Current Outsourcing Trends Worth Following

The outsourcing market – what’s driving it, what IT outsourcing trends should organizations pay attention to, and what does the future look like for this market?

In today’s economy, businesses need to find ways to cut costs and innovate simultaneously or risk becoming irrelevant.

There are many ways to do this, but one of the most tried and tested methods is to outsource what organizations can’t do to a contractor, and software development outsourcing is foremost amongst nearshore software development services – meaning dedicated software teams are now worth their weight in gold.

But before organizations start their own outsourcing journeys they might, understandably, have some questions that need answering before they begin. Questions like “why are companies increasingly outsourcing IT services?” “What IT functions are most commonly outsourced?” “How is cloud computing impacting IT outsourcing?” And “what role does cybersecurity play in IT outsourcing decisions?”

The following blog will shed some light on the current IT outsourcing trends of today. So, with this goal in mind, what is currently trending in the outsourcing market today?

Outsourcing trends today

As of now, 65% of companies in the US outsource their services to other countries, meaning about 300,000 US jobs get outsourced every year – and this market is set to grow at a compound annual growth rate (CAGR) of 8.0% from 2023 to 2030.

Most of these jobs are sent to established outsourcing regions such as the Philippines, and other Asian countries, because overhead costs there are much cheaper for international companies. However, over the last few years these same companies have started outsourcing to more emerging markets in places like South America, South Africa, and Eastern Europe – most of these jobs are in sectors like IT, healthcare, finance, and HR.

But what does the wider, global outsourcing market look like today? Essentially, AI is helping organizations across the globe streamline their key processes, helping them make faster, better decisions that will significantly increase their customer satisfaction scores. But it’s not the only technology making a splash in today’s modern outsourcing market.

Cloud computing, for example, also gives companies greater flexibility. Flexibility that enhances their efficiency and innovation, while providing the stability they need against the next market disruption, as well as the infrastructure necessary to employ a truly international workforce that can deliver projects as one team – despite working in different time zones.

Crucial new technologies in outsourcing

Artificial intelligence (AI)

AI is transforming outsourcing by automating complex tasks that require cognitive abilities, such as data analysis, customer service through chatbots and voice bots, service personalization, and fraud detection. Through machine learning, AI systems carry out repetitive tasks, learn from experience, and improve over time. This capability enables forecasting, optimization, and quicker decision-making. As a result, businesses experience higher efficiency, reduced costs, and increased customer satisfaction. Additionally, AI enhances cybersecurity and enables the analysis of large datasets, fundamentally changing how outsourced services are delivered.

Robotic Process Automation (RPA)

RPA, or Robotic Process Automation, is a technology designed to automate repetitive and rule-based tasks that humans have traditionally performed. In outsourcing, software “robots” (or bots) simulate human interactions with computer systems for tasks such as data entry, invoice processing, and report generation. This automation significantly streamlines business processes, reduces errors, and lowers operational costs. When RPA is combined with artificial intelligence, it leads to a concept known as hyper-automation. This combination enables outsourcing companies to scale their operations and concentrate on more strategic activities, resulting in substantial efficiency gains.

IT outsourcing today

The main factor driving modern IT outsourcing trends is the growth in new, innovative technologies and a lack of skills within teams or organizations to take advantage of them. This issue can arise with anything from cloud computing to DevOps, to chatbot development, and AI.

But two of the most talked about technology topics in the last two years have been ChatGPT and Generative AI. These two technologies burst onto the scene in 2022-23 and now organizations must find ways to implement GenAI, if not ChatGPT, into their ways of working because if they don’t, their competitors will. But how does IT outsourcing come into play?

In short, upskilling their own people in these technologies would take too long and would certainly be extremely expensive for any global organization, which is why IT outsourcing trends are on the rise around both Gen AI and ChatGPT. Handing them off to a third party who is well-versed in either technology is a much quicker, and often a much cheaper route to offering them to customers before anyone else.

