IT Outsourcing Boom – Market Analysis in Early 2020

Digitalization, globalization and rapidly evolving customer expectations demand a shift in how leaders responsible for logistics approach outsourcing strategy,” says Courtney Rogerson, Senior Principal Analyst, Gartner. 

In 2018, the global IT outsourcing market managed to gain $85.6 billion. According to a Global Industry Analytics report, the outsourcing market will reach up to $220 billion by the end of 2020.

This is a clear sign of the steady growth of the IT industry in the upcoming years.

IT services are being outsourced to offshore companies. And the motive is to gain benefits like operational flexibility via the latest skills to cost-effectiveness.

However, 2020 is said to be the year where change is going to be visible. Companies that wish to stay updated should be ready for the new wave of outsourcing.

IT development outsourcing is tried and tested models for a profitable business. It has proved itself as a competitive strategy over the years that companies can use on a long term basis. It allows companies to concentrate more on core business operations while keeping the budget under control.

Before moving further, here are the key statistics to consider.

Key Outsourcing Statistics: IT Marketing Analysis 2020

  • As per Gartner, worldwide IT spending is projected to total $3.79 trillion USD in 2019.
  • In 2019, the enterprise software market is forecast to reach $427 billion USD, up 7.1% from $399 billion in 2018. This increase is due to the shift of enterprise IT spending from traditional offerings to cloud-based alternatives. Source: Gartner
  • According to Technavio, the contract value of the IT outsourcing market is expected to grow to over $409 billion USD by 2022.
  • As per estimation, there will be 1.4 million computer specialist job openings in 2020. This is going to create a talent shortage making it quite challenging by universities to fill by even 30%. Source: Gartner
  •  70% of businesses and outsourcing providers are currently implementing, or are discussing the use of, Robotic and Cognitive Process Automation to improve outsourcing results. Source: Deloitte
  • 54% of companies use third-party support to connect with customers.
  • 78% of businesses feel positive about their outsourcing partners. 
  • More than 93% of companies have adopted cloud services to improve outsourcing.
  • 71% of financial service executives outsource some of their services.

The Current IT Outsourcing of Global Trends

Presently, there are approximately 37% start-ups that are outsourcing at least one task. As per the competitive analysis in marketing 24% of those do this to boost their efficiency. While 18% claim that their main aim is to gain global expertise.

Regardless of the objective, outsourcing has become an important aspect of businesses. That’s why most of the European & Western companies prefer to collaborate with an offshore development company for their software needs.

Earlier, most offshoring deals were price-driven. But the trend has drastically changed and the focus has shifted onto the processes and people. 

Competing Countries

India has always been the first choice when it comes to outsourcing software development. Similar solutions are also gaining momentum in their respective regions.

European and Latin American companies are expected to have tough competition with the country. 

Helping Hand for Startups and Smaller Projects

There has been a rise in the outsourcing of IT operations for smaller projects.

Although established firms continue to be outsourcing huge projects nut startups have less budget so outsourcing proves to be a better option for them. This offshoring advantage is beneficial especially to the budding entrepreneurs who spent years establishing their organization and are willing to save costs from IT staff augmentation.

To reduce the overhead and operational cost, start-ups have turned towards outsourcing.

There is an overall increase in the customer rate as more and more businesses get on-board with the IT consulting outsourcing options.

Custom Outsourcing Agreements

Fixed deals and contracts help in reducing the way for custom outsourcing agreements in pressure and limitation faced by businesses that are willing to outsource your work. NDA and custom contracts give the opportunity to both ends of the party to settle on mutual agreement in regards to the pricing, service, and delivery.

This helps in inspiring IT outsourcing businesses to offer flexible engagement models in hiring dedicated offshore developers.

A Diverse Range of Services

Outsourcing primarily for small tasks has garnered enough attention to start providing large scale business operations. In 2020, this trend helps in evolving further as businesses start outsourcing their high-end critical processes. Businesses that outsource IT solutions strive to provide the stability and security of the client.

IT outsourcing companies are reliable in offering critical functions outsourcing and will have a competitive edge. 

How will Outsourcing Look in the Near Future?

Here is the list of recent outsourcing trends and how they will look in the future. 

1) Blockchain

BitCoin technology is the base of the financial and reporting system of the future.

According to Forbes, with time the trust factor in the blockchain abilities rose. It is only a matter of time when blockchain is going to penetrate every industry. 

