Demand for IT outsourcing services in the European market

Demand for IT outsourcing services in the European market

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The last two years have been a difficult period that has put us through demanding trials. At the same time, this time has made us realize how distance has ceased to matter in terms of work - especially in the IT industry. This, of course, had its impact on the importance of IT outsourcing services in the European market.

Situation in the European market

An observation of the current situation of IT outsourcing services in the European market will reveal to watchful eyes some promising trends - especially in areas such as AI and Big Data. The acceleration of digital transformation, which has been driven by pandemics, has also forced the acceleration of other existing trends. Particularly in the realm of mobile and cloud-based application development, Internet of things (IoT), and machine learning. In turn, the shortage of skilled workers and increased demand for providers of specialized services complements the potential for new opportunities that have arisen in the European market. We are seeing this trend especially in Germany, where the pandemic has shown companies how much is possible through remote work and outsourcing.

Covid's impact on the European IT market

There is a significant shortage of IT skills in Europe. More than half of European companies that were recruiting IT professionals were having difficulty filling vacancies. The COVID-19 pandemic has only increased the demand for IT professionals, which is particularly evident in European job postings. In the first quarter of 2021, job postings for technical positions accounted for about 13% of all job ads in Europe. This is an increase of 2% compared to 2020. This situation creates interesting opportunities for IT outsourcing providers, but skills shortages make it difficult for even large companies known for their position to secure specialists with a specific skill profile. 

Not only is there a shortage of new professionals, but the ever-evolving IT environment requires employees to possess and develop different skill sets. Moreover, European IT buyers are looking for people with both hard and soft skills. The perceived skills shortage in the European IT sector is mainly due to a decline in the number of IT graduates and the rapid growth of IT, which has resulted in a mismatch between available skills and those currently required. Shortages of professionals with the right skills are found in all zones of the IT sector. However, there is a particularly noticeable shortage of IT architects, programmers and specialists in big data, mobile computing and cloud computing.

The main motivator for outsourcing services - quality or cost reduction?

The amount of cost is one of the most important criteria when deciding who should become our nearshoring partner. However, it is still the value of the service offered that matters most - especially if the implemented solution or digital product is to increase the company's competitiveness in the market or automate our key business processes. Companies with experience in outsourcing services are paying more attention to the quality of the product, understanding that cost reduction can lead to a dead end. Initially, the lower cost of a service may look attractive - as it will allow for easier budget management - but the "cheapest option" in the bigger picture may mean further expenses or a completely ineffective implementation.

According to a study by the Global Sourcing Association (GSA), starting in 2020, companies choosing to outsource, and IT providers themselves, will increasingly focus on performance and service quality, rather than price. For companies seeking outsourcing partnerships, it is becoming important not to outsource a project to an outside company, but to build a long-term relationship with a partner who understands the company's needs. Thoughtful selection and cooperation with a proven IT provider guarantee high quality services, developed communication, access to extensive technical knowledge and expert experience. Long-standing relationships and carrying out projects with a reliable supplier is also a chance to really reduce costs, without worrying about losing the quality itself.

Most desirable skills in the IT market

According to research and analysis conducted by Global Knowlegde, a global leader in IT and technology training, the most in-demand skills in the IT market in recent years have been those in cybersecurity. This is largely due to the changes in workflows that the pandemic has forced on companies. The ever-increasing popularity of outsourcing services and the increasingly creative activities of cybercriminals are also not insignificant.

Cloud computing skills also topped the list of most desirable skills in the IT market in 2020 and 2021 - in recent years, cloud solutions have become one of the key enablers of revenue growth through the use of AI or IoT, and have had a major impact on data analytics, project management and the aforementioned cybersecurity. Equally desirable specialists in the IT market are those with competencies in data analytics and data science, as well as artificial intelligence and machine learning algorithms. Software development specialists are also in demand in the market.

