If you’re looking to achieve your bottom line quickly and inexpensively, outsourcing is the way to go; but this method will only work in your favour if you do it correctly. To be more exact, you must be able to find the best talents and utilise the most advanced technologies. Of course, it would also be favourable to get the help you need in the most cost-effective manner.
However, in this data-driven era, not doing appropriate research before making a critical business decision is a huge mistake. Gut-feel is still relevant, but data will be the one to back up your choice through logic and facts as established by studies and surveys—and that includes decisions regarding your outsourcing efforts.
Outsourcing refers to contracting third party entities to do specific business functions for your organisation. One of the most common reasons why companies outsource is to avoid certain costs or cut expenses, but there are also those who choose to do it to meet their strategic objectives.
In this post, we compiled all the latest data and statistics about outsourcing to help you make informed decisions for your business. If you’re still undecided on whether to implement it for your organisation, or if you want to update your current strategies based on what the trends are, the latest figures and facts about the global outsourcing industry presented here will hopefully give you an idea on which path to go.
Use this table of contents to quickly jump to a specific category.
- Top Reasons to Outsource
- Global Outsourcing Industry
- Service Type
- Outsourced Functions
- Industries and Sectors
- Cloud Technology
- Privacy and Security
I. Top Reasons to Outsource
The following are the most common reasons for companies to outsource. (Deloitte, 2016)
- 59% – Reduce or control costs
- 57% – Focus on core functions
- 47% – Solve capacity issues
- 31% – Improve service
- 28% – Gain access to expert talent and knowledge
- 17% – Manage business environment
- 17% – Accelerate organisational transformation
II. Global Outsourcing Industry
The state of outsourcing in the global setting from 2016 to 2018.
- The global market size of outsourced services in 2018 is at $85.6 billion. (Statista)
- 65% of the firms that have outsourced in 2017 would likely continue to do so. (Outsourcing Insight)
- 37% of organisations are planning to increase the amount of work to outsource for application development. (IT Outsourcing Statistics 2017/2018)
- In terms of value, approximately 84.2% of outsourcing deals originated from the United States, followed by the United Kingdom at 5.2%. Spain and Australia were two other key outsourcing markets. (KPMG, 2017)
- Ukraine has the most number of IT professionals in Central and Eastern Europe, with a workforce that is expected to rise to over 200,000 by 2020 (Ukraine Digital News)
- Top Outsourced Countries Based on Financial Attractiveness, People Skills, and Availability, and Business Environment Scores (AT Kearney, 2017)
- 7.07: India
- 6.31: China
- 6.11: Malaysia
- 5.99: Indonesia
- 5.93: Brazil
- 5.92: Vietnam
- 5.87: Philippines
- 5.86: Thailand
- 5.76: Chile
- 5.73: Colombia
Outsourcing in India
- In 2017, the IT-BPO industry in India had an aggregated revenue of $154 billion. (NASSCOM)
- 40% of India’s workforce would need to upgrade their skills over the next five years to accommodate emerging tech like robotics, big data, AI, etc. (NASSCOM)
Outsourcing in Malaysia
- Outsourcing in Malaysia accounts for 1.7% of the total Asia-Pacific market. (Time Doctor)
- Malaysia’s BPO market is expected to grow at a compound annual rate of 7.9% by 2021. (Time Doctor)
Outsourcing in the Philippines
- The outsourcing industry in the Philippines contributes to 10% of the country’s economy. (Time Doctor)
- The BPO sector in the Philippines had a 17% growth and created 1.3 million jobs in 2016. (Time Doctor)
- 34% of the outsourcing industry in the Philippines is comprised of knowledge process outsourcing -– making the country a top choice for higher-value services like animation, content production, and legal and financial services. (EnterPH, 2017)
III. Service Type
Here are specific numbers for the global IT outsourcing (ITO) and business process outsourcing (BPO) industries, two of the most common forms of outsourcing today.
