Off-shoring

Why offshore?

Catalyst and sustaining factors

Numerous reasons exist for off-shoring ICT work,

1.    The promise of lower-cost. Developing countries charge a fraction of the cost of the developed countries for similar products and services.
2.    The nature of the ICT development work. ICT work can vary between innovative and experimental, and that which is repetitive and mundane. Developed counties will often offshore the more mundane work.
3.    The search for talent and expertise. New talents as well as highly-experienced personnel with specialized skills can be found offshore.
4.    The attractiveness of the ‘Global Player’ label. Having such label, can increase can gain further confidence from the investors. Additionally it can open-up doors to new markets.
5.    Customer satisfaction. Being in close proximity to the customer, enables for better provision of services and enhances the relationship with the customers.
6.    Faster time to market. Companies may want to utilize the follow-the-sun approach in development and support.

Perhaps aside from the promise of lower-cost, Iceland has pretty much everything else to offer. The strength of Icelandic ICT sector lies in entrepreneurial labor force, small-scale teams, good education and adaptability reinforced with sophisticated telecommunication systems. Icelandic ICT companies have expert knowledge as well as long practical experience in creating solutions for food processing and fisheries, bank technology, multimedia, Internet applications, ecommerce, real-time telecommunications systems for aviation and transport, medical software, and general office and database systems.

Computer professionals in Iceland can provide expert knowledge of a wide range of leading programming languages and database systems, as well as advanced design and development techniques. Computer professionals are also equipped with in-depth knowledge of leading operating systems and software. Moreover, Icelanders are accustomed to working with international standards and are thus highly methodology-driven.

Enabling Factors

The fast and extensive development of Information Technology has given the ability for companies to surpass the distance associated with offshore development. IT has been instrumental in bridging the gap between virtually every distance factor, physical, temporal and even cultural.

The quality and availability of telecommunication technology in Iceland is one of the best, if not the best in the world. Iceland’s sophisticated telecommunications facilities, through fiber-optic cable connections offer reliable direct international links for telephone, fax and data networks. It is no surprise that telecommunications charges in Iceland, both at residential and business rates are the lowest within the OECD. International connections are laid out via fiber-optic sea cable and satellite. All urban communities around the country are linked by fiber-optic cable. Fiber-optic cables are laid out to all new buildings; at the same time older areas are gradually being brought into the network.

Export of ICT

The value of ICT export from Iceland has grown rapidly over the last decade. In 2008 Export value of ICT goods has amounted to over ISK 2,100 million. The sum is broken down as follows:

• ISK 328 million for audio and video
• ISK 58 million for computer and related equipment
• ISK 451 million for electronic components
• ISK 48 million for telecommunication equipment
• ISK 1,214 million for other ICT goods

The aforementioned sum accounts for close to 2% of total value of export and services from Iceland. This figure excludes substantial sales by the subsidiaries of Icelandic companies in other countries. Iceland’s total ICT export in EU was estimated at around USD 35,600 million in 2007, which made up for .14% of total export in EU and .1% of total export in OECD countries.

Out of the 136 listed ICT companies in Iceland, 102 companies were listed as exporters of ICT in 2009. Of the companies, 12 companies exported for more than ISK 100 million each, accounting for over 60% of the total ICT export value. Many of the remaining companies have exported as much as ISK 20 million each. Reportedly, 82% of total ICT export earnings came from the sales of software development and customization, while 13% came from consulting and data processing , and 5% from licensing.

Given Iceland’s location, the similar governance and the vast trade relations, it is no surprise that its biggest market area for software is EU, accounting for over 60% . North America, with predominate presence in US, is the second, with over 25%, and others areas accounting for the rest.