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German IT Outsourcing Projects:
Price Deterioration continous

2009 was a terrible year for vendors selling offshoring projects to Germany: Less projects (2009: -1%), declining prices (2009: -8%) and offshoring vendors are suffering more than local German outsourcing providers. In 2010 the offshoring market will grow again but due to the fact that there are too many providers competing with each other, the price deterioration will continue in 2010. Another 7% are expected for 2010 but the market grows by 2%.

German companies ar more open for outsourcing than ever before and this inludes also offshoring. More decision makers than ever before said, that they see the necessity to reduce costs.

But they also mention other significant reasons for outsourcing:

  • increase of service quality
  • standardization
  • harmonization
  • consolidation

They also want to increase their flexibility, reduce their risks resulting on fixed cost and concentrat more on their core business.
Once a company decided for outsourcing they keep doing so. Less than 10% find a way back to make it instead of buying it. And when a contract comes to its end, more than 2 of 3 decide for the same provider again - but usually with a lower price than before.
Average contract durations also changed:

2005 2010
1 year 1% 27%
2 years 3% 16%
3 years 18% 31%
4 years 4% 1%
5 years 42% 16%
more than 5 years 32% 9%
Based on interviews with 240 outsourcing decision makers in Germany. B2B Sales Outsourcing
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