Information Technology Outsourcing
- Revenue of the global ITO industry in 2018 is at $62 billion. (Statista)
- 31% of IT services was outsourced in 2017. (Outsourcing Insight)
- Total budget rose from 10.6% in 2016 to 11.9% in 2017 (Logicfy)
- Large organisations increased the percentage of budget from 6.3% to 8.7%.
- Midsize increased spending average from 4.7% to 6.5%.
- Small companies spent 7.8% of their IT budget in 2017, from 6.7% in 2016.
Business Process Outsourcing
- The revenue of the global BPO industry in 2018 is at $23.6 billion. (Statista)
- The global market for BPO will reach $262.2 billion in 2022, which may be due to the cost benefits of back-office administration, and the development and availability of new technologies. (Global Industry Analysts, Inc.)
- US could capture a dominant 41.9% share.
- Asia-Pacific could lead with a compound annual growth rate of 8.5%.
IV. Outsourced Functions
These numbers are based on specific types of jobs or functions within a company that are outsourced.
- The estimated market size for global outsourced customer experience in 2018 is at $75.1 billion, which is expected to rise to $82.6 billion by 2020. (Statista)
- 89% of companies will not outsource strategic planning. (Booth & Partners)
- 80% of companies will not outsource sales or marketing jobs. (Booth & Partners)
- 43% of UK corporations outsource their email marketing solutions, and 32% opt for in-house functions. (Statista)
- The following are the 10 most popular IT functions being outsourced. (Computer Economics, 2018)
- Application development
- Application maintenance
- Data centre operations
- Database administration
- Desktop support
- Disaster recovery
- Help desk
- IT security
- Network operations
- Web hosting and operations
V. Industries and Sectors
- In terms of global deal value, the defense sector tops the list with a total deal value of $100 billion in 2017. It is followed by the government and insurance sectors, with a total deal value of $75 billion and $52 billion, respectively. (KPMG, 2017)
- The healthcare sector saw the most significant outsourcing growth in 2017 by up to 36%, followed by the human resource sector (32%) and finance sector (30%). (Outsourcing Insight)
- In 2018, only 9.4% of the average IT budget was allocated to outsourcing, which is lower to the 2017 figure of 11.9%. This is due to IT organisations relying on their in-house talents to meet service goals, with these reasons also factoring in. (Computer Economics, 2018)
Advances in technology have helped firms enhance their productivity and maintain high quality at a lower cost. The rise of automation paved the way for developments like robotic processes automation (RPA) and AI, which all provided corporations with a way to complete repetitive tasks faster and more efficiently.
It may also lead to a bigger supplier margin, cost efficiency for buyers, and enhanced revenue with reduced liability towards staff. In effect, automation may be well on its way to replace human talents and will likely diminish the need to outsource skills.
- More than 1 million outsourced jobs in the US, Poland, India, and the Philippines are at risk (A.T. Kearney, 2017)
- 1 new automation management position is created with every 4 jobs lost (A.T. Kearney, 2017)
- Higher-level jobs that involve creative tasks are on the rise since these cannot be automated yet. (AT Kearney)
- Financial services firms like banks and insurers have decreased investment on outsourcing at 10% in 2018, but are aggressive in RPA at 50%. (KPMG State of the Outsourcing, Shared Services, and Operations Industry 2018)
VII. Cloud Technology
Another trend that can improve efficiency along with cost-effectiveness is the Cloud. It also allows corporations to deliver innovative products and services to customers depending on the latest market trends.
- In 2018, the cloud industry is expected to reach $200 billion in value. (Outsourcing Insight)
- 95% of SMEs have adopted cloud technologies for outsourcing purposes. (RightScale)
VIII. Privacy and Security
In light of recent hacking scandals and other problems with data breach and misuse, there’s a predicted focus on privacy and security. Even more so in outsourcing, where firms often relay confidential business information to a third-party staff. The smallest problems with data could mean massive loss and damages.
- Companies worldwide are expected to spend an estimated $75.2 billion on protection and security. Other significant key investments include identity and access management ($4.7 billion) and network security ($11.7 billion). (Gartner)
- Most organisations use third-party vendors for about 20% of their security in 2017. (CSO Online)