malta it outsourcing intelligence report 2011
DESCRIPTION
This Intelligence Report is based on the survey of the 154 Maltese companies that either outsource their Software Development / Information Technology function(s) to an external service provider onshore (within Malta), nearshore (within/close to the same time zone) and/or offshore (more than 2 time zones away), or develop their software/IT solutions in-house.The Report aims to help Maltese outsourcing companies:• Get an in-depth understanding of the current IT Outsourcing demands and trends • See what challenges are facing their market peers / competitors and how they respond to them• Revise / improve their current IT Outsourcing engagements / business models based on the industry best practicesThe Report aims to help Maltese non-outsourcing companies:• Better understand modern software development/IT costs optimization and/or reduction strategies• See what challenges are facing the in-house software development and how their market peers / competitors respond to them• Evaluate own readiness to adopt the outsourced / distributed development• Find out what their market peers think about software development /IT Outsourcing and how they are / will be preparing for adoption of the outsourced development in the futureTRANSCRIPT
IT Sourcing Europe
European IT Outsourcing Market
Intelligence
June 2011
European IT Outsourcing
Intelligence Report 2011:
Malta
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Contents
Executive Summary ...........................................................................................2
Survey Overview ................................................................................................3
The Key Takeaways From The Survey ...............................................................4
Profile of Outsourcers .......................................................................................5
IT Outsourcing Drivers & Factors .................................................................... 10
IT Outsourcing Challenges & Problem Solving ............................................... 12
Client – Vendor Relationships ........................................................................ 13
IT Outsourcing Costs ....................................................................................... 15
Impressions of IT Outsourcing ........................................................................ 17
Future Adoption of IT / SD Outsourcing in Malta ........................................... 18
Key Findings’ Discussion ................................................................................. 23
Conclusions ..................................................................................................... 25
Executive Summary
This Intelligence Report is based on the survey of the 154 Maltese companies
that either outsource their Software Development / Information Technology
function(s) to an external service provider onshore (within Malta), nearshore
(within/close to the same time zone) and/or offshore (more than 2 time
zones away), or develop their software/IT solutions in-house.
The Report aims to help Maltese outsourcing companies:
Get an in-depth understanding of the current IT Outsourcing demands
and trends
See what challenges are facing their market peers / competitors and
how they respond to them
Revise / improve their current IT Outsourcing engagements / business
models based on the industry best practices
The Report aims to help Maltese non-outsourcing companies:
Better understand modern software development/IT costs optimization
and/or reduction strategies
See what challenges are facing the in-house software development and
how their market peers / competitors respond to them
Evaluate own readiness to adopt the outsourced / distributed
development
Find out what their market peers think about software development /IT
Outsourcing and how they are / will be preparing for adoption of the
outsourced development in the future
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Survey Overview
The Maltese IT Outsourcing (ITO) and In-House Software Development (SD)
survey was conducted between April 26 and May 31, 2011, in the frames of
the All-European ITO research.
Survey goals:
Explore factors that drive Maltese companies to outsource their
SD/IT functions in 2011
Explore challenges associated with offshore/nearshore outsourcing
and the most effective problem solving techniques
Explore the use of different business models in ITO engagements and
find out which model works best for what type of companies and
industries
Explore factors that keep Maltese companies away from outsourcing
their SD/IT function(s)
Compare and contrast the 2011 and future ITO demands within
Maltese industries
The survey was available online and hosted by SurveyMonkey, the world’s
leading provider of web-based survey solutions. In order to reach as many
Malta-based companies as possible, IT Sourcing Europe used its own
database of business contacts and sent out a survey invitation email to each
company’s decision maker(s) (C-level executives, IT / Outsourcing Managers,
Directors, Heads of Software Development etc).
Additionally, outbound marketing initiatives were launched in order to
attract more companies to participate in the survey. In the frames of this
initiative, the following steps were taken:
Online press releases and survey announcements distribution;
Survey localization and optimization in social media such as LinkedIn,
XING, Facebook, blogs ( Twitter, Word Press, IT Sourcing Europe’s
Blog), event management systems (Amiando), and B2B web portals
(Europages, Hoovers)
All data obtained were analyzed in the form of industry aggregates. The
answers to the open-ended questions were organized by their relativity to
the study goals and displayed as the option “all other responses” in charts
and graphs further in the Report.
