Outsourcing

According to Forrester Research (2004) the number of IT jobs predicted to go offshore in The Netherlands in 2005 would amount to 1,652 jobs. This number consists of 557 computing professionals and 1,095 junior computing staff and operatives. In 2015 the number of offshored IT jobs was expected to be more than 9,236, of which 3,763 computing professionals and 5,473 junior computing staff and operatives.

An estimation of GPI of the Dutch outsourcing market amounted to € 100 million. About 5,000 IT employees from developing countries were working for about 200 Dutch companies. This number would grow in the future. The large companies would outsource more projects and the small and medium sized companies would start outsourcing.

Companies like Getronics, ING Group, KPN Telecom, KLM, Baan and Phillips outsourced substantially. Also, Versatel currently has some outsourcing activities with South Korea and Telfort works with Chinese workers. Companies in The Netherlands have been using foreign IT-suppliers for more than 20 years. India is the market leader by far and is very successful as an outsourcing services provider. More than 200 Dutch organisations have had software related services projects executed in this country. It is estimated that more than 75 percent of Dutch offshore activities are located in India. Although India is the most important destination, software orders have also gone to other Asian developing countries, like Pakistan, Bangladesh, Nepal, China, Indonesia and the Philippines. Compared with India however, these projects are much more limited in size and in number. An important reason is that the IT-sectors of most of these countries are not (yet) well-recognised in Holland.

Although Asia was the most important destination region for outsourcing projects in
2004, the importance of Central and Eastern Europe was rising as well, as IT companies in e.g. the Czech Republic, Romania, Bulgaria and Russia already had tens of Dutch clients. Moreover, service providers from Latin-America, North-Africa and the Middle-East were now also targeting The Netherlands. Table 1 contains an overview of countries that performed outsourcing projects for Dutch companies.

Table 1 Countries with Dutch outsourcing projects

Opportunities outsourcing

IT companies in The Netherlands were expected to turn more and more to external resources as well. In 2004, most IT budgets of large companies were expected to be cut slightly compared to 2003, although no significant changes were expected. This was supported by a research by Giarte, based on 160 decision makers, stating that internal IT departments of companies would continue decreasing in size. Furthermore, Dutch companies would strive for protection of their Return on Investment (ROI) and added value of IT, increase efficiency and lower costs. (Offshore) outsourcing fits very well in this and could help to reach these objectives. The growing demand for external services, and outsourcing of ICT activities in particular, was strongest from financial organizations, the telecommunications industry, central government, Dutch multinationals and the public utility and healthcare sectors.

The competition in the market was increasing, as mergers continued to take place. There was a trend not to place all outsourced activities in the hands of one services company, but to use various service providers for different tasks. Especially the well developed ICT infrastructure and liberalized telecommunications market in the Netherlands could offer opportunities for service providers.

Dutch companies were expected to spend more on outsourcing and software packages
and less on custom software development and new IT staff. However, there were
differences by sector and per company. Investments and new projects were expected for 2004 in the areas of ERP and EAI. Many companies still use older systems and will most probably switch to newer platforms and systems. CRM projects would not gain high priority, as adaptation of new technology, like VoIP or wireless applications would be slow.

Overall, there are good opportunities for foreign IT service providers, as the advantages of global IT outsourcing are still not well-known in the Netherlands. Many large and medium-sized companies are not sufficiently informed on the opportunities that outsourcing offers to them.

Synstar (2004) mentioned the following responsibilities that were considered for
outsourcing by Dutch companies: infrastructure support and maintenance (36 percent)
and network and data management (28 percent).

With offshore outsourcing, software development is still the most important subject, not only including administrative software but technical and embedded software as well. Other possibilities with offshore outsourcing are:

-Data entry
-Internet (web design and e-commerce)
-Geographical Information Systems
-Computer games, animations and cartoons
-Infrastructure management (relatively new)

Dutch companies had their services outsourced because of access to specialized skills
that were not available in-house (40 percent), guaranteed service levels (22 percent) and the chance to focus on the job in hand.

Dutch companies considered offshore outsourcing the following IT functions:
-Business continuity (33 percent)
-Network data management (33 percent)
-IT strategy (32 percent)
The main disadvantages were loss of visibility and control (33 percent) and fear of loss of intellectual property (22 percent). 36 percent of Dutch IT directors believed that there was an IT skills shortage in 2004. Skills in short supply included system integration (80 percent) and security (64 percent).