2023 Nordic IT Sourcing Study

The 2023 Nordic IT Sourcing Study is set to become more competitive as clients plan to outsource fewer IT services. According to our research, 20 percent of organisations are now planning to outsource less of their IT compared with 2022.

For those planning to outsource more IT services, the top drivers reflect previous years with some variances, such as greater emphasis on access to resources. Over a five-year period, a growing number of clients expect to outsource for business transformation reasons, increasing from 20 percent now to 44 percent in future.

About the survey

The 2023 Nordic IT Sourcing Study, conducted by Whitelane Research in collaboration with PA Consulting, investigates more than 750 unique IT sourcing relationships and 1,400 cloud relationships held by close to 400 of the top IT spending organisations in the Nordic region. The survey evaluates and ranks 25 IT outsourcing service providers and 12 cloud service providers based on the opinions of their clients. The scope of this research provides the most comprehensive client study covering the performance of IT service providers across the Nordics.

Overall, the quality of and satisfaction with the service providers in the Nordics is very high and with just small differences, emphasising that the maturity of clients is improving and with a healthy outsourcing relationship many providers can deliver very well. The key is to find the right service provider for the job, which is in line with the nature of deliveries, maturity across the partners, the right industry insight, and a partnership-driven approach.”

Henrik Ringgaard Pedersen PA sourcing expert

The Nordic outsourcing market is stabilising with higher client satisfaction. There are a handful of suppliers that are close in client satisfaction which means higher competition. The survey also tells us that clients are increasingly investing more in cyber security capabilities and that there is a race to get the best people.”

Peter Wardell PA sourcing expert

There is a clear trend that what is driving sourcing in the Nordics now is much more the need to add skilled talent and capacity, rather than the outsourcing of services. This means changes as to how sourcing providers and their customers need to interact going forward.”

PA sourcing expert

Key findings from the research

Overall, the Nordic respondents’ satisfaction with their outsourcing service providers has increased by three percent from last year to 87 percent. Notably, Swedish respondents stand out as least satisfied, with a satisfaction score of 85 percent (down five percent). On average, respondents are most satisfied with their service providers’ relationship management capabilities, whereas they are least satisfied with their providers’ transformative innovation capabilities.

Nordic countries are set to outsource less, which is a trend also observed in the previous survey. This trend is particularly strong in Denmark, where 26 percent of respondents plan to outsource less (a 10 percent increase of those planning to do so last year). The survey indicates that Norway shares the same tendencies as Denmark.

Priority areas for IT investment among Nordic respondents include increased security resilience and further automation of business processes. Migrating core business applications to the cloud is a prominent area of investment in the private sector. In contrast, the public sector remains cautious about cloud-based solutions.

Respondents that plan to increase their level of outsourcing are keen to improve their access to resources and talent – this is a motivation where all Nordic countries show a significant increase compared to last year. In Norway, 86 percent of respondents deem access to resource and talent a prominent reason to outsource (an increase of 42 percentage points). Less of a driver is financial flexibility and cost transparency, which reflects the findings of last year's survey.

This year, there is less emphasis by respondents on the financial drivers for outsourcing, such as cost reduction. While the majority of respondents in Sweden and Finland still mention cost reduction as a driver, Norwegian respondents are increasingly looking for ‘access to innovation’.

Future developments in sourcing partnerships

Security will play an increasingly important role

Global cyber security threats, combined with clients’ complex supplier eco-systems, have led to a need to strengthen resilience and end-to-end cyber security defences. This will result in a closer focus on security services from all IT outsourcing suppliers, and will open up a market for highly skilled, niche players with the capabilities to take on more advanced responsibilities. That said, outsourcing the management and operation of security services will always require thorough analysis and risk management capabilities, and key expert roles within every organisation.

Suppliers will become more niched towards specific industries

Even though there are many broad IT outsourcing suppliers in the marketplace, our survey results show a trend toward specialisation. This is already visible in the delivery of specific services, but also when providing services to clients within selected industries. The reason is clear – the more value clients expect from suppliers, the more industry insight and knowledge those suppliers will need to become a trustworthy partner. The understanding and contacts required are both related to specific applicable regulations and established ecosystems, but also to industry value chains and specific suppliers.

Location strategy will evolve to address trends and legislation

Our survey suggests significant changes in future location strategies for delivery, however this depends largely on the industry and the services that will be outsourced. Four in ten private sector respondents are looking to increase their use of nearshoring, while decreased offshoring is particularly apparent in more regulated industries. This shift is driven by a mix of reasons, including high attrition rates in offshore delivery and changes to legislation, as well as the availability of talent.

Keys to a successful outsourcing strategy

Develop or revisit your IT sourcing strategy

Understand business needs and your place in the market to define what success looks like.

Align supplier objectives

Engage with existing and new suppliers, develop an understanding of their objectives and drivers, and revise contracts to include shared incentives.

Mature the relationship

Establish clear governance and responsibilities with suppliers, co-create transparent ways of working, and build personal relationships by discussing culture as well as techniques.

Drive performance

Identify performance levers and how to use them, establish business analytics and benchmarking, and faciliate collaboration between different service providers and business stakeholders.