According to the latest data, the global outsourcing market size has reached 92.5 billion, and one report from Grand View Research estimates that, by 2027, business process outsourcing will be worth an impressive $406.6 billion. Out of all processes that can be outsourced, IT definitely stands out; at present, approximately 60% of all tech companies are outsourcing at least part of their software development, and most of them plan to increase their spending.
But why do these companies outsource? To save money, one might answer, and that’s a legitimate argument. On average, a company can save up to 30% on operating costs by outsourcing IT tasks, and that is probably one of the reasons why so many professionals decide to try it.
However, when companies decide to continue outsourcing and even increase their spending, more factors come into play. If being cheaper were the only benefit of outsourcing, it wouldn’t have lasted this long, and it wouldn’t have such a big market size. Instead, when they outsource, businesses discover that this solution offers much more than savings.
In 2021, these benefits stand out as the main drivers of IT outsourcing.
Quality Outcomes May Matter More Than Price
Many of those who outsourced IT tasks once plan to do it again. But if the quality of the services they received was low, they would steer clear of them, no matter how cheap they were. Most business owners understand that cheap services aren’t a good idea if you then have to spend more to fix them. But with outsourcing, that didn’t happen. Outsourcing saves you money, but without sacrificing the quality of the outcome, and that right here is the biggest incentive for businesses.
Through outsourcing, businesses save money, but the quality of the services they receive is on par or even greater than what they would achieve in-house. So, instead of hiring expensive local developers and consultants, it makes more sense to outsource. In 2021 and beyond, the quality of services is expected to increase even more, since there’s a lot of competition between offshore providers.
The Tech Industry Is Facing Its Biggest Talent Gap
The demand for IT services continues to increase, but even if you wanted to build a local team, chances are you might not find too many qualified people. And that’s because the tech industry is facing its biggest talent gap. In an interview for the Wall Street Journal, the CEO of global IT recruitment firm Harvey Nash said that CIOs have great ideas, but the lack of talent holds companies back.
Businesses are looking for skilled developers, but there simply aren’t enough candidates, and for small companies, the fight can be tough. If multinationals can afford to attract local talent with high salaries and amazing perks, smaller startups can’t afford to compete, which leaves them with staff shortages. Outsourcing offers a solution to this problem because you are no longer restricted to one market, and you have access to a global pool of skilled IT engineers.
Geographical Barriers No Longer Exist
We live in the era of globalization and remote work. Geographical barriers no longer exist, and if you cannot find qualified candidates in your country, you can outsource that job to an offshore company. For example, if you are looking for software outsourcing Philippines experts, you’ll find that there are many companies who can rise to the occasion and help you with any project, no matter how challenging.
And, as the COVID-19 crisis has proven, you don’t need to see each other in-person to establish a long-term partnership based on trust. As more and more IT giants embrace full-time remote work, soon the entire sector will work more from home than from the office, which makes geographical barriers even less problematic.
Digital Transformation Requires Specialized Services
The growing demand for tech skills is another reason why companies will continue to invest in outsourcing. The need for IT skills isn’t new, of course, and it has existed long before the pandemic. But, ever since COVID-19 jump-started digital transformation, almost all sectors have found themselves in sudden need of innovative services. Stores are moving online, companies are looking for remote collaboration tools as they switch to work from home, and the demand for cloud services is greater than ever.
The biggest demand for tech services is in fintech and healthcare, but just about every industry is moving at least part of their processes online. For example, a Gartner study estimates that the cloud system infrastructure market will reach $81 billion by 2022.
Additionally, a 2020 study revealed that the new context of digital transformation will boost the demand for “disruptive” skills such as quantum computing, connected technologies, Artificial Intelligence, machine learning, automation, Natural Language Processing, and Parallel Computing. And we can’t talk about the demand for IT skills without mentioning cybersecurity. One report revealed that 55% of businesses plan to increase their budget for cybersecurity outsourcing and that this year the cybersecurity market will experience a 10% growth.
Many times, the local marketplace cannot keep up with the demand, which makes businesses turn to outsourcing hotspots in the Philippines and Eastern Europe.
Outsourcing Offers More Flexibility
Business needs can change from one day to another. Especially now, in this climate of uncertainty, companies can discover that they need to scale their IT services up or down and restructure teams based on the state of the market. This makes establishing an in-house department quite a risky venture. Working with a local agency is another option but, many times, these agencies operate on fixed contracts and cannot adapt quickly to changing business needs and team ethics.
By comparison, offshore providers tend to be more flexible and, apart from being at the forefront of emerging technologies, they’re used to working with diverse teams from all over the world and adapting to different client demands on the spot.
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