IT Sourcing Europe, a UK-based research and consultancy company, highlights the key trends and challenges anticipated in the European IT Outsourcing (ITO) industry in 2010.

IT Sourcing Europe announced today the completion of its “European IT Outsourcing (ITO) Intelligence Report 2010: Central and Eastern Europe.”. This is a comprehensive study of the prospective Central and Eastern European (CEE) destinations for cost effective, yet highest quality outsourced development, and the factual capability of the CEE ITO providers to satisfy the rapidly changing business needs of their Western European clients.

Overall, IT Sourcing Europe’s Report shows that:

• Outsourcing to Central and Eastern Europe is expected to grow exponentially over the next 10 years;
• Investors and management anticipate 30% revenue growth in 2010;
• CEE, above all regions, is expected to leverage its competitive advantage in the high-growth areas of offshoring and nearshoring and possibly move ahead as the most attractive labour arbitrage alternative for Western European clients;
• Low labour costs are not necessarily the solution that Western companies are seeking in Outsourcing. The technological potential of young graduates in Ukraine or Poland is one of the primary reasons why Western companies choose to outsource to CEE.

Regarding the major ITO trends benchmarked in the Report, 2010 anticipates a significant change in the European IT Outsourcing landscape:

• More small and mid-sized organizations (SMOs) are expected to outsource their software/web development nearshore, compared to pre-crisis times.
• Additionally, buyers become more demanding and challenge their ITO partners to differentiate their position and value.
• Today’s Western European companies are seeking a combination of speed, cost management and growth supported by business agility and unprecedented technological innovation.
• Striving to evolve strategic long-term Outsourcing relationships, Western clients express readiness to move from project-based services and staff augmentation to more effective business models, able to handle core software development.

According to the Report, the following challenges will be facing Europe’s ITO industry in 2010:

• ITO suppliers in Central and Eastern Europe should be ready to respond to transformations caused by SaaS and Cloud Computing, adjust costs, upgrade delivery models etc;
• ITO suppliers will be forced to respond to client’s business demands through building capabilities to solve technical problems, expand services, build consultative front ends and customized solutions for client’s differentiation.

There are more thought-provoking findings presented in the Report.

IT Sourcing Europe believes that its European ITO research will help Western European companies to make the right Outsourcing decisions and CEE ITO suppliers to better understand the ITO landscape of 2010 and to be better prepared for upcoming challenges.