Outsourcing Activity & Categories Surveyed:
The following ‘outsourcing activity’ is referred to in the 2011 Maltese ITO
Report:
Software Development / Information Technology Outsourcing (SD/ITO) is
the process of transferring part of/entire software development function
and/or other Internet related work to the execution by the external IT
services provider(s)
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
The following categories fall under this activity:
Application (app) development and maintenance;
Website / ecommerce systems;
Data warehousing;
IT security;
Data / voice network operations;
Remote IT infrastructure management
These categories further fall under the five key areas of expertise:
Web (Web 2.0, .NET, Java, PHP, open source etc);
Enterprise 2.0 (J2EE, J2SE, C#, MySQL etc);
Mobile development (J2ME etc);
Embedded development;
Software as a service (SaaS) and Cloud Computing
The Key Takeaways From The Survey
Most of the Maltese companies have been
outsourcing their solutions for 12 to 24 months
Software development companies have the biggest
demand for external IT resources, followed by gaming
companies
Most of the Maltese outsourcers have 1 to 3 IT
specialists on their outsourced teams and value their
projects at €0-49K
Web and mobile solutions are most outsourced, while
Cloud solutions are least outsourced in Malta
Offshoring is the most preferred ITO destination for
the Maltese companies
Shortage of domestic IT skills and personnel is the key
driver of decisions to outsource and the biggest
challenge facing Maltese non-outsourcers
Poor communication with ITO vendor’s project
management is the key challenge facing Maltese
outsourcers
Future Maltese outsourcers will be focused on
nearshore multi-sourcing
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Profile of Outsourcers
Do Companies Outsource Any Element of Their IT / Software
Development?
Current Outsourcing Experience
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Company Size (Headcount)
Primary Industry
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Revenue Growth Expectations
Outsourcers
In-House Development Companies
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Size of Project Team on Vendor’s Side (Headcount)
Value of the Outsourced Project(s)
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
The Outsourced Areas of Expertise
Do Companies Multi-Source?
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Outsourcing Destinations
IT Outsourcing Drivers & Factors
Drivers of Corporate Decisions to Outsource
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Factors’ Rating In Terms of Their Importance In the Choice of the
Outsourcing Destination
Factors’ Rating In Terms of Their Importance In the Choice of the
Outsourcing Partner
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
IT Outsourcing Challenges & Problem Solving
Key Challenges of the Outsourced IT / Software Development
Key Responses to the ITO Challenges
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Client – Vendor Relationships
How Companies Found Their ITO Vendors
Vendors’ Size
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Service Delivery Models Used In the Outsourcing Engagements
Who Hires IT Talent To Be Involved In the Outsourced Project
Execution?
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
IT Outsourcing Costs
Do Companies Know Exact Salaries of Their Project Team Members
On Vendor’s Side?
Levels of Companies’ Satisfaction With Their Current Vendors and
The Quality of Services Provided
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
How Actual Annual Incurred Costs Compare To the Contracted Ones
Actual Savings From the Outsourced IT / Development
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Impressions of IT Outsourcing
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Future Adoption of IT / SD Outsourcing in Malta
Do Companies Plan to Continue Outsourcing Their Projects?
Future Outsourcing Destinations
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Key Challenges of the In-House Software Development
How In-House Developers Respond To Challenges
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Circumstances In Which Companies Would Consider Outsourcing IT /
Development In The Next 12 To 24 Months
Where Current Non-Outsourcers Would Transfer Their IT /
Development In The Future
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Factors’ Importance In The Future Choice of The Outsourcing
Destination
Factors’ Importance In The Future Choice of The Outsourcing Partner
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
How Companies Would Search For Their Outsourcing Partners If They
Make A Decision To Outsource Their IT / Development In The Future
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Key Findings’ Discussion
According to the European Center of Offshore Development (eCODE) Global
Outsourcing Location Report on Malta (2011), Malta is an emerging
nearshore and offshore destination for Call and Contact Center, business
process, knowledge process, HR and payroll administration outsourcing
services. Due to the vast range of tax incentives that Malta offers to foreign
companies, it has become a hub of the densely concentrated innovative
enterprises. These companies locate both their business and technology
functions on the island to not only increase margins, but get access to other
forms of assistance that Malta is able to offer to prospective investors:
innovation grants, SME support and training, access to loans etc.
