In other words, companies are willing to outsource their services to consultants and specialist providers. That said, the question now is which IT outsourcing trends will be the biggest game-changers and why. In this article, we want to answer that question. But before we get ahead of ourselves, let's look at:
Global IT Skill Shortage
The main reason why a company outsources their work is that they lack in-house engineering talents. They will want more attractive destinations like Asia, Central, and Eastern Europe due to the shortage of in-house skills and costs.
The latest survey shows that 70% of technology companies in the UK expect to face a talent shortage in the next 12 months. The survey also goes on to say over 600,000 vacancies in technology will cost the country at least 63 billion pounds a year.
The USA also has a shortage of technology talent. Gartener predicts that 1.4 million computer specialists' job vacancies are on the rise of this year. It will be a big change that colleges and universities won't have the capacity to feel that need.
7 Outsourcing Trends You Need to Watch in 2020
#1. Less Focus on Cost Reductions
The relationship between the client and the outsourcing provider will be value-driven as opposed to price-oriented. Of course, the cost will remain to be a major advantage of outsourcing engineering work.
But it won’t be the main factor why companies select a provider. Companies want to hire specialists who will give them value for their money. They are willing to pay high as long as they get the results they want.
#2. Outsource to Multiple Vendors
In the future, big companies won't have all the technical skills and know-how they need to run their business. In fact, it would be impossible for a single IT provider to supply the company with all the skills they need. Therefore, they will outsource their services to many vendors who specialized in different areas.
They will look for consultants with lots of expertise in the subject matter. That said, expect the world of IT outsourcing to move towards narrow specialization. Vendors will focus on getting clients from specific industries.
When you look at the ISG data of 2018, you’ll notice that 42% of Forbes G-2000 outsourced their work to a single IT provider. Today that figure has moved from 42% to 15%. As we can see, this trend is going to strengthen in the upcoming years.
#3: New Destination for IT Outsourcing
Continents that maintain the largest share of IT outsourcing are Europe, the Middle East, and Africa(EMEA). India and China remain to be the most popular destination generating about $150 billion of IT export.
Small and medium-sized businesses are looking for tech support in Central and Eastern Europe in countries such as Poland, Ukraine, Romania, and Belarus. These countries will provide stiff competition to China and India.
At the time of writing, Ukraine has 250,000 developers. The shift from Asia to Central and Eastern Europe is more about cost and quality-driven as opposed to a cost-driven approach.
#4: Brand-New Contract Models
As more companies continue to outsource, you can anticipate new contracting changes. The changes will make IT outsourcing interpersonal and value-driven. GSA reports that new contracts will remain about the outcome rather than outputs.
Software developers will be contracted as service integrators, and they will share risks and responsibilities. Procurement is going to be an essential part of the contracting process. Notice periods are also going to be short. The competition will also increase between the IT providers. That said, outcome-based contracts will make clients choose the best IT providers.
#5: Cloud Sourcing
Since 2011 the demand for Cloud computing has been on the rise because companies have been migrating to the cloud. Gartner predicts that over $1 trillion will be spent on IT cloud computing this year. When companies move to cloud outsourcing, they increase the demand for public cloud platforms for storage. Therefore, it means IT service providers will have to provide online data centers and equipment.
At the same time, security hacks and threats will be on the rise for companies that choose to operate in a cloud environment. That means they will want to outsource their security services to reduce breaches.
#6: 5G Network Will Cause Disruption
The speed of data exchange to devices connected to a 5G network is on the rise. Actually, the most significant selling point of the 5G network is speed. By the year 2027, the 5G network will generate over $47.3 billion in revenue.
The continent will benefit from fast and robust data exchanges. Companies will also create a small city for fast transmission where they are connected. The 5G network will change the way people access and send information.
#7: Intelligent Automation of Manual Processes
It's no secret that automation is a major IT outsourcing trend. Companies want to use virtual agents and bots to streamline their tasks. Companies will also invest a lot in robotic process automation (RPA) and artificial intelligence (AI).
According to a GSA report, 83% of people surveyed believe that RPA is going to be important in the next few years. And 80% of those surveyed think the same about artificial intelligence. Therefore, companies will need professional data scientists, prominent data analysts, and AI experts that will increase.
Looking at the trends above, it seems that 2020 will be a promising year. Changes in IT outsourcing will come
Software outsourcing vendors will adapt to new market demands so that they can live up to the client's expectations. Collaborations and interdependence will be the center of IT outsourcing relationships.
As the competitions grow, clients develop specific strategies for selecting the best service provider. That said, outsourcing is going to be a mainstream phenomenon, with every company looking to partner with IT experts in their niche.