FAZIT Company Survey in Baden-Württemberg – Outsourcing of IT Services Increases with Company Size

In Baden Württemberg, more than 41 per cent of the companies in the IT and media sector and selected user branches of information and media technologies partially or entirely outsource IT services to external providers.

The larger the companies the higher the share of firms outsourcing IT services: Whereas more than 72 per cent of large companies with at least 250 employees subcontract IT services, this is the case for only 38 per cent of smaller enterprises with up to four employees. These are the findings of the second FAZIT Company Survey conducted by the Centre for European Economic Research (ZEW), Mannheim, in Baden-Württemberg in autumn 2005.

The study shows that 63 per cent of large companies in the IT and media sector with at least 250 employees outsource IT services. This share is even higher among large firms of the user branch (74 per cent). However, the converse applies to small and medium-sized enterprises with less than 250 employees.

Most companies involved in IT outsourcing subcontract the main part of IT service production to providers in Baden-Württemberg. An additional twelve per cent of the enterprises state that their subcontractors are located in another Federal State of Germany.

So far, companies in Baden-Württemberg seem to be rather sceptical about IT offshoring, i.e. the outsourcing to foreign providers. Only one per cent of the surveyed firms rely on providers located abroad to carry out the main part of IT service production. The share of companies subcontracting IT services to foreign providers increases with company size. Small enterprises with up to four employees, for instance, do not collaborate at all with foreign providers. By contrast, already twelve per cent of large companies with more than 250 employees are involved in IT offshoring. Moreover, these large firms outsource IT services more frequently (30 per cent) to other Federal States but Baden-Württemberg than smaller enterprises.

All in all, system support and maintenance are the IT services that are most frequently outsourced; more than 25 per cent of all questioned companies subcontract these services. About 14 per cent of them opted for partial outsourcing and almost eleven per cent entirely subcontract these activities to other firms. IT security services, which are outsourced by almost 23 per cent of the companies, rank second. At only seven per cent, computing capacity is the least frequently outsourced IT service.

The survey was carried out among almost 1,200 companies of Baden-Württemberg from the IT and Media sector (software, data-processing service providers, IT and media hardware, telecommunications, audio-visual media, printing and publishing, advertising and market communication, content service providers), as well as from other sectors that utilize IT and media technologies (chemical industry, mechanical engineering, medical, measuring, controlling technology, car manufacture, transportation, banking and insurance sector, research and development, and technical service providers). FAZIT is a research project conducted within the framework of the Zukunftsoffensive III programme and is funded by the Federal State of Baden-Württemberg. It focuses on current and future information and media technologies as well as on their application in Baden Württemberg. The research project is carried out by ZEW in collaboration with MFG Foundation Baden Württemberg, Stuttgart, and Frauenhofer ISI, Karlsruhe.

Contact

Dr. Jörg Ohnemus, Phone +49(0)621/1235-354, E-mail: ohnemus@zew.de