However, although Malta proudly proclaims itself a world leader in the
adoption of ICT-related advances in commercial properties, it is still largely
constricted by a very small number of domestic IT graduates and shrunken IT
pool available.
The present IT Outsourcing survey was initiated for the purpose of identifying
the current demand for IT resources across different Maltese industries and
determining the most commonly used sourcing strategies, related challenges
and problem solving best practices.
According to the survey findings, almost 52% of the Maltese companies
currently outsource some element of their IT / software development
function. Of these companies, 40% have been outsourcing for 12 to 24
months and 20% - for more than 37 months now. This finding shows that IT
outsourcing is not a new practice within the Maltese business community.
The vast majority of IT outsourcing companies in Malta have 6 to 19
employees on staff and provide software development services. Gaming is
the second most outsourced segment, while entertainment/media, digital
media and financial services are the least outsourced segments on the island.
This finding actually supports Malta’s stance as a Business Process
Outsourcing (BPO), Knowledge Process Outsourcing (KPO) and Accounting
Administration Outsourcing (AAO) center with sufficient resources and
English language skills capable of satisfying other nations’ outsourcing
demands.
Regarding the outsourced projects’ value and resource pool, the survey finds
that almost 67% of the Maltese outsourcers have 1 to 3 specialists employed
in project’s execution on vendors’ side and almost 87% of the Maltese
companies value their outsourced projects at EUR 0-49K.
The biggest outsourcing demand in Malta comes from Web and Mobile areas
of technology expertise.
The survey finds that the prevailing majority of the Maltese companies
transfer their IT / development functions offshore as a response to the
shortage of domestic IT skills and resources. Three other important drivers of
decisions to outsource in Malta are: search for faster time to market (TTM),
reduction of operating costs and focus on core competences.
As seen from the survey responses, most of the Maltese companies single-
source their solutions rather than distribute them among several vendors.
The survey underscores the highest rated ITO destination selection criteria in
Malta. They are: available foreign language skills (English), positive
references from peer companies and available IT resource pool. Regarding
the ITO partner selection criteria, the most valued ones are: sound
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
experience in similar projects, ability to successfully complete pilot / test
projects and, again, positive references from peer companies.
The research further allows identifying the most critical challenges facing IT
outsourcing companies in Malta in 2011. They are poor communication with
vendor’s project management (PM), poor PM on vendor’s side, cultural
difference, poor quality of project deliveries and vendor’s inability /
reluctance to understand client’s business goals and overall concept.
The most popular ways to resolve the critical outsourcing issues include
dedication of more management and IT resources, extension of project
deadlines, increase in face-to-face communication with vendor’s project
managers and engagement with new outsourcing vendors. More than 25% of
companies look at multi-sourcing as a way to overcome their challenges and
only less than 10% choose to back-source.
Almost 64% of the Maltese companies partner with small IT outsourcing
vendors (less than 50 in headcount), while only slightly more than 9% - with
the large ones (1,000 and more).
Regarding the business models that the Maltese companies use in their ITO
engagements, the fixed-price project model is the most popular one,
followed by the Managed/Own Team model. In view of this, it is not
surprising that almost 46% of the Maltese outsourcers are never involved in
the process of selecting and hiring IT specialists to work exclusively on their
software project(s). Most of those who are fully or partially involved in the
candidates’ selection process do not know exact salaries of their project
executors on vendor’s side. It can in part explain another survey finding that
the actual incurred costs are up to 25% higher than expected (in almost 55%
of engagements).
Fixed-price projects are incapable to meet rapidly changing requirements of
today’s projects, especially those that come from lucrative high-tech niches
such as mobile development, online betting/gaming, casual gaming and
digital media. Additionally, they open an ample way for IT outsourcing
service providers to use some “dirty tricks” in order to make clients pay extra
beyond the contractual price. One of such tricks is to bid low at the bidding
stage and to intentionally omit some of the non-critical project features in
the project estimate and then to charge extra for the project scope change at
the production stage.
Still, according to the survey results, the hidden agenda does not prevent the
majority of IT outsourcers from saving 40% to 59% of operating costs via the
outsourced development and being satisfied with their ITO vendors and the
quality of the provided services.
