Italy is a country of hidden gems; from the splendour of Rome to the beauty of Venice and Florence. However, Italy’s economy has been in recession for most of its modern history. In particular, it experienced a growth crisis after 2008 when the financial global crisis hit Europe with full force. This article will explore IT nearshoring in Italy and how this has impacted their economy since then.
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To do so, we will first take a look at the state of the IT industry in Italy before moving on to some statistics that provide more detail about outsourcing in general in Italy. Finally, we will conclude by looking at some other implications for Italian businesses as well as possible solutions to these problems should they arise again in future years.
Let’s dive right in!
State of the IT industry in Italy
Italy has a long history of being an industrial powerhouse. From fashion to automotive, from cheese to wine, Italy produces some of the finest goods in the world. The same is true for its IT industry.
The range includes both manufacturings – including computers, software development tools, and telecoms equipment – as well as services such as consultancy or research and development activities.
Over two-thirds of Italy’s GDP is generated by small businesses, which make up 95% of all registered companies. Business owners decide on staying small for the most part and the ratio between firms with fewer than 10 employees and bigger ones is one of the highest in Europe. Since small businesses generate the majority of Italy’s GDP, their economy is at a comfortable spot and looks healthy.
Italy’s IT service sector produces $23 billion (2019) annually and was growing at a rate of 16.7% per year.
The most substantial sector is the infrastructure services, which constitute more than 57% of the total value of the entire IT industry, with a revenue rounding up at $13.2 billion.
Another big part of that is the software market, which, as per Gartner’s Market Databook, is currently valued at $6.3 billion.
Just like anywhere else in the world, there’s a huge threat in the form of cyberattacks. Current businesses are connected with one another more than ever. For this reason, cybersecurity is one of the highest concerns in Italy.
There’s an ongoing struggle with a deficit of talent. Even with a relatively large unemployment rate of 11.7%, 76,000 jobs were left unfilled or filled temporarily in 2016. Almost half of the available spots stayed that way. One-third of engineering positions were also left empty. All that with another scary figure to accompany – a 37.9% unemployment rate among youth. This could point to an education problem.
According to a study published by an Italian university, the cloud services market in Italy is expected to increase by 16% in 2021 as organizations and the government strive to build on a digital acceleration caused by the COVID-19 epidemic. This year, Italian businesses and government agencies will invest 3.84 billion euro in cloud-related projects, according to research from Milan’s Politecnico University’s Cloud Transformation Hub.
The Italian government has set aside about 1.9 billion euros in EU funds over the next five years to help the economy recover from the pandemic-caused downturn under a plan that will migrate public administration data and services online.
The growing impact of information technology on company operations, in addition to public administration, is prompting an increase in understanding for methodologies, tools, and knowledge that will help Italian businesses generate a broader culture of innovation. However, ICT talent development remains neglected. Only 16.2% of small enterprises with at least 10 workers hire IT specialists each year, down from 17%.
This is not the case with enterprises, wherein 72.3% decide to invest in IT professionals.
Large corporations attempted to employ ICT experts in 31% of instances during the previous year (29.8% in 2016 and 26.6% in 2015), whereas only 4.2 percent of small businesses did so. Both groups have experienced some difficulties finding ICT specialists: 12 percent of firms with at least 10 workers and 1.7 percent of large enterprises. This implies that university offerings do not entirely meet the need for ICT knowledge, according to ISTAT.
Current outsourcing situation in Italy
Italian clients are quite allergic to risk. More than 80% of them prefer to use brands with household names or suppliers they’ve worked with before. Contrary to most of the world, Italians aren’t all that keen on reducing costs. They’d rather sign a contract with a more reliable company that would deliver better results in the form of an end project whose useability and functionality are on par with the best.
Again, not price, but competition, growing the busienss, and possible improvements to productivity are the main factors influencing new software among Italy’s businesses. Italy’s culture is relatively laid-back, which has an impact on the decision-making processes among B2B buyers. On average, they take six months to sign a contract.
Their attachment to the national language is also visible. Italians prefer to have everything in their mother tongue.
The Northwest of Italy was the region with the largest amount of investments in ICT, with over one-third of all spending on a national scale. Together with Central Italy, the two geographical sectors make up almost 60% of the total investments.
Southern Italy’s corporations are more upbeat about the growth of their technology investment, with almost a third expecting a 5% rise this year. However, 60% of these businesses notice issues with both financial resources and risk aversion among managers.
Why IT nearshoring can be a solution for Italian companies
The top seven most important problems rated by respondents of the 2020 Information Technology Issues in Italy Study’s survey were:
- enterprise application integration,
- business intelligence/analytics,
- collaborative and workflow tools,
- business process management systems,
- enterprise resource planning (ERP) systems,
- mobile and wireless applications.
Enterprise application integration is a process that involves combining different applications and data sources, with the aim of streamlining information between them. Outsourcing specialists can help to develop or expand your business integrations without additional costs incurred for infrastructure maintenance, team building, or training.
Business intelligence is crucial for businesses that need to analyze their data in order to make critical decisions concerning marketing, production, and customer satisfaction. Cloud-based solutions are perfect to manage your business intelligence, as they are easy to adopt and are scalable.
Collaborative tools allow you to work more efficiently by automating processes that used to take up a lot of time or included human errors. This category includes workflow management software, team collaboration platforms, social CRM applications, project management systems, and knowledge sharing platforms.
Networks/telecommunications is an important tool that allows businesses to better connect with their customers, suppliers, and partners. Network improvements can help reduce costs for launching an eCommerce website, managing the logistics process (e-invoicing for example), reducing delivery times, or developing mobile apps.
Business process management is an IT solution that helps companies increase productivity thanks to automation tasks and business processes. When all the necessary tasks are done in a timely and accurate way, it’s much easier to achieve your business goals.
ERP is the category that includes the applications companies need to manage their entire workflow from accounting to customer relations management (CRM), human resources management (HRM), and project management. Outsourced specialists can provide all these services as well as training for your employees on how to use them most effectively.
Mobile and wireless applications help organizations implement BYOD strategies among their staff, lowering costs by allowing workers to be more mobile with their work devices because everything they need is now available through a mobile app. This also helps prevent data loss or exposure, enhancing security protocols at a lower cost than a traditional office would.
All that and more can be achieved with nearshoring, especially to countries like Poland, where the economic climate and a high number of ready-to-work professionals make up for an excellent environment in terms of looking for a software partner.