT outsourcing, two benchmarking methods have emerged in terms of pricing: the price-down approachp

profit, and risk. This process appears more the only option when comparable market prices are not available. In practice, both methods are common. Selecting the appropriate method depends on a number of factors, summarised in table 13.1 below.

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Table 13.1 Selecting price method Price down method Cost up method Vendor’s pricing is detailed Vendor pricing is too high level Services are commodities and vendors price the service in similar ways

Large multi-service contracts in which some services may have cross-subsidised others

Comparable price points are available Insufficient comparable price points are available

Contracts include a high proportion of intangible ‘value add’

Source: http://www.compassmc.com (2004) Currency The most commonly used currency is the US dollar. But a good alternative would be the Euro (€). Other possible issues

What documentation is to be produced, to what standard, in which language, and who provides it? Who installs the software and at what cost?

performed as a condition of acceptance (e.g. what tests will be

ute settlement. Although there are international dispute settlement groups situated in London,

neva, it is recommended to clarify the legal aspects of dispute

known

nd the brochures, if applicable) has

p. First get to know each other! Refer to section 13.2 as well.

lease refer to the CBI’s Export Planner for more detailed information and definitions of ayment methods.

•

• What actions must becarried out) and who does them?

• What data conversion is required and who does this? • What defect/issue resolution support is to be provided during the warranty period? • What quality assurance tasks are required and who performs them? • All the offshore contracts could specifically highlight the system of disp

Brussels and Gesettlement in the outsourcing contract itself.

• Risk/reward sharing deals can become more common. Some practical suggestions Some suggestions for successful proposals: • Make the offer as personalized as possible. Show that you understand the buyer's

specific needs by asking specific questions before stating the offer. • Prove your expertise. As the ‘expert’ you could present solutions and outline your

approach. Mention relevant experience and include some names of well clients.

• Quote a fair price. Inaccurate and unrealistic offers lower your credibility. • Be aware that in the EU, a client may expect too much of the savings of the project.

Some clients expect too much cost reduction in offshore outsourcing. To overcome this, describe why you're worth the price and what additional value you'll deliver. Mention some hidden costs and your USP as well (refer section 11.1).

• Study your competition. Find out about awarded projects in the past to find out what the winners did differently and adjust accordingly. Make a telephone call to ask whether the offer (a•

arrived and ask whether additional information is needed. This allows an extra contact moment with the client.

• Also take the cultural differences into account when sending an offer. For example, always approach a German in a very polite and formal way. In France, the relationship with a client is very important. Terms and conditions are discussed later; first the buyer and seller have to have a good relationshi

Pp

118

More information Compass MC White Paper - http://www.compassmc.com/white_papers/FairMarketA4doc.pdf • PDF file: ‘Fair market price using benchmarks to establish rates for outsourcing

services’ Contracts, models and drafting - http://www.intracen.org/laft/

l contracts and users' guides • Collection of more than 160 mode Strategic outsourcing services - http://www.itssonline.co.uk/2003/march/article7.asp • Contracts (Part 1) ITSS March 2003 Working effectively with standard outsourcing contracts – http://wp.bitpipe.com/resource/org_973204426_74/working_effectively.pdf • Problem areas according the Robert Frances Group are discussed, fees, service

levels, ownerships and

1 .4 Handling the contract

ce the agreement is signed, both buyer and supplier will have invested significant time effort in completing negotiations and assembling all the required sch

3

Onand edules into the

tha ery, installation and acceptance are completed in accordance

e responsible for managing the agreement and of

e contractual requirements and processes. In any software development, the project o the requirements to ensure that

of Cooperation could be optimized by the internet, intranet, groupware and

In practice, the following ratio between the staff executing an offshore project is common: • 15 percent of the client staff are retained to provide strategy, architecture and

governance. • 15 percent of the supplier’s resources are co-located (onshore) with the client to

provide liaison, functional, and technical assistance and project management. 70 percent of the supplier staff are offshore.

final document. Both parties should now put this investment to work for them to ensure t all stages of the deliv

with their agreement and as agreed by both parties.

From practice, a very important success factor could be for both parties to appoint one or more project managers. They will bmonitoring progress through each stage. They should each have a clear understandingthmanagers need to exercise strict control of changes tcosts, quality and time-scale are controlled. Communication between the other members

the project groups from the buying and supplying company should be stimulated.

videoconferencing.

termination

Example: chatting as main communication instrument The Dutch IT company Decos, specialized in document management, owns acompany in India. 10 out of 30 employees are working in India. Their communicationruns by chatting. The experience is a very effective communication because most ofthe communication is written communication in stead of talking. Writing is muchmore direct form of communication and there are much less culture problems.

•

119

More staff are onshore at the beginning of the transition. The ratio may also be adjusted

are performed both nsite and offshore.

based on complexity of the work and risk factors. Strategy, solutions architecture, prototyping, and design work are performed at the client site. Development and testing are performed offshore. User acceptance testing and implementation o

More information • Compass ‘The three year itch - Adjusting Outsourcing Relationships to a New

Economic Reality (PDF file) - http://www.compassmc.com/white_papers/1ThreeYearItch.pdf

• Elance – contract agreements – http://www.elance.com/c/static/main/displayhtml.pl?file=signing_the_deal.html

Legal Issues in Offshore Outsourcing | Business - •

http://www.offshoreoutsourcing.org/legal-issues-offshore-outsourcing.asp

13

There are numerous tools to promote outsourcing services. Developing country exporters ould focus their marketing on core sectors and niches and look to run special events and

.5 Sales promotion

cseminars rather than big events. In general, a specialist seminar on a core topic area would bring in more benefit than attending a wider exhibition. Always explore cooperation with other companies, trade and/or promotion organisations.

13.5.1 Trade fairs

Trade fairs play a major role in product and service marketing in Europe. Participation in trade promotion events is highly recommended as one of the most efficient methods of

sting market receptivity and finding prospective business partners in Europe and

veloping country exporters in the IT industry generally profit ore from visiting a trade fair than from participating.

rs) for details. Internet is also a valuable source of information. and publishing in trade press (appendix 2.5) could be a first with potential business partners. A new quarterly outsource

tebeyond. Experience in the Netherlands shows, however, that in the software and IT services sector, the success of trade fairs differs. In general trade fairs will be not successful in the short run. They are certainly a good way to promote the country. Experience shows that dem Appendix 2.4 lists some of the most important exhibitions and trade fair organisers in Europe in this industry. Note that every European country has its own IT fair, mainly targeting the local market. Exporters could ask European sources (e.g. software industryassociations, local partneAttendance at trade fairsstep to get into contact magazine has been launched in 2004 by EMP MEDIA in association with the National Outsourcing Association. (http://www.noa.co.uk/). A thorough preparation is a key element in successful trade fair participation. The CBI manuals ‘Your showmaster, a guide for preparation and participation in European trade fairs’ and ‘Your image builder’ are very useful. The ‘Expo Coach’ has been developed as well, helping to plan, prepare for and participate in exhibitions more effectively and efficiently. They can all be downloaded at http://www.cbi.nl.

120

More information • Association of German Trade Fair Industry – http://www.auma.de select

‘worldwide’ for database • CBI – http://www.cbi.nl

13.5.2 Trade press

An advertisement in a trade magazine could be another possibility. Appendix 2.5 can be helpful in selecting the appropriate trade magazine. The trade press could be used for free publicity as well, as outsourcing is a hot issue in the European markets. A press

lease is the most common method to contact the press. Make them short and punctual nce, depending on the target group. Remember that it is a

• Write it as if you were the journalist (saves time for the receiving person!) • A tailor made press release may be worth considering: a journalist of a magazine

may write another text than a national newspaper journalist • Mind the timing! Newspapers will be interested in recent events, while supplements

and event listings are written weeks (or sometimes months) in advance. Some azines are even planned up to a year in advance.

ss important

he following:

A big advantage of a press release is that the information is much more reliable for readers than, for example, an advertisement. An advantage of an online press release is that you can reinforce your article with hyperlinks that will contain interesting background information.

reand send them well in advaneutral message with information, it is not an advertisement! Some practical suggestions for press releases include:

monthly magPay special at• tention to the introduction (lead). It should briefly answer who, what, where, why and when Put the most important information at the beginning, followed by le•

details • An attractive quote may make the information even more interesting for the readers • Maximum length 1 A4 (in general) • Include contact details of yourself or your staff (e-mail and mobile phone number) When sending it by e-mail, please mind t

Put all e-mail addresses in the Blind • Carbon Copy (BCC) address field of the message so the receivers cannot see to which other parties (competitors) the e-mail has been sent.

