Outsourcing has disrupted the global market; it has become a worldwide practice. The stats hint that outsourcing will continue to grow in the years to come. Talk about the IT industry only; in 2018, IT outsourcing companies generated a revenue of around $62 billion.
A survey by Clutch also reported that IT remains the leading outsourced business function past year, accounting for 37% of the total outsourcing market size. Another report on outsourcing predictions of 2020 found that 70% of companies are looking to rely more on outsourced services in the future.
However, the outsourcing landscape, especially the IT sector, is evolving. Many factors, including the digital revolution, personalization, and automation, are reshaping the ways IT businesses operate. The impact is visible in terms of service and quality.
So, where is the Outsourcing landscape heading in 2020? Let’s find out.
1. Shift from Single to Multi-Vendor Outsourcing
It is estimated that in the future, no company will be able to run their businesses with in-house experts only. Therefore, companies will need to hire third-party vendors with specializations in certain fields.
As per ISG, in 2008, 42% of the Forbes G2000 business giants outsourced their IT functions to single companies. However, the trend has declined to 15% today.
Thanks to Vendor Management Systems, 34% of companies believe they are capable of managing multi-vendor environments. So, IT outsourcing companies will have to focus on narrower specialization as companies continue hiring multiple vendors.
2. The rise in Business Process Outsourcing
Besides IT, Business Process Outsourcing (BPO) also has a huge share in the global outsource market. The growing interest of companies into unusual niche markets and value-added BPO services, BPO is expected to reach $220 billion by 2020, according to Global Industry Analysts. It is a trend that many companies are eyeing.
It is expected that the rise in BPO will develop a trustworthy relationship between suppliers and consumers. Companies are already feeling the heat and shifting from outsourcing of non-core services to core business operations. Business owners are aware of the fact that to keep their business in the race, they have to tap into outsourced expertise.
3. Automation through AI
Artificial Intelligence is already taking over many business operations across different industries. The trend is likely to move in an upward direction. Companies are using Artificial Intelligence (AI) to automate various business processes.
While BPO has benefitted a lot from off-shoring, the software can serve the purpose with little to no cost. Much to the horror of the BPO industry, 40% of American employees are likely to lose their jobs to automation by 2030.
However, that’s only the half-truth. Artificial Intelligence (AI) will help human resource and carry the burden of tedious tasks. Thus, AI will allow humans to focus on their core activities.
4. Major Shift towards Cloud Computing and SaaS
Years ago, companies were required to host their own software solutions if they wanted to incorporate technology into their business activities. Thus, companies would purchase expensive servers and spend so many resources on maintenance. It also meant to recruit on-site IT staff for handling the functions.
However, today, businesses are much leaner than ever, and there is a major shift towards cloud computing and SaaS. 95% of the respondents in a survey reported having adopted the cloud technology for their business.
Cloud-computing services are inexpensive as compared to an in-house team of developers. Also, they are beneficial tax-wise. So, the BPO industry has to adapt to cloud tools and technology.
5. Increased Focus on Cybersecurity
Cybersecurity is a concern shared among all companies, both big and small. Breach of sensitive data not only causes financial loss to companies but is also a threat to their reputation. Now, companies and the clients demand full encryption of their data sets.
Cybercriminals are not far behind either as they have found new ways to break strict security barriers. However, some IT companies are working on upgrading the system and implementing a multi-level security approach with the help of third-party cybersecurity services. Computer Economics research 2018 found that the amount of outsourced security work has increased.
6. Growing Competition in the Outsource Market
In the future, Eastern-European countries are expected to come up as strong competitors in the global outsourcing market. At present, Europe, the Middle East, and Africa have the largest share in the global outsourcing revenue, with India and China at the top.
However, Ukraine, Poland, Romania, and Belarus will rise as the new hotspots. Ukraine is particularly growing as the hub of the off-shore development team. According to a recent PwC analysis, Ukraine’s IT outsourcing market has increased by 150% from 2011 to 2015. It is expected to hit the $5.7 billion mark by 2020.
Final Thoughts
2020 is almost here. A lot is expected to change in the global outsourcing landscape. While we listed some of the expected trends, it will be interesting to see how things unfold.