The Nordic countries are currently experiencing a very healthy outsourcing market with numerous recent deals. In total contract value the market adds up to just shy of $6.3bn, of which approximately 50% comes out of Sweden and the rest is equally distributed between Denmark, Finland and Norway, with demand for ITO services being larger than the demand for BPO services.
Nordic companies, though experienced in outsourcing, have traditionally been somewhat sceptical towards offshoring. They have therefore mainly chosen onshore or near-shore solutions, but it seems that the on-going economic crisis has changed this view and their appetite for offshoring.
The traditional players still seem to have a solid grip on the Financial Services sector, with some major deals being signed over the last 1-2 years. Examples would be:
- Nordea, the financial services group in the Nordic and Baltic region, awarded a $1.92bn 5-year ITO contract extension to IBM in March 2010
- Danske Bank, one of the leading northern European financial services organisations, awarded a $475m 7-year ITO contract extension to IBM in June 2010
- DNB, Norway’s largest bank, awarded a 5-year application outsourcing contract estimated to be worth $250m to Accenture in October 2010
- Tryg, the Danish insurance group, renewed a 7-year $348m ITO contract with CSC in January 2011
The strength of local champions such as EVRY (formerly EDB ErgoGroup), Tieto and TeleComputing, has been to deliver to the demand for onshore and near-shore solutions, and going forward, we believe that they will struggle to match the global delivery capabilities of the offshore specialists and the tier one leaders.
Lately some of the major Nordic players from sectors outside financial services have increased their exposure to offshore resources, and HCL seems to be the big winner. Over the last couple of years they have signed deals with well-known companies such as Electrolux, IKEA, Danfoss and Statoil, i.e.:
- Electrolux, the home appliance manufacturer, signed a five year IT infrastructure management engagement for Asia/Pacific with HCL in February 2010
- IKEA, the world’s leading home furnishing retailer, selected HCL to provide application management services in July 2011
- Danfoss, a global leader within energy efficient solutions for refrigeration, air conditioning, heating and electrical motor control, signed a five-year strategic IT and SAP offshore delivery centre agreement with HCL in 2011
- Statoil, the Norwegian oil and gas production company, awarded a strategic infrastructure management contract to HCL in February 2012
- UPM, the Finnish forestry giant, signed a five-year deal for data centre, end user support, network services and project services with HCL in March 2012
HCL, as well as other offshore specialists, are now able to combine the right mix of global delivery capabilities with an onshore footprint, something which will prove to be a major challenge for the local competitors going forward. It will therefore be crucial for players such as EVRY, Tieto and TeleComputing to start or continue to develop their own low-cost delivery centres in order to remain competitive.