• Always refer to your website.

More information Press release template - http://www.prweb.com/pressreleasetips.php

e that gets noticed by the media. • How to write a press releas The care and feeding of the press - http://www.netpress.org/careandfeeding.html Writing a press release & free publicity for your website –

.com/press-releases/http://www.internetbasedmoms

121

13.5.3 Internet As mentioned in section 3.3, the internet offers many opportunities for developing country exporters, also in terms of sales promotion. The communication can be fast, at

w

Goima ry exporters, the website could go a long way in el

com s (e.g. USP, cost reduction and service quality) and a client fe

sug• local content as this can stress the unique pros of the destination.

Mind the privacy of consumers. An increasing number of countries enforce legislation umers against misuse of personal data. Pay attention to a solid data

excellent advertising tool to attract relevant isitors. The website’s content and structure (including “look and feel”) could be localized

ure to localize the website could probably be the best strategy. However, for websites, particularly those used for e-commerce, language issues can have many hidden costs. Native-language staff needs to maintain the sites, answer customers’ questions, and fulfil orders generated electronically, if this is desired.

arketing the website Last but not least, an exporter should promote his website in a structured manner, so

ners will be able to find the website. Two pieces of advice on

te goal for your website. Who are your main target

it the site? site come from a search engine. Surfers on

ct the information they need out of billions of ag e it is necessary that owners of websites foe

‘log

se case.

r website to a search engine according to the rocedures of that search engine, and you can monitor the progression of your listing. he disadvantage is that you can not do as many search engine submissions as an utomated service does. Look upon it as a difference between quality and quantity.

lo cost, independent of distance and timeline and unlimited in size.

Website ng online is fundamental for companies in the IT sector. Since trust and credibility are jor challenges for developing count

h ping establish these. A website proposing well-defined services, clear prices, petitive advantage

re rence list helps create a trustworthy environment.

When developing a website, developing countries could take into consideration some gestions: Include

• Use both local languages and the languages of the most important EU regions of origin.

•

to protect consprotection and especially avoid spamming (sending unsolicited e-mail / business proposals).

Having a local-language website is anvto the target market/country. Hiring people who have a native understanding of the target country’s cult

M

that potential business partpromoting websites are:

Determine website goals 1First of all, determine the concregroups: software companies, brokers/consultants and/or end users like banks? What are the actions you want them to take? Each target group may require a different approach.

Submit the website 2• Why submMore than 50 percent of the visits of a webthe le web use these services to find and sep es that are available on the web. Thereforin rm the search engines about their websites. This can be done by submitting your w bsite to the search engines or directories of choice. The name of the website should be

ical’ for the target group. Some people only type the name of an organization without using a search engine. Making use of several domain names for your website may be

ful in thisu • How to submit the site? Manual submission has certain advantages over automated submission. The most

portant one is that you will submit youimpTa

122

• Manual submission For manual submission of your website, you need to take some actions. Whitelines (http://www.whitelines.nl/html/regional-search-engines.html ) helps you in this process by offering the direct links, listed on the country pages, to the submission pages of the search engines. Follow the procedures of a submission form of a certain search engine.

racters (including paces), and appear in the top of the HTML code of your page delimited by the <TITLE>

ves. Make sure your title covers the content of your page. Avoid

M@

det e website. It is available at CBI.

egic questions for you are:

se an E-marketplace?

you have decided that an e-marketplace may be of interest to your company, we commend the checklist of http://www.E-marketservices.com

• Most important tip The page title is the most important factor that influences the ranking of your website within a search engine. The title should not be longer than 60 chasand </TITLE> directiusing titles like "Welcome at ……”. It does not cover the content.

nual Website promotion The M@nual Website promotion ‘how to promote your website in the EU’ contains more

ailed information on marketing th

Mnewatch – http://www.searchenginewatch.com

ore information Searchengi

- http://www.whitelines.net Whitelines

Marketplaces In the ICT industry, marketplaces are used relatively much, according to section 3.3, certainly in the future. The most important strat 1 Are you ready to uEven if e-marketplaces are relevant to your business, your company may not be ready for this step. You have to consider whether the cultural environment within your company is suitable to be able to accommodate change. 2 Which are the good E-marketplaces? Ifre . According to this website,

ere are 39 specialized e-marketplaces for the IT sector. It includes more useful formation on marketplaces and gives practical suggestions.

oftware-related marketplaces here are also some specialized marketplaces that concentrate on matching potential uyers and sellers of software development. These electronic marketplaces follow the utsourcing model, where a company is not required to commit resources to meet hort/medium term software development project outcomes. Some examples are: ttp://www.smarterwork.com/

thin

More information E-marketservices – http://www.emarketservices.com • Select, for example, ‘eMarket Basics’, ‘case studies’, ‘reports’ • Select ‘search directory’ and then for example ‘IT Products & Services’ and ‘IT

services’

STbosh ttp://www.onestopclick.com/h

rokers/consultants ome brokers/consultants in the EU use the internet as a possibility to get into contact ith suppliers and possible European clients. This stresses once again the need for a ood online marketing policy. Refer to section 7.2 as well for more information on rokers/consultants.

BSwgb

123

13.5.4 Communication / direct marketing Exporters could use the following tips for dew

veloping good communication / direct mail

Only then do you send a personalized letter.

for example expressions of thanks on the company developments like services

range and quality improvements. l printed p ed ou e com etterhe isiting

rochure of your comp cluding photos of of n be r prom

new contacts and sales. ven if you don’t have an answer

ou have received his message and will reply ASAP.

be available by ) phon and/o il at o urs. De difference en you ry and countr

se r client inf n up in de ame, address, tele

rs, e-mail. Addition ation e ins he akiMU). This could be a software based program (Microsoft Acces or Excel) but a

efer to section 13.2 for more informat ildin relat and fs.

ith prospects: Get to know the decision makers in the EU-company. •

• Take good care of existing contacts. This includesto business partners, regular information

• Standardise al aper us tside th pany (l ads, v cards, fax form, e-mail).

• A b any (in fices) ca useful fo oting

• Be prompt in answering the buyer’s communication. Eat hand you should inform him that y

• Always (mobile e, fax r e-ma ffice ho o not forget the tim betwe r count the EU ies.

Client databaAlways keep you ormatio to date tails: n phone numbe al inform could b ights in t Decision M ng Unit (Ddatabase with file cards as well. R ion on bu g up a ionship inding potential prospect

More information American Marketing Association - http://www.marketingpower.com

13.5.5 Other tools mentioned, more t tools to reach EU cts cou

riefly. They includ

siness eventernation ess e ike th ces organized

rcing Institute could also be regarded as a way poten ts and learn

or an effec chure:res of co itors! hs of y ice (U

lude a map, includin gion e cou not a s know

acter of your services

and CD-rom w cost med reach directl n prep video,

L format and no TSC.

Beside the tools some relevan prospe ld be mentioned b

e:

International buating in in

ts Particip

utsoual busin vents, l e conferen

to findby the

O tial clienabout strategies and good practice.

rochures BSome guidelines f

Learn from brotive bro

• chuStress the strengt

mpet•

Incoug the re

r serv SPwithin th

) ntry as ll client your •

country. Do not mention prices in the catalogue but stress the tailor made char•

Video, DVDThis could be a lo ium to clients y. Whe aring a make sure it is in PA

t in N

124

Trade missions / referrers The effectiveness of trade missions shows a mixed result. The exporter could join a trade

ission of his country or a s ission ed by ernme etime leads, some they do

issions may also b ized a ropea anies for ofroviders in, for example, developing countries. Often, trade associations, Chambers of

ion or long-lists of potential rs. Make sure you are known with these organizations.

ards part of inte al trad pract to store or sc e busine d for fut ference ly using

rmat (approx 9cm x 5cm). speaking c ies it pa t ful ils on th erse sid

card in the local langProvide international telephone contact details.

iaspora lly from, mple, desh o , might be motivat

me co ic ers c blish kageas diaspora networks, universitie

ding mpanies do not know the exis of som loping es, let

gh quality IT How this can e solved ne indiviassociations r gover t could an impo

he success of In The exp mself coul nclude a country map ebsite and/o hure.

m ales m organiz the gov nt. Som s they lead to good sales times not. Sales m e organ s by Eu n comp looking fshore pCommerce and/or Embassies are asked for more informatservice provide Business cCalling cards are rnation e. Some ical tips• Make it easy

standard foan th ss car ure re by on the

• In non-English ountr ys to prin l deta e rev e of the uage.

