2022 Nordic IT Sourcing Study

The 2022 Nordic IT Sourcing Study shows that the region’s market remains stable, with very small movements in average customer satisfaction. Market growth is expected to slow slightly, with 17 per cent of organisations planning to outsource less of their IT.

For both insourcing and outsourcing, the key driver is business enablement. Insourcing is seen to bring improved speed and quality (selected by 64 per cent of respondents), but this has decreased from last year, while cybersecurity concerns have gained more importance. Outsourcing is seen to bring scalability, increased focus on core business and better access to talent, while financial drivers such as cost reduction have become less important.

When it comes to cloud services, adoption is set to continue; it's high security scores continue to be attractive, but the majority of customer organisations would be interested in a European cloud solution.

About the survey

The 2022 Nordic IT Sourcing Study, conducted by Whitelane Research in collaboration with PA Consulting, investigated more than 680 unique IT sourcing relationships and 750 cloud relationships held by more than 350 of the top IT spending organisations in the Nordic region. The survey evaluated and ranked 23 IT outsourcing service providers and 12 cloud service providers based on the opinions of their clients. The scope of this research makes it the most comprehensive study covering the performance of IT service providers across the Nordic region.

IT sourcing is no longer just about IT – it’s about enabling business and creating opportunities with the right setup.”

Henrik Ringgaard Pedersen, PA sourcing expert

Key findings from the research

Client satisfaction with outsourcing service providers remains stable, with 90% of respondents satisfied (+1pp since last year). Satisfaction scores are highest for relationship management, and lowest for providers' ability to deliver transformative innovation.

Overall, organisations plan to outsource less this year. This trend is strongest in Sweden where 21% (+7pp) say they plan to insource. Denmark moves in the opposite direction, with more organisations (31%, +4pp) planning to do more outsourcing.

Respondents planning to insource hope to achieve faster time to market, improved quality, and to enable agile ways of working. However, these objectives have declined in importance since last year, while cybersecurity concerns have increased the most.

The main drivers for outsourcing are ‘more scalability to business needs’ (63%), to ‘focus on core business’ (61%) and ‘access to resources/talent’ (53%). Compared to 2021, the ‘focus on core business’ driver increased the most (+15pp), with more businesses seeking ‘as-a-service’ models.

The financial drivers for outsourcing, such as cost reduction, are cited less this year. Cost reduction is still mentioned by a majority of respondents in Sweden and Finland, while Norwegian respondents are more likely to seek access to innovation.

Adoption of public cloud services will continue, driven by the desire for more agility and scalability (84%). Improved security and compliance has also become a more frequent driver for cloud adoption, with 40% of respondents looking for this.

Future developments in sourcing partnerships

The outsourcing market is characterised by a drive to modernise both technology and ways of working. However, legacy structures still account for a significant part of organisations’ IT portfolios. Many are determining how to maintain a stable legacy environment while introducing new technologies and modernising their IT landscapes.

Long service provider relationships but shorter contracts

High client satisfaction means contract renewals are very likely across all IT services. An increasing share of outsourcing clients are planning to first negotiate with their existing service provider before running a competitive procurement process. And in a fast-moving environment, contract periods tend to be shorter to ensure flexibility.

Clients will reap the benefits of the cloud, but must manage risk of vendor lock-in

New applications will predominantly be hosted in a public cloud as clients seek speed, scalability and the possiblity to focus more on their core business. A majority of respondents agree that infrastructure cloud providers help ensure security and compliance. However, as adoption continues, it will be important to avoid vendor lock-in by having appropriate exit strategies in place.

Technology modernisation and cyber threats require new internal skills

Organisations will need to strengthen their internal capabilities to support technology modernisation. Orchestration of cloud services and managing cybersecurity are the most obvious focus areas going forward. Technology shifts will have a ripple effect into other areas, requiring a refresh of skills around sourcing strategy and execution.

Keys to success for businesses who outsource

Revist your IT sourcing strategy now. New technologies and agile ways of working mean the playing field has changed. The strategy for maintaining a stable legacy vs modernising may very well look different.
Make sure that your portfolio of service providers is optimised to your sourcing strategy and needs. Develop true partnerships with providers who have real relevance.
When revisiting your IT sourcing strategy, consider what capabilities you really want to have inhouse, then design your operating model accordingly.
Steer your outsourced deliveries on desired outcomes, not supporting activities. Be prepared to make your service providers collaborate with each other and your business stakeholders.
Make use of available industry solutions and as-a-service delivery models to improve time-to-market and reduce technology complexity.
Leverage public cloud solutions where possible, but be clear on the benefits you actually want to achieve. Cloud is a delivery model and not the end-game.
Have an exit plan in place for all your outsourced deliveries, including cloud services. This is important to mitigate your risk exposure and avoid commercial lock-in.
The pandemic has taught us that hybrid work models can bring many benefits. Leverage that in your sourcing model to get higher speed, lower costs and better access to talent.