But it is worth noting that Generative AI and ChatGPT are just two IT outsourcing trends currently at play on today’s global market. So, with that in mind, let’s look at some more.

Top five trends in outsourcing

To be clear, there are too many trends in the outsourcing market to go into in this blog, but here are five of the most current trends to give an idea of what’s happening on the ground:

• Cybersecurity will be a key focus moving forward – Cyberattacks are becoming more creative as technology evolves, meaning outsourcing companies will need to take a multilevel approach to reducing risk and securing customer data, which will become increasingly important as the market moves forward into a digital age where securing data is the key to maintaining customer and employee trust
• AI and automation are here but are not remotely ready to stand alone – As a result of government-imposed lockdowns four years ago, AI and automation have become more ubiquitous, however, they’re nowhere near standing on their own without the support of a human being, even now.
• The forecast calls for the cloud – A study by Nemertes Research revealed that after restrictions were lifted, 70.7% of contact centers continued to allow remote work in some capacity, which illustrates that with the rise in remote work, cloud computing will be more in demand than ever because employees will still need to access their organization’s servers to do their work, regardless of their current location.
• Remote working isn’t going anywhere – As more organizations continue to leverage their remote working setup, flexible job opportunities will naturally increase, therefore, if organizations want to continue to attract top talent moving forward, offering work from home opportunities will definitely make them stand out from the crowd – especially, as more companies continue to call their people back to the office.
• Mergers are coming – As the world gets smaller and more IT outsourcing trends pop up, is it surprising that the bigger outsourcing firms may look to acquire smaller firms to fill any skill gaps they may have? Sitel’s $2.2-billion acquisition of Sykes in 2021 was just one example of this, but with Sykes’ multi-channeled generation of demand and full cycle customer experience (CX) management, Sitel became one of the top three CX leaders in the world almost overnight, so why wouldn’t other large players in the outsourcing field look to do something similar?

Models and types of outsourcing

• Onshore outsourcing: Engaging a service provider located within the same country. This approach offers benefits such as cultural alignment and ease of communication, making it ideal for projects that require close collaboration or adherence to specific regulations.
• Nearshore outsourcing: Contracting with a provider in a neighboring country or the same time zone. This strategy provides geographical proximity and cultural similarities, potentially reducing costs compared to onshore outsourcing. It also facilitates easier travel and communication.
• Offshore outsourcing: Partnering with a service provider in a distant country. This option is primarily motivated by significant cost savings and access to a large talent pool despite potential challenges related to time differences and cultural understanding.
• Multisourcing: Utilizing multiple service providers for different IT or business functions. The goal is to leverage the best available capabilities while reducing reliance on a single vendor, enhancing flexibility and managing risk across the organization.
• Captive centers: Wholly owned subsidiaries established in lower-cost locations to perform functions for the parent company. Captive centers provide greater control and integration than traditional outsourcing, often used for critical or sensitive operations.
• Business Process Outsourcing (BPO): Delegating specific non-core business processes to an external provider. This approach includes various human resources, finance, or customer service functions, allowing companies to focus on their core competencies and achieve cost efficiencies.

The future of outsourcing

Taking into consideration all these outsourcing trends, it’s safe to say that the outsourcing market is moving from strength to strength, growing exponentially as businesses across the world continue to give business process outsourcing (BPO) companies more complicated tasks to deal with, as they continue to rely on their outsourcing expertise to get more of an advantage over their competitors.

And, theoretically, this cycle could become self-sustaining very quickly. The more complex tasks BPO companies are given, the more skilled they will get at handling IT outsourcing tasks, and the more skilled they get at handling these tasks, the more complicated the tasks given to them will get.

But regardless of what happens moving forward, the future does indeed look bright for the outsourcing industry. So, where does that leave you?

At Software Mind, we know that implementing an IT outsourcing infrastructure can be challenging. But we also understand the benefits this can deliver to your business and how to implement it into your way of working at speed. This is why our experienced software team is happy to talk about what outsourcing can do for you. Just use this contact form to get in touch with us.