•

• Display logo CMM / ISO if applicable DExecutives origina for exa Bangla r India ed to outsource

ve hoto their respectiverse

untries. Serv e provids, private-sector leaders, and

ould esta strong linconsular

s with and o

foreign trade authorities in their governments.

ountry branCSome EU co tence e deve countri alone that they offer hi

ade services. ever not b by o dual

exporter. Trmatter (refer t

and/odia).

nmenorter hi

play d i

rtant role in this on

for example his w r broc

125

APPENDIX 1 DETAILED STATISTICS This Appendix contains the r statist ITO 20

are market in n, 20 06

elevant ics of E 05. EU25 Softw

€ billio 02 – 20

2002 2003 2004 2005 2006 System software 30,956 31,656 33,321 35,455 37,746 Application software 29,067 29,081 30,051 31,518 33,167 Total 60,023 60,737 63,372 66,974 70,913

EU15 IT Services market lion, 2 2006

in € bil 002 -

2002 2003 2004 2005 2006 Consulting 1 1 1 1 10,834 0,703 0,892 1,382 2,025

Implementation 47,141 46,851 47,678 49,560 51,868

Operations 22,524 23,557 25,581 27,883 3

management 0,164

Support services 30,731 30,992 31,646 32,947 34,374

Total 111,230 112,103 115,797 121,772 128,431

Austria Sof

tware market in € lion, 200 006 bil 2 - 2

2002 2003 2004 2005 2006 System software 728 739 769 806 844 Application software 637 636 652 675 703 Total 1,365 1,375 1,422 1,481 1,547 Austria IT Services marke illion - 2006t in € b , 2002 2002 2003 2004 2005 2006 Consulting 264 276 286 304 322 Implementation 1,300 1,357 1,415 1,503 1,595

Operations 444 486 530 management

579 631

Support services 692 729 768 819 872 Total 2,699 2,848 2,999 3,205 3,420 Belgium / Luxembourg Soft e marke billion, 2 – 2006war t in € 200 2002 2003 2004 2005 2006 System software 742 767 804 847 894 Application software 881 880 900 930 967 Total 1,624 1,646 1,705 1,777 1,861 Belgium / Luxembourg IT es ma € bil 02 - 2 Servic rket in lion, 20 006 2002 2003 2004 2005 2006 Consulting 278 280 286 303 324 Implementation 1,495 1,506 1,541 1,615 1,705 Operations

anagement 628 659 692 746 814

mSupport services 922 954 973 1,011 1,064 Total 3,323 3,400 3,492 3,674 3,907

126

Denmark Software market in € billion, 2002 - 2006

2002 2003 2004 2005 2006 System software 660 684 721 762 801 Application software 740 737 757 786 819 Total 1,400 1,421 1,479 1,548 1,620 Denmark IT Services mar billio 2 - 20

ket in € n, 200 06

2002 2003 2004 2005 2006 Consulting 221 218 224 239 258 Implementation 1,170 1,164 1,190 1,244 1,319 Operations 504 572 724 790 859 management Support services 670 699 763 801 843 Total 2,564 2,653 2,901 3,074 3,278 Finland Software market in € billion, 2002 - 2006 2002 2003 2004 2005 2006 System software 610 624 655 691 730 Application software 514 526 543 565 592 Total 1,124 1,150 1,198 1,255 1,323 Finland IT Services marke billion - 200

t in € , 2002 6

2002 2003 2004 2005 2006 Consulting 260 266 280 299 326 Implementation 728 742 781 835 905 Operations 448 487 566 608 646 management Support services 434 449 507 544 581 Total 1,870 1,945 2,134 2,286 2,458 France Software market in € billion, 2002 - 2006 2002 2003 2004 2005 2006 System software 5,694 5,814 6,136 6,564 7,020 Application software 4,832 4,869 5,035 5,315 5,638 Total 10,526 10,683 11,171 11,878 12,658 France IT Services market i illion, 2 - 2006 n € b 002 2002 2003 2004 2005 2006 Consulting 2,217 2,193 2,242 2,320 2,452 Implementation 10,027 9,919 10,018 10,253 10,587 Operations

anagement 4,492 4,600 4,926 5,330 5,705

mSupport services 6,581 6,603 6,670 7,004 7,315 Total 23,317 23,314 23,947 24,906 26,059 Germany Software market in € billion, 2002 - 2006

2002 2003 2004 2005 2006 System software 7,706 7,629 7,934 8,410 8,915 Application software 7,393 7,245 7,463 7,863 8,228 Total 15,099 14,874 15,397 16,246 17,142

127

Germany IT Services market in € billion, 2002 - 2006 2002 2003 2004 2005 2006 Consulting 2,419 2,323 2,334 2,428 2,549 Implementation 11,361 11,134 11,357 11,925 12,521 Operations management

4,286 4,458 4,747 5,129 5,537

Support services 7,146 7,134 7,205 7,349 7,496 Total 25,213 25,048 25,644 26,829 28,104 Greece Software market i ion, 2 006 n € bill 002 - 2 2002 2003 2004 2005 2006 System software 186 192 201 213 227 Application software 138 139 144 151 159 Total 324 331 345 364 385 Greece IT Services market in € billion, 2002 - 2006 (€ million x 1000) 2002 2003 2004 2005 2006 Consulting 57 63 66 72 78 Implementation 298 328 344 371 403 Operations management

32 35 39 38 41

Support services 198 216 224 235 251 Total 585 642 673 716 773 Ireland Software market lion, 2 2006 in € bil 002 - 2002 2003 2004 2005 2006 System software 227 231 246 265 287 Application software 226 223 232 243 257 Total 453 454 478 544 508 Ireland IT Services market in € billion, 2002 - 2006 2002 2003 2004 2005 2006 Consulting 70 63 66 76 83 Implementation 286 298 313 337 363 Operations management

153 164 198 217 237

Support services 171 177 191 202 216 Total 674 704 722 832 899 Italy Software market in n, 200 6 € billio 2 - 200 2002 2003 2004 2005 2006 System software 2,438 2,460 2,536 2,627 2,780 Application software 2,249 2,236 2,283 2,340 2,439 Total 4,687 4,696 4,819 4,968 5,218

128

Italy IT Services market in € billion, 2002 - 2006 2002 2003 2004 2005 2006 Consulting 890 855 861 894 935 Implementation 4,171 4,126 4,163 4,288 4,473 Operations 1,845 1,880 1,958 2,077 2,224 management Support services 2,895 2,858 2,867 2,953 3,074 Total 9,802 9,72 9,849 10,212 10,706 Netherlands Software market in € billion, 2002 - 2006 2002 2003 2004 2005 2006 System software 2,635 2,338 2,371 2,494 2,767 Application software 2,165 2,185 2,232 2,306 2,396 Total 4,503 4,557 4,726 4,941 5,162 Netherlands IT Services market in € billion, 2002 - 2006

2002 2003 2004 2005 2006 Consulting 721 721 722 769 818 Implementation 1,723 1,724 1,741 1,833 1,942 Operations

anagement 2,370 2,492 2,674 2,980 3,270

mSupport services 1,188 1,216 1,224 1,266 1,316 Total 6,002 6,153 6,361 6,847 7,346 Portugal Software market in € billion, 2002 - 2006

2002 2003 2004 2005 2006 System software 235 244 255 270 289 Application software 215 214 217 223 234 Total 449 457 472 494 523 Portugal IT Services market billion, 2 2 - 2006 in € 00 2002 2003 2004 2005 2006 Consulting 71 76 77 80 85 Implementation 311 332 335 347 362 Operations management

158 179 189 204 218

Support services 179 194 199 207 215 Total 719 780 801 839 879

129

Spain Software market in € billion, 2002 - 2006 2002 2003 2004 2005 2006 System software 1,044 1,119 1,190 1,280 1,365 Application software 1,008 1 1,097 1,152 967 ,050 Total 2,011 2,127 2,240 2,377 2,518 Spain IT Services market in € b llion, 2002 2006

i -

2002 2003 2004 2005 2006 Consulting 388 386 399 423 452 Implementation 1,782 1,733 1,777 1,848 1,936 Operations management

