Test Outsourcing in Eastern Europe

Test Outsourcing in Eastern Europe

Agenda

• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends

Agenda

• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends

What is Outsourcing?

“Process of contracting the company’s business process and operations to an external company. It is expected to be done with

a better quality.”

The outsourcing market

Why did it start?• Cost cuttings • Focus on the core business

What can be outsourced?• Everything• It does not happen due to security risks

Outsourcing models

• Offshoring • Outside the home country.• Risks due to language barriers, cultural differences and different

time-zones.• Usually selected because of cheaper labor costs.

• Onshoring• Same country.• It involves less risks but doesn’t allow saving up much.

• Nearshoring• Outsourcing in nearby countries. • Considered best for West Europe who prefer the East European

destinations.

Reduce operation costs

Overcome IT talent shortage

Free up internal resources

Focus on core business functions

Accelerate company transformation

Accelerate projects

Gain access to management expertise

Reduce time to market

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

44%

34%

34%

28%

22%

15%

15%

9%

Reasons to Outsource

Risks

Top 3 reasons why projects fail

1. No process for specifying the work to be done.2. Poor project management.3. No metrics for measuring success.

Unless you solve the first one, then being excellent at the other two won't make a difference.

Forrester Reports

Fiascos

Client What When Cost

UK Government National Program for IT

2002-2011 12bn pounds

U.S. Navy Manage 350,000 Navy and Marine Corps users

2003 $4 bn

US Air force Expeditionary Combat Support System

2005-2012 $1.1 bn

US Government Healthcare exchange website

2012-2014 $200 mln

Success stories25 successful Startups built with outsourced development

Agenda

• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends

Outsourcing 2015

World Quality Report 2014 - 2015

AT Kearney: Outsourcing Market 2015

AT Kearney: Outsourcing Market 2015

Agenda

• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends

Europe Market

Ernst & Young Report 2014

Europe Market1. Krakow, Poland

2. Dublin, Ireland

3. Prague, Czech Republic

4. Budapest, Hungary

5. Brno, Czech Republic

6. Warsaw, Poland

7. St. Petersburg, Russia

8. Bucharest, Romania

9. Belfast, UK

10. Bratislava, Slovakia

Tholons Report Dec 2014

Examples: Poland

• Has Risen from 38th in 2009 to 11th now;• Krakow in Top 10 Locations and #1 in Europe;• More than 500 institutions of high education;• IT business doubled in the last 5 years;• Multilingual;• Proximity to Western Europe;• Still cost-competitive by several magnitudes;• Considered with potential to become Global player;

Examples: Bulgaria

• Ranked 9th in the world and best in Europe;• EOA Award „Offshoring Destination of The Year“ for 2015;• Growth of Outsourcing since 2005 – 500%;• Growth of IT employees since 2010 – 330%;• Among Top 10 countries with fastest Internet worldwide (8th);• 3rd worldwide by the number of certified IT professionals; • Lowest Cost in Europe – both Salaries and Taxes;

Agenda

• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends

Advantages of EE

"There's a lot more to it than just where are the cheap people?'"

Rolf JesterGartner Vice President

Advantages of EE

Why a preferred destination?

• Education based on the Western system of theory and philosophy - Creative thinking;

• Low cost – competitive salaries and taxes; low cost of living;• Highly technical skills;• Languages – Not only High level of English, but German,

French, Spanish, etc.;• Reliable, existing infrastructure;• Companies in Eastern Europe tend to engage in the business

model of their client;

Advantages of EE

• Reduced time differences – almost same working hours;• Less cultural differences and common values shared;• No “Yes, sir” attitude;• Less employee turnover than India;• The growing SME demand needs flexibility;• For the countries in EU – advantage of the VAT system and the

well known EU rules and regulations.

Other very important benefits:

Agenda

• What is outsourcing?• The outsourcing market – facts and figures• Marketplace of Eastern Europe (EE)• Advantages of EE• Future trends

Future Trends

“It is expected that by the end 2015 top six EU markets alone will need 250 000 extra employees with IT skills,

and this doesn’t cover the rapidly and instantly expanding US job market.”

Source: computerweekly.com

Future Trends

• The shift away from “cheaper is better” - quality is again the crucial differentiator.

• Therefore Nearshoring is gathering pace within higher cost but with high-talent labor.

• Gartner: “This trend will result in outsourcing of IT services overseas (India etc.) dropping by at least 15% through to 2016”.

Outsourcing moves into Strategic activities

Future Trends

Expansion of offshore providers in Europe

• Investing heavily in continental Europe:• Wipro announced the addition of 500 FTEs in the Nordics alone

over the coming 3 years reaching > 4000 FTEs in Europe.

• Offshore providers are also on the acquisition trail:• Cognizant acquired ValueSource NV in Belgium.• Have already acquired six companies in Germany.

Future Trends

Expansion of nearshore providers in Europe

• Investing in Eastern Europe:• Luxoft opened a new site in Bulgaria in 2015. Ambition to hire

up to 1000 FTEs. • Already have labs in other EE countries like Romania.• SoftServe also opened a R&D site in Bulgaria.• EPAM has an office both in Romania and Bulgaria.

• Massive Marketing and Sales representation in Europe.

Future Trends

Freelance Outsourcing

• Physical location is irrelevant.

• SME companies now can take advantage of the talent. • No need for cumbersome long-term agreements.• No need of large volume requirements.

• New countries with talent but with strong operational risk are now able to take part in the industry.

• Bigger talent pool than India, China and Mexico altogether.

• Russia and Ukraine lead by far. Romania follows.

Trends in Testing Testing Budget allocation as percentage of IT spend

World Quality Report 2015 - 2016

Trends in Testing

World Quality Report 2014 - 2015

SMAC and IoT increase the importance of Testing

Trends in Testing

World Quality Report 2014 - 2015

World is going AGILE! What about Testing?

Trends in Testing

World Quality Report 2014 - 2015

Test Automation is the Future

Trends in Testing

• Contracting a single vendor to provide both development and testing: • can reduce supplier management costs, but• it is unlikely to deliver the best business value.

• Using a independent provider for testing gives clear reassurance of an independent auditor with no interest in:• completing testing too quickly, or• finding an encouragingly small number of defects.

Increased demand for independent testing supplier

Trends in Testing

• Skill level baselines must be demonstrated:• If your skills fall behind, you become noncompetitive.• Not acceptable in an outsourced world.

• Certifications become mandatory for outsourcing providers:• Required in most of the tenders.

• ISTQB is closing on 500 000 Certified Testers:• Agile Testing is out.• Security and Test Automation in Beta.• Working on Mobile and Usability testing.

Importance of Certifications grows

Questions?