The IT outsourcing trends last year witnessed the rise of cloud computing and automation, among others. Aside from these, the industry also recognised the need for tightened security and confidentiality, especially after the GDPR's implementation.
This year, as the tech industry continues to evolve and as the growing gig economy continues to pose a threat to the outsourcing industry, it is important for offshore firms and developers to understand global outsourcing trends to stay ahead.
Some of the IT outsourcing trends we'll see this year have been carried over from last year, but we'll also see new trends that are now shaping the industry.
Without much ado, here are the IT outsourcing trends that businesses should expect this 2019.
Strategy over cost
Traditional IT outsourcing has always been about reduced costs, and businesses admit that this is one of the primary reasons why they choose to outsource. However, this 2019, one of the major IT outsourcing trends is diminishing the focus on it being a cost-effective solution.
While it is still relatively important, affordability will no longer be the determining factor for businesses to outsource. This time, both businesses and offshore providers focus on how to create human-driven and process-oriented relationships through outsourcing.
By not focusing too much on the price, businesses with outsourced developers are able to:
- Place more attention and importance on the quality of the products and services delivered.
- Have IT outsourcing companies as strategic partners and as system integrators.
- Avoid project risks by only getting what they pay for.
Businesses realise that cutting on costs may not have a positive impact on the company's long-term growth. In order to grow, a company must have a solid vision backed by the right investments. With this, businesses now look for other outsourcing setups and benefits that align with their corporate strategy.
With strategy triumphing over costs, businesses should now keep in mind that a successful outsourcing experience lies in finding the right outsourcing partner. As such, it is necessary for businesses to look for an offshore provider with proven technical expertise and business experience to ensure that they will be able to carry out your vision. Choose a provider who aligns with your business objectives and provides strategic solutions to your tech hiring needs.
Multiple specialised offshore partners
One of the top outsourcing trends that we will see this year is ‘multisourcing', an approach where businesses contract their IT operations or infrastructure to several IT outsourcing providers.
A lot of businesses do not have full technical equipment as well as in-house teams who can fulfil growing demands; because of this, businesses turn to multisourcing instead. Through this approach, they are assured that certain tasks or specialisations are delegated to the right outsourcing provider. In turn, this maximises the effectiveness of a business' different operations or infrastructure.
This rising trend in multisourcing could also lead outsourcing companies to eventually offer narrower or specialised services in the future—another IT outsourcing trend that we might soon witness.
As such, IT offshore companies with the most tech talents who offer a wide range of specialisations will definitely gain a competitive advantage over other providers.
In the past years, when only the large KPO and BPO companies dominated the industry and played an active role in it, both businesses and outsourcing providers had difficulty gaining detailed information on plans, policies, contracts, and other processes from each other.
However, the increase of small businesses using outsourcing services has urged the outsourcing industry for more transparency, thus prompting them to declare their contracts, pricing, and policies.
This 2019 and in the coming years, more outsourcing IT companies will implement a higher level of transparency in their processes. As with any business partnerships, transparency is essential to establish trust and better business relations between parties.
Besides, increasing transparency can also result in diminishing the risks of outsourcing IT services. Knowing what each party will be providing and receiving, respectively, is vital to achieving a smooth collaboration and a successful outsourcing experience.
Meanwhile, government policies imposing more transparency in global businesses are being implemented; strongly affecting the outsourcing industry. The best example would be the UK's implementation of the GDPR last year.
A 2016 report by the Global Sourcing Association UK found that 80% of survey respondents believe that artificial intelligence will become one of the most significant technologies of the decade.
Fast forward to 2019 and artificial intelligence has indeed taken over most areas of our lives, not only in the workplace but at home as well. From complex machine intelligence usages such as robotics and healthcare to common household items such as the smartphone and various smart appliances, artificial intelligence has become almost commonplace in our lives.
In the business world, this expansive innovation means an increased demand for AI products and services. To ride on the trend, many small and large businesses will opt to outsource as they explore and tap on AI's capabilities to improve their products and services.
For the outsourcing industry, this means an increased demand for AI developers or engineers, big data analysts, and data scientists.
In fact, NASSCOM, India's IT-BPM trade association, reports that 40% of their IT-BPO workforce have to upgrade or re-skill to cater to the growing list of job positions in areas such as artificial intelligence, robotics, machine learning, and big data.