841 892 953 1,040 1,144

Support services 1,154 1,157 1,187 1,233 1,298 Total 4,164 4,167 4,315 4,544 4,830 Sweden Software market in € b llion, 2002 2006

i -

2002 2003 2004 2005 2006 System software 1,109 1,142 1,210 1,287 1,363 Application software 1,266 1,283 1,314 1,358 1,410 Total 2,375 2,425 2,524 2,645 2,773

market i billion, 2 - 2006 Sweden IT Services n € 002 2002 2003 2004 2005 2006 Consulting 619 614 609 632 663 Implementation 1,691 1,675 1,652 1,690 1,753 Operations

anagement 1,084 1,162 1,282 1,404 1,525

mSupport services 1,291 1,310 1,341 1,403 1,466 Total 4,686 4,761 4,883 5,129 5,407 United Kingdom Software market in € billion, 2002 - 2006 2002 2003 2004 2005 2006 System software 6,518 6,830 7,260 7,778 8,326 Application software 6,074 6,025 6,242 6,553 6,919 Total 12,592 12,855 13,502 14,332 15,244 United Kingdom IT Services market in € billion, 2002 – 2006 2002 2003 2004 2005 2006 Consulting 2,366 2,366 2,436 2,543 2,680 Implementation 10,798 10,813 11,051 11,471 12,004 Operations management

5,239 5,491 6,103 6,741 7,313

Support services 7,210 7,296 7,527 7,920 8,367 Total 25,612 25,965 27,117 28,675 30,365

130

, 2002 - 2006 Czech Republic Software & IT market in € billion

2002 2003 2004 2005 2006 System software 190 215 242 273 306 Application software 180 207 237 270 307 Total Software

370 422 480 544 612

products IT services 680 794 875 965 1,065 Estonia S ware & IT market in €oft billion, 2002 - 20056 2002 2003 2004 2005 2006 System software 12 12 13 14 15 Application ftware 19 so 21 22 22 24 Total Software 31 products

33 35 37 40

IT services 36 41 46 53 59

of billion, 2002 - 2006 Hungary S tware & IT market in € 2002 2003 2004 2005 2006 System software 164 181 200 220 241 Application ftware 163so 186 208 232 256 Total Software 326products

367 407 452 497

IT services 475 554 596 646 708 Latvia Sof are & IT market in €tw billion, 2002 - 2006 2002 2003 2004 2005 2006 System software 12 13 14 15 16 Application ftware 18 so 20 22 24 26 Total Software 30 products

33 36 39 42

IT services 42 47 54 62 70 Lithuania ftware & IT marketSo in € billion, 2002 - 2006 2002 2003 2004 2005 2006 System software 12 13 15 17 18 Application ftware 17 so 21 24 27 29 Total Software

s 29 34 39 43 47

product IT services 37 45 51 59 69

131

Poland Software & IT market in € billion, 2002 - 2006 2002 2003 2004 2005 2006 System software 253 289 329 374 424 Application software 279 313 355 405 464 Total Software 532 602 684products

779 888

IT services 725 883 999 1,134 1,289 Slovakia tware & IT market in € billion, 2002 - 2006Sof 2002 2003 2004 2005 2006 System software 46 51 57 63 70 Application software 54 62 68 77 86 Total Software

101 113 125 140 156

products IT services 155 174 197 224 252 Sloveni tware & IT market in € ba Sof illion, 2002 – 2006 2002 2003 2004 2005 2006 System software 32 36 40 44 48 Application software 40 45 51 56 62 Total Software 72 110 products

81 91 100

IT services 81 132 141 150 158

132

APPENDIX 2 USEFUL ADDRESSES 2.1 Standards organisations

ity M are (CMM) ions@sei.cmu.edu

INTERNATIONAL Capabil aturity Model for SoftwE-mail: mailto:customer-relat

ternet: http://www.sei.cmu.edu/cmm/In International Organisation for Standardisation (ISO) E-mail: mailto:central@iso.ch

ternet: http://www.iso.ch

Model® .org

In IT Service Capability MaturityE-mail: mailto:info@itservicecmm

mm.org/Internet: http://www.itservicec EUROPEAN UNION

orm.beComité Européen de Normalisation (CEN) E-mail: mailto:infodesk@cen

/Internet: http://www.cenorm.be

tuut voor Normalisatie (BIN)

BELGIUM Belgisch InstiE-mail: mailto:info@ibn.be Internet: http://www.ibn.be/ FRANCE Association Française de Normalisation (AFNOR)

r.frE-mail: mailto:norminfo@afno ternet: http://www.afnor.fr/In

s In

-mail: mailto:webmaster@din.de

GERMANYDeutsche stitut für Normung e.V. (DIN)

/www2.din.de/

EInternet: http:/

ds N) -mail: mailto:info@nen.nl

NETHERLANDS Nederlan Normalisatie-instituut (NE

EInternet: http://www2.nen.nl/ UNITED KINGDOM British Standards Institution (BSI) -mail: mailto:info@bsi-global.com

.bsi-global.com/EInternet: http://www

s

SPAIN AENOR, the Spanish Association of StandardE-mail : mailto:info@aenor.es Internet : http://www.aenor.es SWEDEN Swedish Standards Institute (SIS) E-mail: mailto:info@sis.se Internet: http://www.sis.se

133

2.2 Sources of price information ed through trade organisations, trade press or trade fairs.

ing for prices on the Internet, asking for prices at distributors, agents and other distribution channels. Please refer to the other appendices

r details.

European Information Technology Observatory (EITO)

Price information can be obtainOther possibilities include check

fo

E-mail: mailto:info@eito.com Internet: http://www.eito.com Overview Offices of Statistics by county Internet: http://www.cbs.nl/nl/service/links/default.asp 2.3 Trade associations EUROPE

nications Technology Industry Association (EICTA) European Information and Commu

E-mail: mailto:info@eicta.org Internet: http://www.eicta.org/ European Outsourcing Association E-mail: mailto:admin@noa.co.uk Internet: http://www.e-oa.net/ BELGIUM Agoria ( nology federation, ICT included) tech

.beE-mail mailto:luc.simons@agoria -mail: mailto:pierre.sohl@agoria.beE (Belgian Software Industry Group)

Internet: http://www.fabrimetal.be Information Services Association (INSEA) E-mail: mailto:info@insea.be Internet: http://www.insea.be

Federatie van Belgische verenigingen voor informatica (BFIA) Extensive listing of IT associations and users groups from BFIA E-mail: mailto:webmaster@www.bfia.be

Internet : http://www.bfia.be/

FRANCE ation

Association Française des Sciences et Technologies de l'InformE-mail : mailto:asti.asso@infonie.fr Internet : http://asti.asso.fr

Syntec Informatique mailto:jpeybert@syntec.fr

atique.fr

E-mail: Internet http://www.syntec-inform

ERMANY BITKOM Bundesverband Informationswirtschaft, Telekommunikation und neue

E-mail: mailto:bitkom@bitkom.org

G

Medien e.V., Berlin

ternet: http://www.bitkom.orgIn

134

EDV-Berater e.V. (IT-services Association) E-mail: mailto:kontakt@vdeb.de Internet: http://www.vdeb.de Spitzenverband der deutschen softwareindustrie

tions Largest European alliance of software organizaE-mail: mailto:info@dmmv.de Internet: http://www.svds.de

der utschlands e.V. (VSI) E-mail: http://www.vsi.de/

Verband Softwareindustrie De

(select ‘Kontakt’) Internet: http://www.vsi.de/ NETHERLANDS Federation Dutch IT (FENIT) E-mail mailto:bureau@fenit.nl Internet http://www.fenit.nl

:

SPAIN Asociación de Empresas de Electrónica, Tecnologías de la Información y Telecomunicaciones de España Internet http://www.sedisi.es/ WEDEN S

IT-Företagen E-mail: mailto:info@itforetagen.se

.se/Internet http://www.itforetagen

ssociation for Software Testing SAST Swedish AE-mail: mailto:webmaster@sast.net Internet: http://www.sast.net/ Swedish A ciation of Software Industsso ry E-mail: mailto:peter.bergh@sinf.se

tp://www.swedishsoftware.org/Internet: ht UNITED KINGDOM

ns and Electronics Association E-mail: mailto:info@intellectuk.orgInformation Technology Telecommunicatio

ternet: http://www.intellectuk.org/In

siness Advice for the UK Computer and Software er Se rtment of Trade and Industry

E-mail: Select ‘contacts’ at bottom of page ternet: http://www.internationalgrowth.org