Based on the responses highlighting the future IT outsourcing plans of the
current outsourcers, most of the companies plan to continue with the
outsourced development in the next 12 months, although planning to change
their outsourcing destinations. Almost 37% of companies plan to multi-
source to the geographically dispersed locations, i.e. nearshore, offshore and
within Malta and almost 27% plan to transfer their operations nearshore.
Only 9% of companies plan to continue offshoring in the future, which is
down 31% from the actual ratio of outsourcers.
European IT Outsourcing Intelligence Report 2011: The UK
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European IT Outsourcing Intelligence Report 2011: Malta
Conclusions
Based on careful analysis of the data obtained in the course of the Maltese IT
Outsourcing survey 2011, it is possible to summarize some of the key trends
among / make forecasts for the future scenarios of adoption of the ITO
services by the Malta-based companies:
• Most of software development and gaming companies currently
outsource due to the shortage of domestic pool of IT specialists and
will continue to do so in the months to come to be able to increase
their margins and better satisfy pressing customers / end users of
their products
• Most of outsourcing companies anticipate their annual revenues to
increase by 10% to 19%, while the majority of the in-house
development companies expect only 1% to 9% revenue growth in
2011
• Maltese outsourcers are expected to multi-source more in the
following months to secure risks associated with a single vendor
network
• Although the majority of companies currently outsource offshore,
they think it is important to have their outsourced teams located in
the same/close time zone as Malta and, therefore, will most likely
back-source their operations nearshore in the following months
• Most of current outsourcing companies did online research to find
their ITO partners and not a single company surveyed reported hiring
an outsourcing consultancy to assist with their vendor selection
process. In the future, companies are expected to change their
partner search practices: more companies will rely on the positive
references from their peers and more companies indicate plans to
hire outsourcing consultants. It generally denotes companies’
readiness to source strategically and focus on long-term benefits in
their future decisions
• The demand for external IT resources and/or outsourcing services is
expected to increase from digital media and entertainment/media
companies focused on a more extensive use of mobile technologies
and their integration into products’ portfolio
• Future Maltese outsourcers will have to revise their engagement /
service delivery models and look for more price-transparent and
flexible ones to have predictable outsourcing costs and easier
scalability which are essential for effective long-term IT /
development strategy planning
Almost 70% of today’s non-outsourcing companies in Malta say they are
very likely and likely to consider outsourcing their IT/software
development in the future in order to get access to skills and resources
outside the island.
With the Maltese fiscal regime being the key driver in attraction of the
foreign investments, more companies from the European Union and
North America are expected to set up their back-offices here for the
purpose of leveraging costs via the outsourced business and accounting
processes, R&D and technology. To be able to satisfy such an ample
demand, Maltese IT outsourcing service providers will have to look at
other locations to source resources from. Therefore, re-outsourcing (i.e.
sourcing extra resources from other locations to better serve own
outsourcing clients) is quite likely to become the next “hot” trend in
Malta in the years to come.
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European IT Outsourcing Intelligence Report 2011: Malta
About IT Sourcing Europe
IT Sourcing Europe is a UK company specialized in nearshore IT
Outsourcing consultancy, market research and analysis.
IT Sourcing Europe provides:
• Top quality quantitative and qualitative IT Outsourcing market
research and fieldwork services
• Evaluation of Central and Eastern Europe's IT Outsourcing
services providers and their factual capabilities to deliver
innovative technological solutions on time and on budget
• Free consulting services for European companies planning to
outsource IT / software development functions and / or change
their current IT Outsourcing strategy / engagement
• Ad-Hoc IT Outsourcing strategy development and full-cycle
support
IT Sourcing Europe cooperates with several European ICT and
Outsourcing organisations in terms of free analytics / information
exchange. Amongst its major information partners are Outsourcing
Verband, Das Outsourcing Journal, Outsourcing Portal, Ngi and others.
Our Contacts:
The Meridian, 4 Copthall House, Station Square
Coventry, West Midlands,
CV1 2FL United Kingdom
Email: info(at)itsourcing-europe.com
Tel.: +44(0)2476992505
Web: www.itsourcing-europe.com
Blog: http://itsourcingeurope.wordpress.com
Follow our tweets @ITSourcingEurop
Registration at the UK Companies House: 07217899
You are free to use, share and/or remix any part of this work as
long as you attribute it to IT Sourcing Europe.