IT Nearshoring in Sweden

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In the age of globalisation, nearshoring has been on the rise. In Sweden, where there’s a high demand for IT services and engineering solutions to be outsourced from nearby countries, nearshoring is becoming increasingly popular. The Swedish government itself has been pushing for more companies to outsource their work in order to help grow the economy. Learn more about what you should know about software development outsourcing in Sweden today!

State of the IT market in Sweden

The IT and telecom industry in Sweden is a very prosperous one. The Swedish government has been pushing for more companies to outsource their work in order to help grow the economy, which speaks volumes to the type of talent that is present within the country. There are many well-known global tech brands based in Sweden, such as Electrolux, Truecaller, µTorrent, Spotify, Klarna, Skype, Mojang, Ericsson, and King. These companies have been able to play a leading role in various sectors internationally thanks to their roots within Sweden and finding new employees in nearshore locations.

The Sweden IT market has seen an increase over the past few years in relation to the IDC (International Data Corporation) report on Nordic IT services. The IDC predicted that Sweden’s IT services will grow from $24.4 billion in 2018 to $29.5 billion in 2023 with a CAGR of 3.2% in 2019-2023.

Further, Sweden is leading digital transformation within the Nordic region, with its share of IT spending set to grow from 40% in 2019 to 44% in 2023. This growth is mainly driven by rising demand for offshore/nearshore integration services across all verticals and industries.

Why that matters: Sweden accounts for more than 40% of the Nordic IT Market, followed by Denmark, Norway and Finland respectively. The region is experiencing rapid growth in digital transformation led by Sweden that experienced a CAGR of 10.3% in 2019. As digital transformation progresses and changes the way IT services are produced, sold, and used, the differences in the four Nordic markets become much more important and defined by variations among industries.

Current Outsourcing situation in Sweden

The Swedish IT outsourcing market is one of the largest in Europe with a total turnover of 3.9 billion U.S. Dollars in 2020, and it is expected to grow at an annual rate of over 7% until 2021. The IT-outsourcing market share has been increasing steadily for years, accounting for more than half of the IT services market revenue and a vast majority of companies outsourcing their IT services to third party providers across Sweden.

The Swedish ICT service exports are dominated by four major sectors: software development (including maintenance), system integration, hardware procurement and telecommunications infrastructure procurement. These four sectors account for around 80% of all exports from this industry segment while the other 20% are generated by various other service categories including business process management, consulting industry, training and other professional services sectors.

Software development in Sweden has increased in recent years. As of today, almost half of the large companies in Sweden are investing in their own software development, with around 30% businesses already having it.

Between 2014 and 2019, software development costs in Sweden have more than doubled. The COVID-19 catastrophe has driven demand for software development and outsourcing even higher. More organizations are considering alternatives to the traditional destinations such as India, China, and Central and Eastern Europe because home offices have blurred the line between in-house and distributed teams. With the pandemic at large, enterprises are also looking for cost reduction, talent pool, and cultural proximity in nearshore countries.

The Hays Global Skills Index, 2019/2020, show Sweden to be amongst the most pressured labour markets. The talent shortage indicator has risen to 10.0 which shows that the gap between the skills wanted by businesses and the skills available on the labour market is now at its greatest. According to Swedish IT & Telecom Industries, by 2022, 70,000 unfilled digital jobs will have emerged in Sweden, accounting for 4% of the European digital talent gap, which is similar to other Western European countries.

Skilled professionals in Sweden who are in high demand include ICT architects, testers, test analysts, software and systems engineers, and software developers. Other areas with critical shortages of skilled workers include Business Intelligence (BI) and Data Analytics, Cybersecurity, Enterprise Architecture, financial services, Technical Architecture, User Experience Design (UX), and DevOps.

According to a Whitelane Research and PA Consulting Group study, customer satisfaction has increased to 72% in 2021 from 69% in 2019 across all Nordic countries.

Why software development outsourcing companies can be the solution for Swedish companies

A lot of businesses in Sweden are experiencing labour shortages. They often rely on outsourcing to get other skilled workers. As certain skills become more difficult to find, local outsourcing is becoming more prominent than before. This includes IT outsourcing markets, which has increased steadily for years.

Companies are looking to nearshore for other skilled workers because it is increasing the efficiency of their workforce while saving them money. Nearshoring also benefits Swedish companies because they can get access to better tech jobs and become more competitive globally. IT outsourcing is not the only area where Swedish companies and organizations need help.

They also want to focus on their core business rather than everyday tasks like data entry and customer service. Human Resources (HR) is another market that needs attention. When HR departments do not have the resources they need, it can affect their overall productivity as well as their employees.

Nearshoring is the ideal solution for SMBs who want more experienced talent without investing in onshore resources or outsourcing to another country. Sweden has an abundance of highly skilled people, but the labour market cannot meet the demands of some companies, which means that they have to look elsewhere for support.

The need for quality web services outsourcing is definitely on the rise in Sweden, and with a burgeoning tech economy, there is no doubt that more companies will increasingly need high-end tech talent nearshoring.