It is difficult to find an IT expert who doesn’t agree that outsourcing in the IT industry will grow in the coming years as an increased number of businesses choose to outsource services to specialists. This article is going to cover some of the biggest questions we are asking about IT outsourcing in 2020.
What To Expect From ITOutsourcing
The GSA report stated that 70% of companies are planning to outsource more in the future; half of them plan to do so significantly. 84% of service providers see the industry growing and 37% feel the growth will be remarkable.
The traditional outsourcing industry generated $88.9 billion in revenues across the globe in 2017. From this figure, $64.3 billion was from the IT outsourcing market. Technavio expects the market to reach $409 billion by the year 2022. While this can meanmany positive things for clients and vendors, it also means that businesscomplexity will be on the rise.
How IT OutsourcingRelationships Are Changing
The way we regard outsourcing is going to dramatically change. The line between outsourcing and partner relationships will begin to disappear and eventually will fade out.
Despite the statistics we have seen, outsourcing still has negative connotations. Many companies still don’t admit to using outsourcing services. Nevertheless, the industry will become indispensable for many businesses in the near future. Today, everything is becoming faster, including the way we do business. Companies are going to need reliable partners in order to stay ahead in their field. Software development service providers will become a strategic part of any company.
A Global Shortage of IT Skills
The IT outsourcing industry is driven by a shortage of in-house specialists. A common practice is to outsource services to countries in Eastern Europe because there isn’t sufficient talent locally.
Within the next year, it is predicted that 70% of tech employers in the UK will face a talent shortage with an estimation of 600,000 job vacancies. The digital tech shortage could cost the UK £63 billion per year.
Things don’t look much brighter in the US either; Gartner’s report predicts that there will be 1.4 million computer science specialist jobs available by 2020. Universities will only be able to fill around 30% of this talent shortage.
Overall, the skills that will be required are in automation and artificial intelligence. The largest demand will be for digital transformers skills and transformation architects
7 IT Outsourcing Trends For 2020
1. Less focus on cost; more focus on people
The cost has always been a significant factor in outsourcing. The ability to save money will continue to be important but the relationship between the client and the software developer will play a larger part in the decision.
The value of the delivered product and service will become the client’s focus. IT outsourcing companies will become more like a partner and will take on higher risks along the way.
2. A greater need for multiple vendors
Big companies can’t rely on in-house technical talent. As digital technology continues to expand, companies are going to require more than just one IT provider. Businesses will search for various IT providers depending on the specific skills needed. The industry will be much more specialized. Of all the Forbes G-2000 companies in 2008, 42% outsourced to one IT company. Now, it’s down to 15%, with 34% sing more than one vendor.
The great advantage will come for those outsourcing providers that have a wide range of skilled engineers.
3. Where we choose to outsource
In 2017, Europe, the Middle East, and Africagenerated the most outsourcing revenue worldwide. China and India led the waywith $150 billion in IT export.
Central and Eastern Europe are already on the rise and will soon become a powerful competition for China and India. Those countries that are most likely to become software development hotspots are Poland, Ukraine, Romania, and Belarus. Ukraine is already a country to watch, with 166,000 software developers. By 2020, this is predicted to grow to 250,000.
4. A completely new contract model
The new contracts between clients and IT providers will be based on the outcome rather than on the output, encouraging IT outsourcing to be more intrapersonal and value-driven.
The main difference will be the integration of software development providers as they take on more risk and responsibility. Notice periods will become shorter, the competition will be greater and clients will make their outsourcing decision based on the outcome of the provider.
5. The outsourcing of core business services
When looking at Business Process Outsourcingworldwide in 2017, it was around $24.6 billion. A Global Industry Analystsreport estimates this will reach $220 billion by 2020.
As the relationship between the client and the supplier gains more trust, businesses will be more inclined to outsource core services rather than just non-core services
6. Manual processes will be automated
We are on the brink of a revolution when it comes to automation and the effects on the IT outsourcing industry. Virtual agents and bots are going to streamline routine tasks across all industries. We will witness a huge amount of investment in Robotic Process Automation (RPA) and Artificial Intelligence (AI).
In GSA’s report, 83% of people questioned feel that RPA will become more important within the next 10 years; while 80% feel the same way about AI. With this, we will see a higher demand for data scientists, big data analysts, and AI experts. Automation models will be a necessity for all IT outsourcing providers.
7. Cloud Migration
Cloud computing is going to seriously take off. The switch to the cloud is going to affect $1 trillion in IT spending by 2020. Cloud outsourcing will increase the necessity for public cloud platforms used for data storage. There will also be a need for more online data centers and equipment.
Cybersecurity will be on the increase too as there will be greater risks when operating in cloud environments. In order to have the highest levels of online security, companies will outsource security services, handing over the responsibility to those with specialized knowledge.
Not just 2020, but also the foreseeable future, is going to be very exciting for the global IT outsourcing industry. Partnerships will develop between the client and the provider that will lead to faster solutions, versatile expertise and greater competition.
The focus will shift from those who can deliver the lowest rates, to those who can provide the best outcomes. And those outsourcing providers that will really stand out will be the ones that can provide IT talent in multiple specialties.