Keep in mind that this is just the beginning for AI. As well explained by Nacho De Marco in a July 2018 Forbes article:
“The burgeoning advancement of artificial intelligence in the tech world will continue to have a large impact on the way that we write code, build new technology and even advance frontiers like blockchain in the next few years. AI's potential to customize tech to individual consumers is enormous, and we've only seen the tip of the iceberg in terms of its capabilities thus far.”
Robotic Process Automation
Automation is one IT outsourcing trends that have a negative impact on the outsourcing industry. Due to the considerable efficiency and savings it offers, RPA has slowly but surely made its way to all kinds of IT and BPO services.
As a result, more businesses opt to use bots and virtual agents instead to effectively streamline routinary tasks. Unfortunately, this puts lower-skilled tech talents in the industry at risk of losing their jobs.
However, the challenge brought on by automation processes also opened opportunities for the IT outsourcing industry; it highlighted the specialisations offered by the KPO sector as most of their services are from automation.
One way for IT outsourcing companies to survive the automation trend is to move or upgrade low-skilled staff such as data entry specialists or IT support specialists to higher IT roles. This allows outsourcing providers to offer more high-skilled tech talents to businesses. In fact, in the Philippines alone, around 700 thousand medium and high-skill jobs would be created by 2022.
Even though providing automation support will prove to be challenging for outsourcing providers, major outsourcing firms are already on their way into making RPA a part of their services.
It's critical for outsourcing companies to be adaptive to new technologies as it will give them a competitive advantage.
Related Article: Will Robotic Process Automation be the Future of Outsourcing?
This year, cloud outsourcing will continue to become one of the most prominent IT outsourcing trends globally. As the number of businesses moving to and utilising the cloud increases, so does the demand for tech talents specialising in this area grows.
For the IT outsourcing industry, this means that providers should start or continue to expand in offering various cloud services such as application hosting, network storage and SaaS among many others.
In addition, businesses who operate via the cloud will mostly be concerned with impending security threats such as data leaks and data loss. One way to solve this is by seeking help from experts in the cloud security field. According to Gartner, shifting to cloud platforms and services will amount to $1 trillion in IT spending by 2020.
The emergence of new outsourcing destinations
Given the increasing demands for tech talents, many outsourcing locations have now emerged from different parts of the world. More and more countries in the Middle East, Latin America, and Eastern Europe are now becoming good alternative outsourcing locations.
For Eastern Europe, the rising countries that you should keep an eye on are Ukraine, Bulgaria, Romania and Poland. Among these countries, Ukraine has started to become a solid base for outsourcing software development. The country's current talent pool is estimated to be around 116,000 professionals and is expected to significantly increase by 2025.
The Middle East is also catching up with providing tech talents around the globe. Due to the country's multilingual talent (Arabic, English, French, and German among others), the low business costs, and its strategic location, Egypt has been continuously attracting global startups since 2009.
On the other end of the world, two countries from Latin America emerge as competitive outsourcing destinations: Mexico and Colombia. Because of the country's close proximity from the US, it has become a preferred outsourcing destination for US businesses due to the little to no time difference, lower freight costs, and improved speed-to-market production.
For the next few years, outsourcing companies within these regions are expected to increase and compete with larger outsourcing destinations such as the Philippines and India.
Related Article: Top Outsourcing Cities in the Philippines
Despite the negative impact of automation, the IT outsourcing industry will see an overall increase in demand and growth this 2019.
Demand for new job roles in areas such as cybersecurity, data science, and mobile app development gave way to the rise of the KPO sector. The IT outsourcing industry is thus expected to offer more specialised roles and new tech innovations to cater to the evolving market. It will continue to be an intelligent solution to address tech talent shortages—all while keeping rates cost-effective.
Given these upward trends, we can also conclude that IT outsourcing is definitely not declining; rather, it is progressing.
In fact, a report from the GSA UK found that 70% of buyers plan to outsource more in the future, and 83% of outsourcing firms believe that the industry is still set to grow.
IT outsourcing is moving away from being stereotyped as ‘just a cost-effective solution'. Instead, it is now what we call a ‘Disruptive Outsourcing Solution'—one that utilises technology not only to reduce costs but, ultimately, to help businesses innovate by solving IT challenges then gaining a competitive advantage. This also means that businesses realise the value of transforming and improving processes and seeking experienced counsel for a successful IT outsourcing experience.
As new technologies continue to emerge, we might see more IT outsourcing trends that will not only shape the outsourcing industry but also other fields as well. Let's see how far can IT outsourcing take us.
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