Nordic IT Sourcing & Cloud Survey 2020
Status and trends in the Nordic IT sourcing market
Nordic IT Sourcing & Cloud Survey 2020
In this report, we identify and analyze trends in the Nordic IT outsourcing market. It is based on a survey distributed to 500 IT executives in large-scale private and public Nordic organizations.
- Focusing on core business, improving flexibility and scalability are the overall key business drivers for IT outsourcing in the Nordics. Access to specific knowledge, expertise and tools are the most important drivers for application development/maintenance services.
- The survey results indicate that outsourcing will increase in the future in all service towers. This confirms the trend towards more outsourcing from last year’s Norwegian IT outsourcing survey. Some organizations do, however indicate reduced outsourcing of their Application Development and Maintenance services.
- The survey results also show that while proactivity, innovation and continuous improvements are important expectations of the service providers, few service providers are delivering on this value proposition. This could pave the way for new performance measurements in the outsourcing agreements and more partner-led outsourcing, i.e. vested sourcing.
Key EY Insights
- Focus on drivers and benefits realization: Clearly define your purpose with outsourcing and the desired benefits (drivers) for your sourcing process. Focus on realizing benefits throughout your sourcing process (from strategy, through procurement and negotiations, to implementation and steady state).
- Consider the impact of key trends within the different service towers on your organization: Consider cloud computing for your infrastructure services. Think personalization and user-centricity for your Digital Workplace services. Evaluate data-driven, automated Service Desk solutions.
- Define a pace-layered model for your application portfolio: Use different models for your “run”, “differentiate” and “innovate” applications. Use managed services, where appropriate.
- Don’t underestimate the need to clearly articulate and possibly strengthen your retained organization: To a large extent, success from outsourcing will depend on your own (retained) capabilities.
The survey addresses four main service towers, namely IT infrastructure, Digital Workplace, Service Desk and Application Development and Maintenance. The report also addresses cloud services in conjunction with IT infrastructure services. Below you will find corresponding definitions for each respective service tower, as used in the survey.
All services necessary to host applications, including data center, hardware and server software (virtualization, operating systems, middleware and runtime). IT infrastructure can comprise traditional on premise hosting, private and public cloud.
Services used to deploy, manage and secure devices, applications and data that workers require to perform their jobs. It is often also referred to as end-user services.
A service desk is a help desk that is equipped with the resources for resolving incidents, problems and service requests. It gives the customer service representative or end user the ability to efficiently diagnose, troubleshoot and correct technical-support problems, rather than being a “pass through”.
Application Development comprises all services that are necessary to create, change or remove functionality. Application Maintenance comprises all services that are necessary to ensure the quality of the application is maintained over time and is in accordance with the agreed service levels.
The degree of IT outsourcing
IT Infrastructure services have evolved to become a commodity, which most organizations have outsourced. Most of the respondents have either outsourced or let their Service Desk remain inhouse; very few have partially outsourced this service. For the rest of the Services Towers, the picture is mixed.
In general, the degree of outsourcing is quite high for all service towers. Across all service towers, at least two-fifths of the respondents report that 60% or more of their services are outsourced. IT Infrastructure is the most outsourced service tower, with nearly half of the respondents reporting that 80%-100% of their infrastructure is outsourced. Service Desk stands out, as two-fifths of the respondents report that their Service Desk is fully retained inhouse. Partial outsourcing is less common for Service Desk services than for the other service towers.
Application Development and Maintenance outsourcing have the most even distribution. One reason could be the number of different applications where commodity applications are easier to outsource than business-critical or sector-specific applications.
The key business drivers for IT outsourcing
The business drivers for “Infrastructure and Operational Services” are mostly similar, while there is a significant difference compared to Application Development and Maintenance services. “Focus on core business”, “Improve scalability” and “Improve flexibility” are reported as key business drivers for all service towers. “Cost reduction” and “Access to specific knowledge and expertise” are becoming increasingly prominent.
“Focus on Core business”, is among the top three drivers for all the “Infrastructure and Operation Services”¹. These are fundamental services supporting the business but does not drive the business. “Improve flexibility” and “Improve scalability” are important for all service towers, mostly for IT Infrastructure, but all service towers include them in the top five business drivers for outsourcing. It’s worth noting that compared to the 2019 EY Norwegian IT Outsourcing survey there is a notable increase in reported importance for “Improve scalability”. Scalability is fundamental in cloud services, which indicates that IT Infrastructure outsourcing is moving to IaaS (Infrastructure-as-a-Service), and Application Development and Maintenance outsourcing is moving to PaaS (Platform-as-a-Service) and Software-as-a-Service (SaaS).
“Cost reduction” and “Cost transparency” are important drivers for all service towers, but most important for infrastructure services with almost two-thirds of the respondents highlighting these drivers. The respondents reported that, in general, “Drive business transformation” and “Drive Innovation” are among the least important drivers for IT outsourcing.