2) Internet of Things (IoT)

IoT has become an integral part of mainstream electronics culture and the world is adopting smart technology faster than ever.

Alexa has already proved its worth and by the end of 2020, there will be more than 21 billion devices connected to the Internet. This will require special skills in programming and voice recognition. 

3) Artificial Intelligence and Deep Learning

AI-powered networks will help in the improvement of customer service quality. The online world helps in smoothing the personalized customer journey based on the previous interactions that the client had with the platform.

Do you want to automate your business operations? Hire AI developers & get started.

4) Chatbots

As per Gartner 85%, customers will be purchasing without contacting humans. Chatbots will be substituted by individuals by giving clients online advice and guidance. 

5) Machine Learning

With the advancement in algorithms, statistical modeling, and computing, machine learning is only getting better.

As per the best industry Report Garter, Machine learning has reached a tipping point and is expected to extend virtually the technology-enabled service. 

6) Social Media

A Salesforce report depicts 50% of customers expect instant replies to their queries. One of the global outsourcing trends is hiring human experts to work on repetitive processes to offer amazing support levels.

Most of the work is done by outsourcing companies as it is more efficient than delegating it to the in-house team.

7) Robotic Process Automation

As the technological era evolves, bots will keep performing the repetitive manual process but there are tasks that require a small human intervention.

The best industry reports further results in intelligence automation where humans interact with machine workers. Keeping all this in mind, RPA security will become a priority.

8) Cloud Services

Today, as per the market analysis the cloud is scalable and flexible providing security and control over the data center. Improved storage capacity, enhanced Internet performance is expected.

This technology is becoming more diverse so that businesses are able to deal with security concerns. This has shifted towards adopting the technology in order to meet the demands of the critical operations.

Cloud computing is powerful and will continue to evolve in the future.

9) Cybersecurity

Data is very valuable for all businesses today. The specialist skill of Cybersecurity is best delivered via outsourcing. 

10) Big Data

As per the IDC predictions, there is expected to be 44 zettabytes or 44 trillion gigabyte data in 2020. Predictive analytics help businesses to produce informed decisions on the basis of data while following an appropriate approach.

This analytics leverages machine learning, simulations in order to derive a data-driven scenario. 

What is Making Outsourcing More Popular in 2020?

The major reasons considered for outsourcing this year also include less cost to the company, reduced capital expenditure, no rigorous in-house staff training and enhancing organizational resource utilization. 

Here are more reasons why IT Outsourcing is becoming popular in 2020!

a) Specialization and Expertise

Whenever a business plans to outsource tasks from the experts, they know they will get superior knowledge and experience in the field. The resources offer specialized assistance and the highest quality IT outsourcing services.

It is their responsibility to ensure that the business requirement is fulfilled in the best way possible. 

b) Value Over Cost

The most popular advantage is cost-effectiveness. The top offshore developers reside in countries like India where the labor cost is comparatively lower.

When you hire Indian developers, it becomes possible to make financial savings from operational costs as there are no added benefits inclusive of administration, payroll, rentals reimbursements, and other utilities. 

The market forces clearly indicate that offshore developers and companies will rely on outsourcing contracts based on future value. Customer experience, business expansion, and improved security are priorities when it comes to outsourcing development services.  

In 2020 also companies will be curtailing their overall outlay by paying less for quality outsourcing services.

c) Open Market for Different Business Models

Nowadays, software outsourcing companies allow you to collaborate via different business models. Offshore development companies are considered as strategic business partners that help in improving the market reputation of your business.

Ambitious companies are giving priority to offshore developers keeping them at the forefront of the business model and getting ahead of the marketplace.

d) Focus on the Core Business

When different tasks are assigned to the offshore development team, the company doesn’t need to fragment its attention to unimportant things.

This gives more time and energy to concentrate on the most important business jobs. The IT outsourcing consulting providers offer on-time delivery allowing streamlines business flow.

e) Reduction in Infrastructure Investment

When IT-related tasks are taken care by dedicated offshore developers, there is no need to invest in expensive infrastructure for the in-house facility. As per industry and competitive analysis, the cost for a company offers state of the art infrastructure like IT support, IT helpdesk among others.

Alternatively, you can avoid this cost by hiring developers from an offshore software company.

f) Frees In-House Employee

Another major benefit of hiring offshore workers is that the company’s in-house staff is relieved from the pressure of multi-tasking and focusing attention on unimportant functions.