International growth - BuComput rvices by the Depa

In

E-mail: mailto:csia@css.com.cn

OFFSHORE LOCATIONS CHINA China Software Industry Association (CSIA)

://www.csia.org.cnInternet: http

-mail: http://www.nasscom.org/

INDIA NASSCOME select ‘contact us’ Internet: http://www.nasscom.org/ view ‘company directory’ and ‘market studies’

135

IRELAND

E-mail: mailto:isa@ibec.ieIrish Software Association

et: http://www.software.ieIntern

S igital Philippines - Bridging the Philippines Today

mailto:info@digitalphilippines.org

PHILIPINED

http://www.digitalphilippines.org/

E-mail: Internet: E-Services Philippines: IT Services and Outsourcing Portal

arket information and company list included citem.com.ph

ME-mail: mailto:itservices@

Internet: http://www.e-servicesphils.com/main.php European IT Service Center-EITSC

mailto:info@eitsc.com t: http://www.eitsc.com/

E-mail:Interne Outsourc hilippines: Your Oue P tsourcing Destination of Choice -mail: http://www.outsourcephilippines.org/ select ‘contact us’

w.outsourcephilippines.org/EInternet: http://ww view ‘partner organisations’ RUSSIA National Software Development Association E-mail: mailto:info@outsourcing-russia.com Internet: http://www.russoft.org/

ing-Russia - Knowledge Base - Outsourcing oftware Development companies

OutsourcSelect database of Russian Offshore SE-mail: mailto:info@outsourcing-russia.com Internet: http://www.outsourcing-russia.com 2.4 Trade fair organisers This app ix gives an overvend iew of the most important international trade

irs/exhibitions in Europe and some national trade fair organisers. Note that every , mainly targeting the local market. Ask European tions, your local partners) for details.

on industry xtensive database with information on various exhibitions in Europe

.spinger@auma.de

faEuropean country has its own IT fairssources (e.g. software industry associaEUROPE Associati of German Trade FairEE-mail: mailto:m Internet: http://www.auma.de select ‘worldwide’ BELGIUM

-mail: mailto:si_expo@bab.beSiexpo

http://www.siexpo.lu

EInternet:

cIT IC -solutions Telecom y - The Marketplace for TE-mail: mailto:info@tmab.be Internet: http://www.tmab.be/

FRANCE

tions.fr

Infopromotions E-mail: mailto:info@infopromo

ternet: http://www.groupesolutions.com In

136

Le Salon de la Sécurité InformatiqueLocation France's top computer security exhibition E-mail: mailto:caroline_moulin@reedexpo.fr Internet: http://www.infosecurity.com.fr

WorlAn important annual fair in Europe on multimedia, interactive entertainment and digital

edia distribution. garaude@reedmidem.com

MILIA, d Interactive Content Forum

mE-mail: mailto:laurine. Internet: http://www.milia.com SETI (European IT Week) (COMDEX IT)

he "European IT Week," represents Europe's third largest IT event after CeBIT

E-mail: http://www.seti2004.com/fr/index.php

The SETI, t(Hanover) and SMAU (Milan)

select ‘contact’ r/index.phpInternet: http://www.seti2004.com/f

CeBIT is world. It takes place on an annual basis

ebruary/March) at the Hannover fair ground.

GERMANY

The CeBIT the largest IT exhibition in the (FE-mail mailto:cebit@messe.de Internet: http://www.cebit.de

uropean Banking & Insurance Fair (EBIF), Frankfurt tp://www.ebif.com/de/kontakt/

EE-mail: htInternet: http://www.ebif.com/ Systems This popular fair is the second largest IT exhibition in Germany, and not as crowded as the CeBIT. It takes place on an annual basis in October in Munich. E-mail: mailto:info@systems.de Internet: http://www.systems.de NETHERLANDS

-mail: mailto:info@jaarbeursutrecht.nl

Jaarbeurs Select ‘agenda’ E Internet: http://www.jaarbeursutrecht.nl

-mail: mailto:mail@rai.nl

RAI Search in ‘Fairs and Events’

http://www.rai.nl

EInternet:

he largest information industry event in the world.

UNITED KINGDOM Online Information TE-mail: mailto:sales@learned.co.uk Internet: .co.ukhttp://www.online-information

K Trade fairs us types of exhibitions in the UK.

mailto:info@aeo.org.uk

UInformation on varioE-mail: Internet: http://www.exhibitions.co.uk

137

SPAIN cnologias –

IMO E-mail: mailto:simo@ifema.es

Feria Internacional de Informatica y Telecomunicaciones,Nuevas Te S

Internet: http://www.simo.ifema.es SWEDEN Comdex E-mail: mailto:pia.nyzell@exponova.se Internet: http://www.comdex.se Stockholm International Fair E-mail: http://www.stockholmsmassan.se/stockholmsmassan_eng/ select ‘contact us’ Internet: http://www.stockholmsmassan.se/stockholmsmassan_eng/ ITALY SMAU E-mail: mailto:info@smau.it Internet: http://www.smau.it 2.5 Trade press A very large number of IT magazines is available in Europe. Most of these magazines are aimed at local markets mainly, there are hardly pan-European IT magazines on the market. The names of the popular magazines can be requested at the various European software industry organisations. Below you will find the most popular magazines for the selected EU countries. EUROPE International Data Group (IDG) IDG is the world's leading technology media, research, and event company with more than 300 publications in 85 countries (Belgium, France, Germany, Netherlands, Sweden and United Kingdom included). Select your country of interest. E-mail: mailto:questions@idg.com Internet: http://www.idg.com National Outsourcing Association A new launched outsourcing magazine E-mail: mailto:admin@noa.co.uk Internet: http://www.noa.co.uk VNU-net in Europe Magazines of publisher VNU in Belgium, France, Germany, Netherlands, (Spain) and United Kingdom. E-mail: mailto:http://www.vnunet.com/Aboutvnu/au_team.jsp Internet: http://www.vnunet.com BELGIUM Datanews E-mail: mailto:kf@datanews.be Internet: http://www.datanews.be FRANCE CIO France E-mail: mailto:ciocontact@idg.fr Internet: http://www.idg.fr/cio/

138

Informatique E-mail: mailto:redaction@01informatique.presse.fr Internet: http://www.01net.com/01informatique

E-mail: mailto:j.weiss@groupetests.fr

Informatique, decision informatique, l'ordinateur individuel

t p://www.0 nIn ernet: htt 1 et.com

Le informatique -m http://www.weblmi.com/ monde

E ail : select ‘contacts’Int http://www.w b

ernet: e lmi.com/

GE

o eseller News -m ailto:info@

RMANY C mputer R E ail: m cmp-weka.de Int http://www.c - deernet: rn online.

n eek Germa y -m http://www.i o nweek.de/

I formationW nE ail: nf rmatio select ‘reda

t http://www.i o ek.dection’

In ernet: nf rmationwe

T Banken und Versicher nE-m b u

I u gen

ail: http://www. a ve.de select ‘Kontakt’ t ttp://www.bauIn ernet: h ve.de

NEAutomatisering Gids E-m ttp://www.a t gids.nl

THERLANDS

ail: h u omatisering select ‘ nternet: http://www.a t ggids.nl

co tact’ In u omatiserin

o-m mailto:redact @ l

C mputable E ail: ie computable.n Internet: http://www.c m nlo putable.

o ease magazine-m Hit ‘contact’

Int ww.r le

S ftware rel E ail:

ernet: http://w e ase.nl/ SPVN-m lto:suscrip@

AIN U

E ail: mai vnubp.es ternet: http://www.v uIn n net.es/

W

Co eden (of ID )-m s.d h e

S EDEN mputer Sw G

E ail: mailto:Lar a men@idg.s t http://www.computersweden.seIn ernet:

y - The largest t h kly magazine n-m ailto:info@affa n.se

N Teknik ec nical wee i Sweden E ail: m rsvarlde

t ww.n t /In ernet: http://w y eknik.se UN DOM

o ting -m http://www.computing.co.uk

ITED KINGC mpuE ail: select ‘conta t Int http://www.c m co.uk

c us’ ernet: o puting.

