There are three main reasons why businesses outsource IT operations: Rising operational costs, looming recessions, and lack of specialized skills.
IT outsourcing empowers businesses, particularly startups, to improve their operational efficiency while keeping budgets in control. Recent advancements in AI tools have further identified the need to work with third-party experts as companies strive to optimize their processes.
However, is IT outsourcing a viable model? The answer is yes if implemented correctly.
Partnering with a credible outsourcing agency is a strategic move. At the same time, businesses may also face challenges like communication issues, security risks, and legal compliance. These issues can be resolved by careful planning, internal team discussions, and monitoring at every stage of implementation.
Most importantly, staying updated with the latest IT outsourcing trends is also crucial.
Hence, we bring the top five IT outsourcing trends that can help employers explore future growth opportunities and strengthen their competitive edge.
So, let’s get started!
Understanding IT Outsourcing
Before we look at the IT outsourcing trends, we’ll understand this model.
IT outsourcing is the process of subcontracting IT operations to a third-party agency that is specialized in the relevant domain. Kodak was among the first companies to outsource their processes during the 1990s. The main objective was to cut down costs without reducing quality.
Today, the world’s leading tech giants like Microsoft, Google, Amazon, and IBM have adapted IT outsourcing to meet their short-term or long-term project needs.
Collaborating with third-party experts brings agility to organizational operations. Besides, the approach allows entrepreneurs to focus on more critical tasks while outsourcing repetitive ones to external resources.
IT Outsourcing in Numbers
The US is the leader in the global IT outsourcing industry. Almost one-third of US-based enterprises have outsourced their operations to external agencies worldwide. As a result, nearly 0.3 million US jobs get outsourced annually and the industry is predicted to grow by 8% from 2023 to 2030, according to Grandview Research.
In 2024 alone, yearly spending on IT outsourcing is expected to cross $512.60 billion. Likewise, offshore outsourcing will rise from 43.46% to 45.24% from 2024 to 2028.
5 IT Outsourcing Trends for 2024
Here are five trends that are likely to shape the global IT outsourcing industry in 2024 and beyond:
1. AI and Machine Learning
Artificial intelligence and machine learning are two revolutionary technologies. They have reinvented the IT outsourcing industry by bringing positive changes.
For instance, AI-driven automation empowers businesses to streamline complex processes and make data-driven decisions based on real-time insights. Similarly, AI and ML enable outsourcing providers to deliver value-added services through predictive analytics to automate manual processes.
Moreover, AI and ML boost team productivity by improving the speed of implementation. AI chatbots and virtual assistants, for example, are gradually taking over traditional human support. AI algorithms make workflows more optimal through better collaboration between in-house and outsourced teams.
Eventually, AI adoption in IT outsourcing continues to grow as firms continue to invest in AI-driven technologies to drive better cost efficiency, scalability, and innovation.
2. Robotic Process Automation (RPA)
The second disrupting IT outsourcing trend is robotic process automation (RPA). It automates repetitive and rule-based tasks and helps businesses operational costs while maintaining accuracy. By leveraging RPA to automate data entry, payroll, etc. outsourcing vendors can free resources and give more time to strategic tasks.
RPA’s ability to automate complex workflows without human interference from humans attracts industries that contain high-volume transactions. Popular examples of those sectors include finance, healthcare, and retail.
Moreover, RPA bots can process thousands of bills of invoices or claims in a fraction of the time it would take a human team. Other benefits of RPA in IT outsourcing include more scalability and flexibility. Businesses can upscale or downscale the automated processes with ease according to demand.
Outsourcing services providers can thus leverage RPA to offer value-added services at minimized costs. They can pay more attention to their core business functions and achieve their desired objectives.
3. More Emphasis on Cybersecurity
The protection of confidential data and business assets remains the top concern of IT companies. The increasing number of cyberattacks and data breaches challenges the credibility of IT outsourcing operations.
As more companies outsource sensitive data and critical systems to external providers, the protection of those assets becomes critical. Therefore, outsourcing vendors are now investing in state-of-the-art cybersecurity for better security of customer data and improvement in regulatory compliance.
One critical step taken in this regard is the adoption of zero-trust security models. It minimizes unauthorized access by allowing companies to verify users, devices, and applications accessing the network. Vendors can secure sensitive information by developing multi-factor authentication, encryption, and endpoint protection.
Additionally, cybersecurity-as-a-service is also gaining momentum. Many companies nowadays prefer to outsource cybersecurity for continuous monitoring, threat detection, and incident response.
4. Cloud Computing and SaaS
Cloud computing has significantly changed the global business landscape, and IT outsourcing is no exception. As companies move to SaaS, providers are offering different cloud-based solutions to make IT outsourcing efficient, scalable, and cost-effective.
SaaS is the preferred choice of businesses that outsource software development to third parties. Cloud-based SaaS applications eliminate the need for developing or maintaining systems within the organization. It allows quicker implementation, lower costs, and flexibility. Businesses can scale up or down and meet the evolving needs of their customers.
Likewise, cloud computing brings global talent and resources closer. Organizations can meet their IT staffing needs by integrating outsourced teams with in-house resources.
In addition, cloud-based IT outsourcing offers a bundle with more sophisticated security and disaster recovery possibilities. This emerging trend continues to push further providers to develop more forward-looking innovations in outsourcing.
5. Customer-centric Approach
Every business in today’s competitive age strives to deliver enhanced customer experiences. Employers also expect the same from their outsourcing partners.
Personalized services are one of the major ways outsourcing providers are embracing a customer-centric approach. Data analytics coupled with AI allow service providers to offer bespoke solutions that serve the needs of clients and customers alike. This can be anything, from personalized features in software to customization of user interfaces.
Another critical aspect of customer-centricity in focus is the delivery of frictionless omnichannel experiences. Outsourcing service providers now use advanced analytics and AI-driven insights to better understand customer preferences, behavior, and pain points.
Final Thoughts
The global IT outsourcing landscape is rapidly changing. Thanks to emerging technologies like AI and ML coupled with continuously changing business needs.
Some of the key trends shaping the IT outsourcing industry are AI, RPA, cybersecurity, cloud computing, and customer-centricity. These trends empower businesses to explore new possibilities by increasing efficiency, reducing costs, and improving customer experiences.
While companies evolve these growing trends, they strengthen their competitive advantage and drive innovation in the global marketplace.
