Since its inception in the 1980s, the IT outsourcing industry has been on an upward trajectory since the global shutdown forced businesses to seek more viable ways to accelerate digital transformation while optimizing operational costs.
Although most countries have recovered from the pandemic and businesses have resumed operations, the IT outsourcing industry will continue to grow. To clarify, let’s look at some outsourcing facts and statistics you should be aware of.
What is IT outsourcing, and why is it becoming so popular?
A business model, outsourcing, is when a company uses other companies’ talent to supplement its resources. Outsourcing is delegating specific tasks, processes, or projects in software development to a third party outside of a company.
Outsourcing as a business model is a fantastic way to accelerate development progress. Companies can reduce the load on their professionals by outsourcing specific stages or entire projects, increasing their efficiency. At the same time, outsourcing companies provide the fastest task execution possible; thus, each party benefits.
Businesses that outsource will achieve maximum efficiency in the shortest amount of time. This method eliminates the need for in-house employees and staff for each process. The problem is that some companies will work with several software pieces that require narrow specialization within hundreds of completed projects each year. Finding talent with the necessary skills takes time and effort, especially in the short term. However, outsourcing is always willing to assist.
You can significantly expand your company’s services by using outsourcing to grow your business. You can turn your company into the equivalent of a Swiss army knife by outsourcing virtually any software development service as quickly and efficiently as possible.
Outsourcing does have many advantages, but it also has some drawbacks. So, what should business owners know if they consider outsourcing a potential development opportunity? What will outsourcing trends be relevant in 2023? What are the prospects for the industry in the future?
Advantages of IT Outsourcing
IT outsourcing is gradually gaining market share. Outsourcing is attracting an increasing number of professionals. Therefore, company owners considering outsourcing part of their business can find a specialist for their particular needs.
Because outsourcing is so common, its market is constantly expanding and will continue to do so in the future. According to Technavio, the outsourcing market will be worth 97.51 billion dollars in 2024. According to Grand View Research, outsourcing-related business processes will generate $232.32 billion in 2020.
On average, the share of outsourcing-related business processes grows by 8% per year. As a result, by 2028, IT outsourcing will have gradually displaced the corporate labor market in terms of market size and popularity.
No matter where your company is located, you will always be able to find someone who provides the services you require at a lower cost.
By delegating work to professionals from other parts of the world, outsourcing will lower the cost of developing new products.
There are millions of talented developers all over the world. To cut costs, approximately 70% of businesses outsource a portion of their products. It is worth noting that such tactics are fail-safe and are therefore becoming increasingly popular.
Significant talent reserve
Many entrepreneurs needed help finding talented employees when they were starting their businesses. However, as the number of professionals grows, it becomes easier to find suitable human resources.
It is impossible to have a team that can solve any development task because there will always be a project that requires knowledge in less popular or rare niches, regardless of how many employees you have. This problem is solved by outsourcing.
You can significantly expand your company’s services by outsourcing software development and other areas. For example, you could create software in a lesser-known language or with plugins that only recently gained popularity. You may not have a specialist for this project, but you can develop everything you need while saving money by outsourcing.
Moreover, more orders and revenue result from offering diverse services. Furthermore, outsourcing development is frequently less expensive than internal development. This IT business model is ideal.
A diverse set of technologies
However, for many specialists worldwide, entrepreneurs who use outsourcing have access to many technologies.
In contrast to your in-house team, which is focused on a specific current task, outsourced talent is ready to do the work for you and help you move forward. You are only required to hire professionals on a short-term basis if you only require them for a single project. As a result, the budget suffers less.
Weaknesses in IT outsourcing
Nothing in the world is perfect. A business model will always have some drawbacks, no matter how many functions it covers. Not surprisingly, there are several disadvantages to IT outsourcing.
You must decide whether they are critical, and we will highlight the most important ones.
Finding a Trustworthy Partner
If you manage a software development company, you can always seek assistance from outsourcing specialists or an entire company.
Finding a trustworthy partner is one of the most difficult aspects of outsourcing. This is the most difficult aspect of outsourcing.
The outsourcing market is currently overcrowded, with specialists eager to perform a specific task. Outsourcing firms are also actively involved, providing a wide range of services at breakneck speed. Unfortunately, what they describe and what is done sometimes differ, and businesses suffer.
When outsourcing a task, you must carefully consider the risks. Nobody can guarantee that the specialist you hire has sufficient expertise in the field. Even if the partner has sufficient experience, it is not guaranteed quality.
Offshore IT outsourcing can be a highly effective way to obtain the services you require at a lower cost than local providers. However, time zone, language, and cultural differences can make communication difficult. This situation is especially problematic when you need to work as a team. Hiring companies in nearby time zones and seeking providers emphasizing language abilities can help alleviate this problem.
Risk to security.
Because security can be both an advantage and a disadvantage, we list it as both. While IT professionals from outsourced companies are typically knowledgeable about security measures, the companies they work for can pose a security risk. The cybersecurity of an outsourcing company may be less robust than yours, leaving the door open for attacks.
Some outsourcing companies are more concerned about the well-being of the team members they hire than others. Like any other company, those who provide a low level of care may find themselves with disgruntled employees.
Outsourced IT employees are not directly responsible to you, but their job satisfaction may influence the work they do for you.
Trends in IT Outsourcing
Two key drivers have increased the demand for IT services and, as a result, IT outsourcing due to the COVID-19 pandemic. The first is that during the pandemic, businesses drastically altered their operations, focusing more on digital solutions for accessing information and applications and communicating. This transition includes a greater reliance on the cloud. The second is that cybercrime has increased in both number and severity.
Recent research backs up these claims. According to LogicMonitor, “87% of global IT decision-makers agree that the COVID-19 pandemic will cause organizations to accelerate their cloud migration.”
Most respondents believe that “by 2025, 95% of all workloads will be in the cloud.” Separately, according to a recent CNET article, the number of reported breaches reached an all-time high in 2021. These trends are followed by the services provided by IT outsourcing services. Outsourcing firms assist businesses in developing, implementing, and maintaining digital systems that support operations and help employees remain productive and communicative.
As discussed above, outsourcing companies have a firm handle on what is needed to ensure business cybersecurity, such as virtual private networks (VPN), secure sockets layer (SSL), and multifactor authentication. Furthermore, these service providers are emphasizing increased cybersecurity. Experts predict that global spending on information security will soon reach hundreds of billions of dollars annually.
Application development is another trend in corporate IT departments and, thus, in IT outsourcing. Unique business processes can be supported by proprietary software applications, allowing businesses to increase efficiency.
On the other hand, the resources required to develop these applications can cost businesses both time and money. As a result, more businesses are hiring outsourced software developers to create these applications, allowing their in-house IT teams to focus on more pressing issues.
Future of IT Outsourcing
The future of IT outsourcing will likely see a greater emphasis on security, challenges in attracting and retaining top talent, increased demand for cloud-based technology, the advancement of artificial intelligence and automation, and increased globalization. Companies that want to take advantage of beneficial and necessary outsourced IT resources should begin looking for a partner on whom they can rely on building the IT infrastructure required to support current projects and those that will emerge as they grow.