139

Infomatics E-mail: http://www.infomaticsonline.co.uk select ‘contaInternet:

ct us’ http://www.infomaticsonline.co.uk

ITWeek

ek.co.ukE-mail: http://www.itwe select ‘contact us’ ternet: http://www.itweek.co.uk In

140

APPENDIX 3 LIST OF DEVELOPING COUNTRIES Please n at the OECD list of developing countries, as applied ote th in this market survey,

Afghanistan Georgia Pakistan

Grenada Palestinian Admin. Areas a Panama

Papua New Guinea Antigua and Barbuda Guinea-Bissau Paraguay

Peru Philippines Rwanda

Bahrain India Samoa Bangladesh Indonesia São Tomé & Principe

Saudi Arabia

Benin Jamaica Serbia and Montenegro Seychelles

Bolivia Kazakhstan Sierra Leone ina Kenya Solomon Islands

ana Somalia ca

Burkina Faso Kyrghyz Rep. Sri Lanka St. Helena

odia St. Kitts-Nevis St. Lucia

Cape Verde Liberia St. Vincent and Grenadines Sudan

Chad Madagascar Surinam Chile Malawi Swaziland

Syria Colombia Maldives Tajikistan

zania Congo Dem. Rep. Marshall Islands Thailand

Togo Cook Islands Mauritius Tokelau

re Mexico Trinidad & Tobago ia ates Tunisia

Turkey Djibouti Mongolia Turkmenistan

Montserrat Turks & Caicos Islands can Tuvalu r Uganda

East Timor Myanmar Uruguay Uzbekistan

vador Vanuatu Equatorial Guinea Nepal Venezuela

Eritrea Nicaragua Vietnam

Yemen Zambia

Gambia Oman Zimbabwe

nuary 2003

may include countries that are usually not considered as developing countries. Albania Ghana Palau Islands Algeria Angol Guatemala Anguilla Guinea Argentina Guyana Armenia Haiti Azerbaijan Honduras

Barbados Iran Belize Iraq Senegal

Bhutan Jordan Bosnia & Herzegov Botsw Kiribati Brazil Korea, rep of South Afri Burundi Laos Camb Lebanon Cameroon Lesotho Central African rep. Macedonia

China Malaysia Comoros Mali Tan

Congo Rep. Mauritania

Costa Rica Mayotte Tonga Côte d'Ivoi Croat Micronesia, Fed. St Cuba Moldova

Dominica Domini republic Morocco Ecuado Mozambique

Egypt Namibia El Sal Nauru

Ethiopia Niger Wallis & Futuna Fiji Nigeria Gabon Niue

Ja

141

APPENDIX 4 USEFUL INTERNET SITES

Group: The Trusted Advisor to the Global 5000 and Their Solution

Ad 1) ICT AND E-COMMERCE AberdeenProviders for Technology E-mail: http://www.aberdeen.com select ‘about us’

ternet: http://www.aberdeen.comIn

Association for Information Systems, developing countries page

E-mail: mailto:isrobert@cityu.edu.hk Internet : http://www.is.cityu.edu.hk/research/resources/isworld/developingcountries/ Bigworld E-mail: mailto:info@big-world.org Internet: http://www.big-world.org Bitpipe Technolo hite Papers, Webcasts, Cagy W se Studies and IT Product Information E-mail: mailto:info@bitpipe.com

ternet: http://www.bitpipe.com

elopment site y.org

In Development Gateway ICTs and DevE-mail: mailto:info@developmentgatewa Internet: http://www.developmentgateway.org/node/133831/ Eastern Michigan University's ICT E-mail: mailto:Paul.Litton@mail.doc.gov

Internet: http://www.emich.edu/ict_usa/ Ebusiness forum

-readiness ranking. E-commerce statistics: forms and growth of e-commerce and eSelect ‘doing e-business in …’ E-mail: http://www.ebusinessforum.com select ‘contact us’

mInternet: http://www.ebusinessforum.co

businessLex national legislations on e-business.

E-m

EInformation on most relevant European and

ail: http://www.ebusinesslex.net/ select ‘e-mail’ Internet: http://www.ebusinesslex.net/ Electranet

en newcomers in the European Union ICT Information about the tE-mail: mailto:icel@pophost.eunet.be Interenet: http://www.electranet.org/ Eldis Gateway to Development Information. Select ‘ICT for development and E-commerce’ E-mail: http://www.eldis.org/ select ‘contact eldis’ Internet : http://www.eldis.org/ Electronic Journal of Information Systems in Developing Countries

xport included Articles about outsourcing and software eE-mail: mailto:robert@ejisdc.org Internet: http://www.ejisdc.org/

142

E-marketservices Select fo mple: ‘eMarket Basics’, ‘case r exa studies’, ‘reports’ and ‘search directory’ for an

ns by industry and/or country. -mail: http://www.emarketservices.com

overview of marketplaces and auctio select ‘contact us’ E

Internet: http://www.emarketservices.com select for example ‘IT Products &

nterprise - E-business - Information and Communication Technologies ices

-mail: mailto:entr-ict-e-commerce@cec.eu.int

Services’ and ‘IT services‘ Eindustries and serv

http://europa.eu.int/comm/enterprise/ict/

EInternet:

onitor (ERM)

E-mail: mailto:emcc@eurofound.eu.int

European Restructuring MFind individual outsourcing cases by country

ternet: http://www.emcc.eurofound.eu.int/erm/In

European ICT observatory (EITO) The EITO 2005 study is to be ordered at the website for € 81,- (CD rom) E-mail: mailto:info@eito.com Internet: http://www.eito.com/ E-trade-center E-mail: mailto:infocenter@berlin.dihk.de Internet: http://www.e-trade-center.com / http://www.dihk.de European e-Business Market Watch E-mail: mailto:info@ebusiness-watch.org Internet: http://www.ebusiness-watch.org Google – most used searchengine worldwide

search results. at C

Refer to m@nual ‘Digging for Gold’ for suggestions and how to optimizeAvailable BI. Internet: http://www.google.com iConnect Online - Applyting Knowledge to Development

e.orgE-mail: mailto:editor@iconnect-onlin Internet: http://www.iconnect-online.org/

stitute for Development Policy and Management, University of Manchester IDPM - In

E-mail: mailto:editor@iconnect-online.org Internet: http://idpm.man.ac.uk/index.shtml Infoconomy

mailto:edit@infoconomy.com .com/

E-mail: Internet: http://www.infoconomy Infodev: The Information for Development Program -mail: mailto:infodev@worldbank.org

http://www.infodev.org/EInternet:

tiona and Development (IICD) E-mail: mailto:information@iicd.org

Interna l Institute for Communication

ternet: http://www.iicd.org/In

143

International Trade Centre (ITC) E-mail: http://www.intracen.org/ select ‘contact’ Internet: http://www.intracen.org/ Intellect UK, Special interest offshore group included E-mail: mailto:info@intellectuk.org Internet: http://www.intellectuk.org

iteuropa.comITEuropa E-mail: http://www. select ‘contact us’

: Internet http://www.iteuropa.com ITPortal E-mail: mailto:enquiries@net-communities.co.uk Internet: http://www.theitportal.com

elect ‘outsourcing report’ and more tact us’

ogit/country.html

Landscape of I.T. in Nations SE-mail: ‘conInternet: http://www.american.edu/academic.depts/ksb/m Line56.com | The e-Business Executive Daily

info@line56.comE-mail: mailto: Internet: http://www.line56.com/ New Med eview ia R

rmation about new media ewmedia.com

Up to date infoE-mail: mailto:info@etcn Internet http://www.etcnewmedia.com/review/ .

nline internet surveys, demographics, statistics and market research - Nua

-mail: mailto:nuafeedback@jupitermedia.com

OInternet surveys

m/surveys/index.cgi

EInternet: http://www.nua.co Team der irtschafts- und Beschäftigungs W förderung der GTZ eam of GTZ's Economic and Employment Promotion Division, dealing with questions

ess by SMEs in Developing Countries" Trelated to "E-businE-mail: mailto:joachim.prey@gtz.de Internet: http://www.gtz.de/e-business/ UNCTAD Electronic Commerce Branch

ment. • ICT and Internet powered trade and economic developE-mail: mailto:ecommerce@unctad.org Internet: http://r0.unctad.org/ecommerce/ UK Online for Business E-mail: http://www.ukonlineforbusiness.gov.uk/ select ‘ask an expert’ Internet: http://www.ukonlineforbusiness.gov.uk/

s earch engines, search engine optimization and marketing

WhitelineSE-mail: mailto:info@whitelines.net Internet: http://www.whitelines.net World Economic Forum - Global Information Technology Report E-mail: mailto:gcp@weforum.org Internet: http://www.weforum.org/gitr

144

World Information Technology and Services Alliance E-mail: mailto:ahalvorsen@itaa.org Internet: http://www.witsa.org ZDNet - Information resources for IT professionals E-mail: http://www.zdnet.com/ select ‘feedback’

Internet: http://www.zdnet.com/ Ad 2) BY COUNTRY

s Ad Computer Services –

EUROPE Busines vice for the UK Computer and SoftwareInternationalGrowth.org E-mail: mailto:Jane.Eardley@dti.gsi.gov.uk Internet: http://www.internationalgrowth.org/index.asp Europages

ct an industry and then company by ctivity and/or size.

