Outsourcing Increasing in The Netherlands: Application Management Biggest Area of Growth
Paul Cornelisse, Managing Director Information Technology Advisory, The Netherlands
Looking at market trends specifically, the results of The 2010 Dutch Strategic Outsourcing Study highlighted that outsourcing continues to increase in The Netherlands. Seventy-eight percent of all respondents involved in this study confirmed that they will continue to outsource at the same rate or more, with 58 percent saying they will ‘probably’ or ‘certainly’ outsource more (see chart below). This supports what our advisors are experiencing when working with organisations, in that the focus is on relatively small and short-term outsourcing deals which typically have cost-saving or quality improvement as a driver.
Dutch ITO Buyer Outsourcing Plans 2010
However, thirteen percent of organisations anticipated outsourcing less. This trend has held across all the European markets polled in the EquaTerra research programme and in our view is typical of a more mature outsourcing market, where companies re-evaluate their outsourcing strategy and may be considering insourcing specific operations and components.
Another market trend highlighted in the study is that Infrastructure Management (IM) is the most frequently outsourced area for 80 percent of study participants, followed by Application Management (AM) at 64 percent. Application Management is the biggest growth area, with 28 percent of the respondents answering that they have plans to outsource (more) AM.
The 2010 Dutch Strategic Outsourcing Study investigated over 460 outsourcing contracts held by over 150 of the top IT spending organisations in The Netherlands. The total annual value of the contracts included in this study was over €3 billion – accounting for more than two-thirds of the total Dutch outsourcing market in terms of annual contract value.
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(The focus of this research is IT services outsourcing contracts with an annual value of more than €1 million).
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In our view, the large enterprises in Dutch market have generally benefitted from outsourcing and hence continue to outsource more as part of their cost reduction and quality improvement strategy. They have faced challenges in making the multi-party sourcing model work, but have been committed to resolving the issues mutually with their partners. Also, they have made significant investments in ramping up their internal capabilities for managing outsourced relationships.
We also see outsourcing picking up momentum in the small & medium enterprises in the Dutch market. These firms are more cautious, take long time to evaluate the right partner and typically start with small pilots. However, once an outsourcing relationship is initiated they are fully committed to making it work and want to outsource more as the relationship matures.
In summary, several enterprises in the Dutch market have strategically invested in outsourcing for the long-term and hence continue to support, improve and do more. Outsourcing is a strategic choice for them, not just a tactical opportunity.