10 Outsourcing Trends – 2020 & Beyond

Global markets and technology advancements have paved the way for a booming outsourcing sector, fundamentally changing the way organizations work. The business benefits unlocked by outsourcing are being harnessed in a broad range of ways and are enabling companies to stand apart, thrive and compete in a tight market.

Here are 10 facts that you should know about the outsourcing industry:

1. The global market size of outsourced services skyrocketed to $92.5 billion in 2019 and is projected to increase to $105.5 billion before 2025.
   Revenue for global outsourcing industries peaked in 2014 at $104.6 billion, with the Americas having the largest share. In the Asia Pacific region, however, the Philippines dominates the outsourcing market.
2. Large organizations and enterprises prefer outsourcing business processes to third-party service providers.
   As businesses expand, there comes a higher possibility of implementing flexible labor rules and regulations which translate to a greater interest in outsourcing or offshoring. At least 85% of IT leaders with over $250 million budget are becoming increasingly reliant to remote workers and contingent staff.
3. More than 35% of small businesses are actively engaging the services of an outsourcing provider.
   A 2019 survey report from Clutch revealed that about 64% of business executives rely on an outsourced partner for software application development, while over 50% leverage IT outsourcing specialists to manage their organization’s application and software maintenance.
4. Cost efficiency and improved business valuation are major motivations for outsourcing IT functions.
   For global business services, being cost efficient and driving business value are the top two most widely cited reasons for partnering with an outsourcing firm. At least 48% of survey respondents use the savings to reinvest within the business while 20% of the organizations focus on technology upgrades.
5. More technical responsibilities are being outsourced to third parties to gain crucial expert guidance to help lead the business to success.
   Startup businesses and emerging firms look to outsourcing companies to provide expertise for their IT services (37%), accounting functions (37%), and digital marketing responsibilities (34%).
6. Chief Information Officers (CIOs) and C-suite executives consider investments in data center and IT infrastructure outsourcing as essential for organizational growth in the digital age.
   According to two Deloitte studies in 2018, the attractiveness of disruptive outsourcing solutions such as cloud adoption provides a competitive advantage for an organization. “The promise of delivering next-generation digital business capabilities is the driving force behind why cloud adoption has become mainstream these days”, said Sid Nag, Vice President for Research at Gartner.Directives from the C-suite are geared towards promoting a ‘One-Office’ strategy which aligns and integrates all front and back-office functions digitally while still making customer needs top priority.Expenditures on outsourced data centers from different regions around the world are at an all-time high and expected to accelerate to $300 billion by 2024. Similarly, heavy investments in outsourcing IT services and co location are driven by their guarantee of meeting capacity requirements and delivering optimal IT functions without the high capital costs associated with running them in-house.
7. Cyber security and data privacy are key factors when executives turn to outsourcing.
   Data breach and cybercrime damages are estimated to cost businesses at least $6 trillion in losses by 2021. As such, 78% of organizations invest in outsourcing contracts to proactively monitor data and security protocols and to mitigate the significant risks and losses during their cloud transformation journey.Privacy laws and issues vary among countries around the world. In the Philippines, data protection is a priority which become all the more evident when the Data Privacy Act was signed into law in 2012. The country is considered a leader in cybersecurity within the Asia-Pacific region as it continues to ensure that its Critical Information Infrastructure (CII) has the highest level of trust and security while making businesses more secure against digital attacks as discussed in the National Cybersecurity Plan 2022.Unlike India which is the world’s third least cyber safe country for businesses after Russia and China, the Philippines keeps people’s privacy top of mind. This is an assurance that gives global businesses peace of mind when vetting long-term outsourcing relationships with Philippine-based companies and organizations.
8. There are diverse and numerous growth opportunities for cloud-managed service providers.
   There is now a huge demand for outsourcing teams and managed service providers across wide-ranging industries to help them navigate through complex cloud application and infrastructure services such as Amazon Web Services and Microsoft Azure. By 2021, market revenue from cloud-managed service providers is expected to skyrocket to $300 billion.According to Gartner, global IT expenditures in 2019 totaled $427 billion, which was largely influenced by abandoning traditional or non-cloud offerings and incorporating cloud-based products and services into their corporate portfolio strategy. Due to the continued increase in enterprise IT spending, specifically for enterprise software (+10.5%), worldwide market revenue is expected to reach $3.9 trillion by the end of 2020.
9. Outsourcing contracts are more focused on value and outcomes over price.
   When asked what motivates clients in hiring a specific outsourced service provider, business owners believe that it isn’t just about cutting costs but due to the value-added services associated with the plan or package. They also believe that outsourcing has enabled their organizations to experience progress and innovation in their current projects through using emerging and new technologies.
10. The Philippines is a global leader in the IT-BPO services industry.
    Tholons Services Globalization Index 2019 described the Philippines as one of the biggest leaders for providing accelerated digital transformation of global industries and services. The Philippines is also ranked among the top 10 best locations for offshore operations, according to A.T. Kearney’s 2019 research report. It is also worthy to note that the country is at low risk of experiencing negative impacts of cloud-based automation due to its capability to deliver high quality customer service.Though India may have made a bigger name for itself within the world of outsourcing over the past decade despite its lax IT security, lack of fluent English speakers and significant cultural differences with the West; it is the Philippines who stands at the forefront of the IT-BPO sector not only because of its excellent fluent English proficiency, high literacy rate, and cultural compatibility with the West but also because it leverages new technologies such as service delivery automation (SDA), cloud computing, artificial intelligence (AI), and Big Data for its local and overseas clients.

The Take Away

As technology and customer demands continue to change and evolve at rapid scale, businesses that leverage the power of outsourcing IT expertise, cloud applications, and IT infrastructure will enjoy a significant competitive advantage over those that don’t and those who are slow to embrace the future which has arrived.

Contact us if you want to get to know more about outsourcing your business in Asia.