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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Micro Focus International plc       GB00BCZM1F64

MICRO FOCUS INTERNATIONAL PLC

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Micro Focus International plc : CIOs outsource 48% of all testing and development projects, but almost 1 in 4 fail to deliver, threatening 31% of jobs

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11/12/2013 | 06:31am EDT
Media Contacts

Natasha Holloway
Racepoint Group
+44 (0) 20 8811 2474
microfocusuk@racepointgroup.com

57% of IT leaders describe some of their outsourcing projects as unmanageable, an embarrassment, a nightmare or a total failure, according to new global research

Newbury, UK, November 12th 2013

Almost half (48%) of testing and development projects are outsourced, with CIOs predicting around a 14.5% increase in these outsourced projects in two years' time. However, 31% of outsourced projects have run into service level or time issues and 23% have failed to deliver on the final requirements, threatening 31% of CIO jobs. That's according to an independent global research study undertaken by Vanson Bourne and commissioned by Borland, a Micro Focus company (LSE: MCRO.L).

Of the 590 CIOs and IT directors polled from nine countries around the globe, more than half (57%) described some of their outsourced testing and development projects as unmanageable, an embarrassment, a nightmare or a total failure. The majority of respondents (55%) cited too many changes to the requirements during the project as the main reason for project overruns or failure to deliver on the final requirements. This is a serious issue given 47% of organizations change the specification of work being done by their outsourced vendor at least once a fortnight or more frequently.

The requirements conundrum

The IT leaders painted a troubling picture about their own ability, as well as that of their outsourcing partners, to accurately define project requirements at the outset and manage change requests during the project:

  • 81% of respondents said they are not totally confident in their ability to clearly document and communicate project requirements to outsourcing vendors at the outset
  • Less than half said they use a dedicated requirements software tool. The majority are relying on spread sheets like Excel and written documents like Word to capture their requirements
  • Only 37% felt they could manage variability, variety and change very well during outsourced contracts
  • Even fewer (27%) felt that the outsourcing vendors themselves managed these changes well for all parties
  • 85% said they capture and share requirements with a variety of stakeholders, adding complexity which can lead to a higher chance of project issues or failure
Cost implications

Despite a clear requirements need, survey respondents said 68% of outsourcing vendors don't expect requirements to be correct first time as a prerequisite for any project, and that only 15% of vendors actually review and propose changes to the original requirements at the outset of a project. Interestingly, more than a third (37%) said outsourcing partners use changes to drive profitability, which could explain vendors' reluctance to determine requirements from the very start. Almost all CIOs (96%) confirmed unpredicted costs arise due to change requests, but only one in three felt those costs were fair.

Partner problems

When questioned about their outsourcing vendor relationships during projects with time or service level issues, over half of CIOs (53%) said they felt let down by their partner. Surprisingly, 43% of these said although it was far from ideal, issues were par for the course when using outsourcing vendors - seemingly removing accountability from partners. It's not surprize therefore that only 35% said their outsourcing partners were definitely contractually obliged to provide financial damages should service levels not be achieved. Overall, 84% of survey respondents claimed outsourced development and testing projects had created negative issues for their organization, ranging from delays to customer products (39%), the ability to protect company IP (29%) and reputation (25%), and even an impact on company revenues (12%).

The in-house impact

Despite outsourcing their test and development needs, a shocking 98% of CIOs confirmed some form of additional in-house work was needed following the final delivery of outsourced projects.

Additional findings
  • The majority of survey respondents (52%) work with 3-5 outsourced vendors
  • The average size of each outsourced testing and development project is over 5 man years of effort
  • In order of size, outsourced testing and development projects today involve the following applications: cloud apps, customer facing apps, mainframe apps, desktop apps, internal business apps and mobile apps.

Chris Livesey, Borland Vice President at Micro Focus, said: "The research highlights that the relatively poor outsourcing results are often caused by a lack of investment in the processes for requirements management and test specification, and this is something we see consistently in the market place today. However, the results could be greatly improved by investing in a much clearer statement of requirements and their associated test cases early in the project, enabling both the end client and the service provider to more accurately estimate the project schedule, risks and costs at the beginning of the contract. This transparency is relatively straightforward to achieve through a combination of discipline and dedicated tooling, which also allows a much stronger element of control in how those requirements and test cases evolve throughout the project. With this early and continual visibility these partnerships would work much more effectively."

###

Notes to Editors

The independent research survey was undertaken by Vanson Bourne in August 2013. It covered 590 IT decision makers in nine countries including UK (100), France (100), Germany (100), USA (100), Brazil (100), Australia (35), New Zealand (15), Hong Kong (15) and Singapore (25). The respondents were from mainframe organizations with 501+ employees, covering multiple industry sectors, and were already outsourcing testing or development of applications.

To download an overview of the research, please visit www.borland.com/Vanson-Bourne-outsourcing-report.

About Borland

Originating in 1983, Borland Software Corporation is a world-class provider of requirements, test and change management solutions. As part of Micro Focus Ltd, a member of the FTSE 250, Borland offers tools that are open, agile and work across the entire Application Development Lifecycle to enable customers to build better software, faster.www.borland.com.

To find out more about Borland requirements management and Caliber product visit: www.borland.com.

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Financials ($)
Sales 2019 3 493 M
EBIT 2019 1 366 M
Net income 2019 64,0 M
Debt 2019 3 681 M
Yield 2019 4,07%
P/E ratio 2019 144,19
P/E ratio 2020 24,28
EV / Sales 2019 4,06x
EV / Sales 2020 4,11x
Capitalization 10 510 M
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Mean consensus HOLD
Number of Analysts 11
Average target price 21,0 $
Spread / Average Target -18%
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Managers
NameTitle
Stephen Murdoch Chief Executive Officer & Director
Kevin Loosemore Executive Chairman
Paul Rodgers Chief Operating Officer
Christopher John Kennedy Chief Financial Officer
Stuart McGill Chief Technology Officer
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