The core team can easily dedicate their time and energy to accomplish mission-critical tasks. 

g) Result Orientation

The best thing about outsourcing is that the company that takes the help of outsourcing IT services can plan ahead of time. When the requirements are known, the responsibilities can be handed over to the external service provider to get it done within a given time span.

This gives the company full control of the tasks and embeds them as per the business strategy. The ability to measure the results helps in setting realistic goals that prove beneficial for a company’s growth. 

h) Makes Way for Flexibility

If you want everything to work as per your requirements, you should take the help of the best outsourcing company that understands your vision clearly. If the company is unsatisfied with the quality of deliverables, then it refrains from renewing the service contract.

This allows you to be more adaptable being able to move to a better position quickly whenever there is a change in circumstances.

The best market analysis clearly depicts significant time and cost savings when compared to the involved process in hiring new staff to join your in-house team.

i) Access to New Technologies

Not only does the company get help from the specialists while outsourcing but it also profits from the latest technologies. The technological advancements come with minimum downtime and improved quality and productivity.

The dedicated development team works efficiently to deliver improved operational efficiencies. 

j) Helps to Overcome the Talent Shortage

Whenever there is an acute shortage of local talent, there is a high demand for a skilled workforce. With the help of outsourcing, the urgent need for qualified and experienced professionals can help in averting the situation that may have led to significant losses. 

Businesses, especially SMEs, consider setting up an offshore development center. Not only it helps them to save cost and time, but it also saves their efforts to gain skilled dedicated developers for generating high-quality solutions.

k) Offers a Competitive Edge

Cost-effectiveness and streamlines business operation is something to embrace via outsourcing that gives an upper foot to the companies. Today, remaining viable and competitive has become more important than ever. And for this, hiring offshore developers is the key.

Therefore, the competitive edge is relative giving away to necessity as hiring offshore developers is becoming a norm.

l) Seamless Seasonal Workflow

The majority of the companies look for outsourcing agencies that can perform multitasking. The offshore remote team helps a company deal with an immense workflow in critical situations and that too in a cost-effective manner. 

m) On the Whole – New Outsourcing Areas are Challenging Limits

The popularity of outsourcing is pushing itself to the advanced business areas that are overcoming structural constraints without hampering the strategic direction. An IT competitor analysis depicts that companies that manage to successfully identify new value for creating arrangements in advanced business areas will have an edge in 2020.

To accomplish the same, the offshore developers will build a new system-wide perspective involving complex relationships with plenty of partner organizations. 

n) Innovation and Idea Generation Will be the Key

To live up to customer expectations, IT outsourcing companies have to improve their innovation capacity and move towards innovation.

This move will certainly differentiate you and help in gaining competitive advantages. 

o) Outsourcing Areas will be More Specialized

With the ever-evolving technological advantages, the outsourcing domain is expanding into new service areas. This will further create new market opportunities for customers and service providers.

Furthermore, for customers where personal information is the primary asset, new opportunities emerge for the industry players. Data sets for integral storage, analytics and applications will be driving efficiency, quality, and personalized services.

p) The Emergence of an Experienced Economy

As per industry analysts, the emergence of an experienced economy creates values and new ways for service and innovation while offering various market opportunities.

Customers keep demanding outsourcing services regarding design, aesthetics, culture, storytelling, values, and experiences. This entails an amazing focus on service design and user experience. This is a client-centric approach having an emphasis on the experience is equally important.

Closing Thoughts

As technology and customer whims evolve, so does outsourcing. 2019 has evidently seen numerous changes that had far-reaching impacts.

IT outsourcing business helps in bridging the gap for expertly skilled professionals in some of the important portions of business processes while not compromising on quality standards.  

Over the past years, outsourcing has grown into a multi-trillion US dollar business across the globe. The financial rewards, scalability, flexibility and improved productivity will still remain the hot commodity for the upcoming years.

When hidden benefits come handy, it is evident how important outsourcing is for any business. The outsourced IT department is resting assured to survive in the turbulent waters of today and will be evolving dramatically.

The best offshore service providers continue to serve different organizations of various sizes, domains, and industries. In 2020 offshore services will shift from low-level process to more strategic approaches that involve complex relationships.

Businesses will seek a differentiator, intellectual capital, skilled team, latest technology, and tailor-made solutions. Global outsourcing will continue to flourish, become valuable, and become a common practice in the upcoming future. 

Are you too planning to outsource software development? Drop your requirements at info@yourteaminindia.com & our team will get in touch with you instantly!

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