E-mail: mailto:info@europages,com

Company information/EU business directory. Selea

Internet : http://www.europages.com Enterpris E-business - Surveys and se - tatistics European Union -mail: mailto:entr-ict-e-commerce@cec.eu.int

m/enterprise/ict/statistics/e-commerce.htmEInternet: http://europa.eu.int/com Information Technology Industries E-mail: mailto:ecommerce@ita.doc.gov Internet: http://web.ita.doc.gov/ITI/itiHome.nsf/(HotNews)/HotNews

irectory of more than 200,000 European manufacturers and distributors

The Thomas Global Register (TGR) Europe DE-mail: http://www.tipcoeurope.be/ select ‘contact us’ Internet: http://www.tipcoeurope.be/ UK Trade & Investment E-mail: mailto:info@tradeuk.com Internet: http://www.uktradeinvest.gov.uk

edict is the Belgian Federal Government's e-business drive

BELGIUMFEDICT FE-mail: mailto:info@fedict.be Internet: http://www.fedict.be

lub for Large French Companies

FRANCE CE-mail: mailto:cigref@cigref.fr Internet: http://www.cigref.fr

rchiv Industrienet

GERMANY AE-mail: mailto:webmaster@konradin.de Internet: http://archiv.industrienet.de

-mail: mailto:bi@nomina.deBI Special: Business Intelligence Software E Internet: http://www.isis-bi.de/

145

Empirica - Gesellschaft für Kommunikations- und Technologieforschung mbH E-mail: mailto:info@empirica.com Internet: http://www.empirica.com/ German Agency for Technical Cooperation E-mail : mailto:postmaster@gtz.de Internet : http://www.gtz.de Handelsblatt

sourcing special m

Select outE-mail: http://www.handelsblatt.co select ‘Kontakt’

Internet: http://www.handelsblatt.com ISIS Datenbanken with 10.000 IT firms and Software product, top 500 IT firms

dl@nomina.de

includedE-mail: mailto:men

e/germantop500/index_isis.phpInternet: http://www.software-marktplatz.d

DMA software VE-mail: http://www2.vdma.de/software/ select ‘Kontakt’ Internet: http://www2.vdma.de/software/ UNITED KINGDOM

for IT and more -mail: http://www.applegate.co.uk/

Applegate Directory select contact form

http://www.applegate.co.uk/EInternet:

-mail: mailto:contact2@limesearch.co.uk

UK Directory – LimeSearch

http://www.limesearch.co.uk

EInternet: Ad 3) OUTSOURCING Center for global outsourcing E-mail: mailto:admin@outsourceglobal.org

l.org/Internet: http://www.outsourcegloba Computerworld

ncluded Search by outsourcing, a specific outsourcing knowledge center iE-mail : http://www.computerworld.com select ‘contacts’

orld.comInternet: http://www.computerw

tegies - Offshore Outsourcing Portal E-Business StraE-mail: mailto:contact@ebstrategy.com Internet: http://www.ebstrategy.com/Outsourcing/ ECODE - Offshore Outsourcing Consultancy and Project Management

h users and providers of rvi

-mail: mailto:admin@ecode.org.uk

eCODE provides and promotes offshore outsourcing for botoffshore se ces

http://www.ecode.org.uk/

EInternet:

he ices (US focus) -mail: http://www.elance.com/

Elance: T Better Way to Buy and Manage Serv

select ‘contact’ EInternet: http://www.elance.com/

146

*European Information Technology Exchange :: off-shore :: outsourcing ::

m logy Exchange - is a European one-stop-hop that provides information for both buyers and suppliers of off-shore IT and IT

enabled services outsourcing. EuroITX.com has three units: intelligence, marketing and

knowledge :: EuroITX.co - the European Information Technos

supply-demand. E-mail: mailto:euroitx@euroitx.com

ternet: http://www.euroitx.com/

r

irmbuilder.com

In FirmbuildeOutsourcing - Firmbuilder.com: Europe E-mail: mailto:CustomerService@F

ternet: http://www.firmbuilder.comIn

nance & Accounting from

-mail: mailto:info@CorbettAssociates.com

Information for Outsourcing - IT, BPO, HR, FiCorbettAssociates.Com

EInternet: http://www.corbettassociates.com/

Services & Solutions focuses on IT services issues each quarter. erab@pmp.co.uk

IT Services & Solutions ITE-mail: mailto:me

ternet: http://www.itssonline.co.uk/In ITtoolbox Emerging Technologies Select 2004 ITtoolbox Outsourcing Survey and/or the 2004 ITtoolbox Salary Survey -mail: mailto:Info@ITtoolbox.com

mergingtech.ittoolbox.com/EInternet: http://e

Offshore Outsourcing (PDF) ws/documents/it2004_giga.pdf

IT Trends 2004: Internet: http://www.satyam.com/homene Morgan Chambers - Strategic Outsourcing Consultants

s.comE-mail: mailto:linda.pollard@morgan-chamber rs.com/Internet: http://www.morgan-chambe

NeoIT - Global Offshoring Advisors | Offshore Outsourcing Consulting and

elect ‘offshore knowledge’ eoIT.com

Program Governance sE-mail: mailto:info@n

ternet : http://www.neoit.comIn Offshore IT Outsourcing :: Your Premiere Destination for IT Outsourcing

cing.com/(location in USA and India) E-mail: http://www.offshoreitoutsour select contact us

ternet: http://www.offshoreitoutsourcing.com/In Offshor tsourcing | Information on Offshore Resources e Ou Process Issues |

-mail: http://www.offshoreoutsourcing.org/

Indian ITE select ‘contact us’ Internet: http://www.offshoreoutsourcing.org/ Outsourc offshore outsourcing compaing nies outsource outsourcing IT

utsourcing services -mail: http://www.ezgoal.com/outsourcing

o select contact us at the bottom left

ternet: http://www.ezgoal.com/outsourcingE

In

147

Outsourcing Information and Resources -mail: mailto:info@outsourcing-center.comE forum included

/Internet: http://www.outsourcing-center.com Outsourc - A Buyer's Guide To Oing ffshore Outsourcing -mail: mailto:thorgan@cio.com

://www.cio.com/offshoremap/EInternet: http SBPOA Information on Shared Services and BPO E-mail: mailto:info@sharedxpertise.org Internet: http://www.sharedxpertise.org/ TPI.net

lto:duncan.aitchison@tpi.netGlobal sourcing advisors E-mail: mai Internet: http://www.tpi.net/ The Outsourcing Institute - Resource for the Outsourcing Industry -mail: mailto:request@outsourcing.comE

Internet: http://www.outsourcing.com/

Y

BC News

Ad 4) TECHNOLOG BE-mail: http://news.bbc.co.uk/1/hi/technology/default.stm select ‘feedback’

1/hi/technology/default.stmInternet: http://news.bbc.co.uk/

uilder.com BE-mail : http://builder.com.com/ select ‘help/contact us’

://builder.com.com/Internet: http

itpipe, Technology White Papers, Webcasts, Case Studies and IT Product

lto:info@bitpipe.com

BInformation E-mail: mai

/Internet : http://www.bitpipe.com

chnology news and business reports ://news.com.com/

CNET News.com -- TeE-mail: http select ‘contact us’ Internet: http://news.com.com/ Computerworld E-mail: http://www.computerworld.com/ select ‘about us’ and ‘contacts’

m/Internet: http://www.computerworld.co

n Technology for Executives ://www.darwinmag.com/

Darwin - InformatioE-mail: http select ‘contact us‘ Internet: http://www.darwinmag.com/ Infoworld E-mail: mailto:customerservice@infoworld.com Internet: http://www.infoworld.com/techindex/ Inter.com the Internet and IT Network from Jupitermedia Corp -mail: http://www.internet.com/E select give us your feedback

