What is the future of outsourcing?
In 2018, the outsourcing industry generated $85.6 bn in revenue globally. The total contract value of the market was announced up to $64.3 bn. Experts at Technavio predict this figure will rise to over $409 bn by the year 2022.
The above-mentioned growth prospects the promising future for both outsourcing companies and their clients. Some challenges are, however, awaiting those companies to overcome.
The changing nature of IT outsourcing relationships
In the coming years, outsourcing service would become indispensable to almost all the companies as the markets of most of the industries have become more demanding than ever. They require companies to grow faster and more stably. Hence, when outsourcing IT service, more considerations about the partnership to a certain outsourcing vendor would be taken. Software outsourcing companies with the ability to provide IT outsourcing ecosystem would become more preferable to clients with strategic vision and long term development.
Top 07 Future Outsourcing Trends Software Company Could Expect
In the year of 2019 and for the coming ones, the outsourcing industry would be more collaborative and more competitive at the same time due to the change of business models in the current world. IT service providers will therefore have to focus more on not only their infrastructure but also on strengthening their software development teams.
Besides, a software outsourcing company which wants to stand out in the current market also have to work smoothly on cutting edge technologies because clients have become more and more knowledgeable and they want their services and companies stay competitive for a long run.
Cost will no longer play the main role
Customers in IT outsourcing industry would be less price-oriented. It is undeniable that companies with more reasonable still be preferred. However, cost reduction does no longer play the role of a decisive factor when choosing on an IT service vendor.
Instead, customers who choose to partner with a certain IT outsourcing company will focus more on the long-term and adding values brought to their organization. This requires more integration from the IT company to the services of their clients. The cost and the risk for service catering would therefore be higher.
The partnership among outsourcing companies
Big-scaled companies will no longer outsource all of their services to only one vendor due to the higher and higher demand of all the market to a deeper level of expertise. Therefore, those companies would seek for partnership with various vendors who have deep expertise in a specific area. Then, it is obvious that IT outsourcing companies, to stay out among competitors, should provide their customers with the proof of proficiency in a specific area. So, an outsourcing software company would find it harder to persuade their customers to use their services if the company cover variety of areas at the same time or at least it could not prove to service users the leading field it is currently working on. This trend has emerged since 2017 and would become more rigorous in the next few years.
A bold but risky step that outsourcing companies might try out that is to partner with other software development companies whose expertise are not under one roof. This step would at the same time save the company more time to focus on their cutting edge industry and still provide their customers with high quality services.
Asia Pacific – a new destination for IT outsourcing
The year 2017 witnessed the biggest share from global outsourcing company revenue come to Europe followed by the Middle East and Africa. In term of IT export, China and India were among the leading outsourcing countries.
In the years to come, Asia Pacific would become the most “sexy” destination for outsourcing industry according to Deloitte. This movement would provide IT service user with more options when choosing IT outsourcing service providers. With the high-skilled developers and recognizable reasonable cost in comparison with other areas, Asia Pacific including Vietnam would promisingly turn out as the destination for clients of IT outsourcing services and more specific software outsourcing services.
A new contract model in which both IT outsourcing providers and their clients would actively make themselves more interpersonal and at the same time value-oriented. In other words, outcomes of the contract would matter more than the outputs.
An outsourcing software development company would work with their client not only as a service provider but also as service integrator which share the risks the responsibilities. Both parties would collaborate together to enhance the customer procurement process. So, outcome-based contracts is somehow the evidence of commitment that the service provider offers to their customers.
Core business services outsourcing:
It is expected that the relationship between IT outsourcing service providers and customers will witness a spectacular improvement in status. It would become more and more trustworthy. Instead of just hand over the non-core services to a service provider, more and more companies now are outsourcing even their core business to outsourcing companies. This is both a chance and a challenge to service provides. As mentioned above, the competition would be more rigorous and it would be hard to prove its expertise to customers. But, once the partnership is set, it would be much more fruitful and long-term.
Cutting Edge technologies:
Automation is among the major IT outsourcing trends driving a revolution in the next few years. Virtual agents are more and more popularly used for daily routine tasks. Besides, robotic process automation (RPA) as well as artificial intelligence (AI) are receiving more and more investment and interest.
Blockchain technology still a topic for discussion. More and more clients are placing orders on custom app development using Blockchain technology. Outsourcing companies need to invest more in these techs, or to partner with a leading company in the field to provide more options to existing and new customers.
A big wave of data would be migrated to cloud bringing an estimated revenue up to $1 trillion to the industry following Gartner. Outsourcing software development companies should prepare themselves for sufficient cloud services to their customers.
Then, security breaches would become an issue. Partnership with a cloud security provider then is a plus when negotiation with customers who are desire for a cloud service.
It would be, overall, a promising future for the IT outsourcing service providers as well as outsourcing software development companies. More trust and more transparency are required for a new type of contract and partnership among the parties. Clients would be more demanding in term of outcome guarantee but the long-term partnership would then become more prosperous.
More challenges need to be overcome as a software outsourcing company still wants to stay competitive. More collaboration with other outsourcing companies would nurture the relationship with customers.