According to a Technavio report titled ‘IT Outsourcing Market 2018-22’, the global outsourcing market is likely to grow at a CAGR of 5.84% till 2019. Organizations across the world are adopting software-defined infrastructure and showing a strong preference towards outsourcing vendors to develop and support their IT function.
The Deloitte ‘Global Outsourcing Survey’ report also reflects this trend – currently enterprises outsource their 72% of their IT functions, but plan to increase it by 31%.
Outsourcing is not only a major cost-cutting tool for organizations but also enables them to focus on their core functions and utilize their resources effectively. Many well-known companies such as Skype, GitHub, Slack, UpWork, Alibaba, and AppSumo are known to have outsourced their development work.
Their success coupled with increasing demand from other organizations only proves that outsourcing will get more traction going ahead.
Experts predict that 2018 will put the further limelight on IT outsourcing. The trends which will dominate this year are:
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Usage of Emerging Technologies Will Rise
The demand for emerging technologies such as the Internet of Things (IoT), Blockchain and Augmented & Virtual Reality (AR and VR) will increase. The biggies such as Facebook, Google, Sony, HTC, Microsoft are making big bets on AR and VR. Similarly, IBM, Maersk, Goldman Sachs, J.P. Morgan, CoinPip and many international stock exchanges have embraced blockchain technology.
Then, there are conglomerates like Amazon Web Services, GE, Dell, Cisco, Bosch and Hitachi Data Systems which are pushing IoT heavily. In 2018, a higher number of enterprises will expect outsourcing agencies to provide expertise in these technologies.
Cloud Computing Will Witness Exponential Growth
Cloud computing has been there for a while now, but its usage will become even more prominent this year. Even small and medium enterprises will migrate to cloud computing to scale their capacity, increase their productivity and reduce hardware costs. In its ‘Global Cloud Index’ report, Cisco revealed that the cloud traffic is expected to rise 3.7 fold by 2020.
With the demand for cloud services soaring, there will also be a need for increased data storage capacity. The service providers will provide more online data centres and equipment. At the same time, enterprises will want fail-proof security solutions to thwart cyber attacks such as WannaCry and ransomware.
According to Forrester’s ‘Prediction 2018: Cloud Computing Accelerates Enterprise Transformation Everywhere’ report, more than 50% of global organizations will depend on at least one public cloud platform to drive digital transformation and delight their customers. Definitely good news for outsourcing vendors!
Demand for IT Outsourcing Professionals Will Rise
While the demand for outsourcing has been increasing, the supply of qualified IT professionals is still short. With so many old technologies maturing, new technologies emerging and technologies such as big data & machine learning growing exponentially, there is a requirement of specialists in each of these fields.
Organizations, human resource service providers, and educational institutions will join hands to create a bigger resource pool of such professionals. The 2018 outsourcing market will also be ripe for freelancers, virtual/remote professionals, and independent agencies.
More Companies Will Adopt Software Robots
Irrespective of the hot debate whether robots will replace humans, the truth is that companies are increasingly showing interest in using Artificial Intelligence (AI) and Robot Process Automation (RPA). IT Outsourcing agencies will have to consider changing their working models and gear up to accommodate this demand, both in skills and capacity.
A Deloitte report ‘The Future of Outsourcing as We Welcome AI Software: Robotic Process Automation’ clearly highlights that the service provider capabilities around RPA could be the deal maker when it comes to outsourcing contracts.
New Outsourcing Destinations Will Become Popular
According to A.T. Kearney ‘2017 Global Services Location Index’ study, India has been undoubtedly the most popular destination, followed by China and Malaysia for companies to outsource their IT processes. While these countries will continue to witness growth, it is interesting to note the emergence of new destinations such as Peru, Czech Republic, Columbia, Vietnam, Germany, and the UK on the list. These new destinations are poised to take away a chunk of business from the current top three destinations in 2018!
Looking at the above trends, 2018 surely looks interesting and promising. However, enterprises will have to look at outsourcing partners who can give them a competitive and innovation edge. At the same time, outsourcing vendors will have to up their game if they want to leave their peers behind.
About the Author: This article is contributed by Amit Dua – Co-Founder & CEO at Signity Solutions and ValueAppz.