European companies are becoming more open to offshoring

The shortage of specialists in the market and the changes caused by the pandemic continue to force many companies to adapt to new conditions. The German market is a prime example. Germany is the largest economy in Europe, and the combined ITO markets in the DACH region (Germany, Austria, Switzerland) have gained a secure position as the second largest ITO region on the continent. At the same time, German companies were, until recently, strongly distanced from outsourcing cooperation - they were far less open to outsourcing and offshoring cooperation than, for example, companies in the UK. 

However, this approach has begun to change in recent years, heralding a new trend. Due to the outbreak of the pandemic, German companies have been slowly gaining experience in implementing projects in cooperation with external IT specialists while gaining confidence in such solutions. Research conducted by Whitelane Research showed that among the 450 outsourcing contracts signed, in as many as 73% of cases respondents announced that they would opt for such a cooperation model in the future - to the same or even greater extent. The research also indicates that the projects implemented as part of nearshoring cooperation are characterized by a high quality score. Analyzing the above data, and taking into account the main trends in the market, we can safely assume that this interest will grow over time.

Why use IT outsourcing in Poland?

Poland's location on the map of Europe makes it an attractive destination for outsourcing cooperation. The attractiveness of the Polish software services market is due to several aspects. Currently, the Polish economy is one of the fastest growing in the CEE region - since 2016, Polish GDP has increased in value from $472.26 billion to $595.92 billion in just four years. By 2026, GDP is projected to grow to as much as $954.58 billion. The potential of the Polish market is underscored by the country's strong presence in the high ranking of the Global Services Location Index, an annual classification that allows companies to understand and compare factors that influence the attractiveness of a location for investment and the search for an offshoring partner. Poland, mainly due to its financial attractiveness and start-up activity, saw an increase of as many as 10 points in the ranking last year 

The IT industry itself, which accounts for 8% of Poland's total GDP, is also growing dynamically in Poland, with its value increasing from $11.3 billion to $12.8 billion in 3 years. There are already about 50,000 software companies of various sizes operating in the Polish market, employing nearly 430,000 people, while about 70,000 students a year are educated in the technical faculties of universities each year, so that 10,000 to 15,000 young and trained potential employees enter the labor market each year. As a result, the Polish IT market boasts the largest pool of specialists in all of Central and Eastern Europe. 

Quality also goes hand in hand with quantity. After all, Polish programmers are considered to be among the best not only in Europe, but all over the world. This is evidenced, among other things, by the high ranking prepared by the HackerRang service, in which Poland ranks third among countries with the best developers in the world (behind only Russia and China). Polish specialists also occupy leading positions in the rankings for specific technologies and categories - they are, among others, the best specialists in Java technology in the world and rank high in categories such as Algorithms, Phyton, Shell, Theory and Ruby. In all cases, Polish programmers are among the top in the world.

The choice of Polish IT suppliers is also supported by the extensive experience in cooperation with foreign clients that Polish companies have. Aspects such as the attractive geographic location and cultural proximity to most European countries, as well as the lack of language barriers to communication - Poland ranks high in the EF English Proficiency Index prepared by Education First, an international education company.

We describe more reasons to cooperate with Polish IT providers in the article: Why should Germans cooperate with Polish companies in IT outsourcing?

Digital transformation and demand for IT outsourcing services

Nowadays, increased spending on IT services is basically inevitable. Appropriate implementations, development of existing systems, attractive digital products for customers or automation of internal processes - all these affect competitiveness in an increasingly demanding market. Companies are forced to make further investments and increase operating costs - otherwise they will be left behind and "out of the game" in the fight for customers. The solution to increasing expenses is IT outsourcing. Delegating tasks to an external partner is gaining in importance. The right model of cooperation allows not only to make a fast and optimal implementation, but will transfer part of the technical risk to the supplier. Such a solution also means access to experienced specialists who, in addition to completing the entrusted project, can point out other aspects that require technical modernization and will immediately propose ready-made solutions - thus ensuring that the company keeps pace with the dynamic digital transformation.

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