Interent: http://www.internet.com/

148

Technology Evaluation.Com (TEC) E-mail: http://technologyevaluation.com/ sInternet:

elect ‘contact’ http://technologyevaluation.com/

TechWeb: The Business Technology Network E-mail : http://www.techweb.com/media/contactus/ Internet : http://www.techweb.com/

d iometrics

E-mail : mailto:tmc@tmc et.c

TMCnet.com - CRM, VoIP, Communications, Call Centers, Teleservices, Wi-Fi anB

n om Intenret : http://www.tmcnet.com/

ahoo! News - Technology - Ente prise p ews/

Y r

http://help.yahoo.com/hel /n o.com/news?tmpl=index&cid=1208

E-mail: Internet: http://news.yaho Zdnet, Informa-mail : mailt

tion resources for IT p fession ls o:info@zdnet com/

ro a.

www.zdnet.com/EInternet : http://

ava developerswork ttps://www-136.ibm.com/developerworks/secure/feedback.jsp

PROGRAMMING - JAVA IBM JE-mail: h

bm.com/developerworks/java/Internet: http://www-136.i

va.com references, Java books

rejava.co /

FreewarejaFind free Java applets, tutorials, E-mail: n.a. Internet: http://www.freewa m

vaworld.com/feedback

Javaworld E-mail: http://www.ja

http://www.javaworld.com/

Internet: The Java Community Process(SM) Program Internet: http://www.jcp.org/en/home/index

et101: Home of .NET Knowledge Bas . ASP.N T, ADO.NE , C#, B.NET, SOAP ervices

.dotnet101.com iteinfo/contactus.asp

PROGRAMMING - DOTNET n e E T Vand Web SE-mail: http://www /s

w.dotnet101.comInternet: http://ww / Dotnetwire, The Source For Microsoft NET News

p://www.dotnetwire.com/siteinfo/contactus.asp .

E-mail: htt //www.dotnetwire.comInternet: http: /

Microsoft .NET Information

/www.microsoft.com/netE-mail: http:/ select ‘contact us’ http://www.microsoft.com/net Internet:

149

PROGRAMMING - XML

l t -mail: http://www.ebxml.org/contacts.htm

ebXML - Enabling A G obal Electronic MarkeE

ww.ebxml.org/Internet: http://w

verPages mailto:robin.cover@oasis-open.org

The Co-mE ail: t http://www.oasis-open.org/cover/sgml-xml.html

Focus Areas provide dom in-spec fic content on XML s andards http://www.xml.org/xm contactus.shtml

In ernet: XML.org, a i tE-mail: l/

ternet : http://www.xml.org/

nsible Markup Lan uage

files.com/

In XML Files - Exte gE-mail: n.a

ternet: http://www.xmlIn

ment Report 2003, Unctad urce software: Implications fo ICT policy and dev lopment

.a. tp://www.unctad.org n/docs/e dr2003ch _en.pdf

OPEN SOURCE / LINUX Ecommerce and DevelopOpen so r eE-mail: nInternet: ht /e c 4 (PDF)

CC Home Page - GNU Project - F e Softw re Foun tion (FSF mailto:gnu@gnu.org

G re a da )E-mail:

ternet: http://gcc.gnu.orgIn

Linux Platform Survey E-mail: n.a Internet: http://gmi-mr.com/20/survey/s.phtml?sn=17027

Linux Today - Linux News On Internet Time (quality links included) E-mail: n.a Internet: http://linuxtoday.com/ MIMOS Open Source E-mail: n.a Internet: http://opensource.mimos.my/ Opensource initiative E-mail: mailto:webmaster@opensource.org Internet: http://www.opensource.org/ Open source portal E-mail: n.a Internet: http://opensource.pagina.nl Yahoo! News - Linux/Open Source E-mail: http://help.yahoo.com/help/news/ Internet: http://news.yahoo.com/news?tmpl=index&cid=1817

150

APPENDIX 5 CHECKLIST SWOT

could ssist exporters in determining their own strengths, weaknesses, opportunities and

In chapter 12, the SWOT analysis is described. The following checklist in table I athreats. Table I Checklist SWOT Analysis (to be adapted to exporter’s own situation)

Effect for your company Influence on performance

Strengths/Weaknesses Strength Neutral Weakness High Low 1 Quality Quality standards (ISO and CMM) Project manager USP Safety / security 2 Marketing and sales Sales office Qualified staff (especially sales

anager) m

Price Pricing strategy Promotion Ttrade fairs Promotional materials in several languages

Trade magazines (advertisement and free publicity) Internet opportunities (website) Direct Marketing International business events Referrers Visits to clients Foreign nationals within EU client

company (diaspora) Distribution Own sales office in EU country Cooperation 3 Financial Financial stability (budget) Access to external funds Subsidies 4 Capabilities Skilled personnel High quality service Dealing with foreign languages and cultures Telecomm

frastructure unications

inIntellectual Property Rights protection enforcement

Access to soft- and hardware Flexibility 5 Others

151

Effect for your company Influence on performance Opportunities/threats Opportunity Neutral Threat High Low 1 Offshore outsourcing Demand Growth Trends • internet

BPO •

• Other Price level Technology 2 Economics Business culture / language

Stability exchange rate 3 Competition Offshore locations (from developing countries and Central and Eastern Europe) 4 Distribution Own sales office Broker/consultant 5 Others

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APPENDIX 6 REFERENCES ANP (21 November 2003), Helft grote bedrijven wil meer ICT-diensten uitbesteden Bond, T. (October 2003), Outsourcing to India – avoiding the pitfalls Bulter, A. (Update 2004), Mapping offshore markets, NeoIT, Offshore insights white paper, issue 6 EITO Task Force experts and leading market research companies (March 2005), European Information Technology Observatory 2005 European Commission Enterprise Directorate General e-Business, ICT Industries and Services (2003), ICT & e-Business in the Telecommunications and Computer Services Sector, The European e-Business Market Watch Sector Report No.6 III/July 2003 European Foundation for the Improvement of Living and Working Conditions, (2004 ) Outsourcing of ICT and related services in the EU, Luxembourg Euroitx (2004), Offshore outsourcing the Netherlands Gianotten, J. (September 2002), Onderzoek UK geeft trends aan voor Nederlandse markt voor outsourcing, Topmanagement en IT Magazine ITToolbox (2004), ITtoolbox Outsourcing Survey 2004 Kooij, van der J. en O. Roukens (2004). Exportmanagement (chapter 4: international market research), Wolters Noordhoff & Fenedex, Groningen, the Netherlands Kumar, V., (2000). International Marketing Research, Upper Saddle River, New Yersey, Prentice-Hall, Inc. ISBN 0-13-045386-2 Kuszewski, J and K. Prakash-Mani, (February 2004) Good Migrations? BT, corporate social responsibility and the geography of jobs Offshore Outsourcing World Staff (2004), Eastern Europe goes further East to outsource Lane, Stephen (September 2002). Offshore Software Outsourcing Best Practice, Building Succesfull Relationships on a Diverse Business Model, AberdeenGroup NeoIT (2005), Global ITO and BPO trends in 2005, volume 2, Issue 12 Peterson, B., M.Prinsley (October 2002), Contracting for International Outsourcing, Outsourcing Journal Raad voor werk en inkomen (2005), Offshoring in de Nederlandse ICT: Grenzeloze kansen? Roland Berger UNCTAD (June 2004), Service Offshoring, Service Offshoring takes off in Europe Sampath, V (maart 2004), Offshore Outsourcing: the Dutch perspective, Sogeti Nederland Sourcing Interest Group (2003), Offshore outsourcing part I: State of the Industry

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Synstar (September 2004), Pressure Point Index V (PPI V) - the fifth study into the pressures facing today's IT directors across Europe, USA Tjia, P. (2004), Offshore outsourcing in Nederland, trends in offshore outsourcing 2004, GPI Consultancy, Rotterdam UNCTAD Electronic Commerce Branch, E-Commerce and Development Report, Chapter 5 (outsourcing) UNCTAD (2004), World Investment Report 2004. The Shift towards Services, New York and Geneva, Vries, W (februari 2004). MKB niet geïnteresseerd in outsourcing, Webwereld Van Welsum, D. and Vickery, G., ‘Potential Offshoring of ICT Intensive Using Occupations’, Paper presented to the STILE conference, Measuring the Information Society, European Trade Union House, Brussels, 30 September-1 October, 2004 Zwart, Cok de (2003). Offsourcing blijft ver weg, Computable