How to get IT outsourcing ‘done right’ in 2021? What to expect as a result of the global pandemic? Will companies increase their collaborations with offshore software developers? What IT outsourcing trends will shape partnerships between vendors and clients? Here is everything you need to know about IT outsourcing as a great way to thrive in the new normal.
The year 2020 proved that we are all living in a highly volatile environment, where things can change drastically at any given moment. But the past year has also given us a good lesson - it has prepared us to cope with such crises as the global pandemic and taught us to be more adaptable, resilient, and responsive.
So how do businesses thrive in the face of change? Here, we’ve assembled the top 5 IT outsourcing trends and statistics from reputable sources such as Technavio, ISG, Flexera, Gartner, KPMG, Atomico, etc. to help you succeed in 2021. Let’s take a closer look into what a new year holds in store.
IT outsourcing in 2021: Key insights
- According to the IT outsourcing statistics by Technavio, the value of the IT outsourcing market is expected to reach $486.16B by 2024 growing at 5% during 2020-2024.
- The majority of organizations across sectors are accelerating their digital transformation, especially fintech, healthcare, and telecom. Businesses in these industries are following IT outsourcing trends and are the most likely clients who are searching for IT outsourcing services.
- Cloud technology is on the rise. Companies will increasingly outsource the migrations, maintenance, security, compliance, and day to day troubleshooting related to the cloud. According to Gartner, cloud system infrastructure services is expected to grow from $44B in 2019 and reach $81B by 2022.
- The crisis caused by the global pandemic has impacted IT outsourcing trends in 2021. It has a significant impact on business decisions and technology investments planned for 2021. The growing number of companies of different sizes plan to increase their use of IT outsourcing. From our experience, we can also confirm this trend. If at the beginning of the pandemic some of our clients scaled down their teams or freeze IT outsourcing, a few months later they resumed IT outsourcing and even scaled up development teams. Many of those who have never outsourced, plan to do it for the first time in 2021. Judging from the previous crisis in 2008, few companies will stop their outsourcing efforts. Even during the 2008 recession, only 9% of businesses decided to terminate relationships with IT outsourcing partners.
Drivers of IT outsourcing:
1. Cost-efficiency and quality
Although cost savings will remain the primary reason why organizations outsourced, quality and technological excellence will also become just as important. Companies primarily used outsourcing to reduce overall labor costs, including salaries, insurance, tools and supplies, and technology. But now, new IT outsourcing trends have emerged, and the focus is made on quality outcomes. As the competition between outsourcing companies grows, the quality of the service delivered is increasing too. Companies tend to fire expensive local IT consultants and opt for skilled IT experts offshore.
2. Lack of in-house talent
The IT industry has long experienced a skills gap. According to a 2020 CIO survey conducted by KPMG, the global shortage of technology skills remains high, almost the same as during the pre-covid times. By contrast, in the 2008 recession, tech skills shortage fell by a greater amount.
As lockdown eases, there is a spike in IT job advertisements around the world. Businesses will be increasingly looking for tech partners offshore trying to make the most out of their investment.
According to the report from ISG (Information Services Group), European IT outsourcing sector will grow more in 2021. Eastern Europe is an emerging market for scouting tech talent. And Ukraine is going to be placed high on the companies’ wish list of the most lucrative IT outsourcing destinations.
Due to all-remote work, COVID -19 has eliminated borders across countries. It has accelerated the globalization and cultural diversity trends that started a few years ago. Companies will continue to hire top talent from across the globe in the post-crisis world. And people who are already accustomed to the remote type of working will not be ready to lose their chance to work at an international company while preserving their work-life balance.
Top IT outsourcing trends and statistics
Given global changes 2020 has brought, outsourcing trends for 2021 will imply more agility, diversity, and automation. Outsourcing trends for 2021 seem promising, and the IT outsourcing industry has the potential to help companies cope with new challenges caused by the crisis.
1. In-demand tech skills
According to Burning Glass Technologies, quantum computing, connected technologies, fintech, AI & ML expertise are expected to be the most in-demand tech job skills in 2021. Also, companies will look for professionals skilled at automation, cybersecurity, and cloud. Demand for AI and Machine Learning skills is growing at a 71% compound annual growth rate through 2025, with 197,810 open positions today. As the report by Cybersecurity Ventures claims, there will be 3.5M open cybersecurity jobs across the globe in 2021. What concerns cloud, during the pandemic this sector has seen rapid growth and become stronger than ever. Thus, cloud skills are in demand as every tech company is pursuing agility to satisfy increasing customer demands and ensure business continuity.
2. Eastern Europe is becoming an IT outsourcing hotspot
Countries in Eastern Europe will become more appealing as IT outsourcing destinations. Granted, India and China will remain the leading outsourcing countries where the largest share of global outsourcing revenue is generated, but Ukraine, Poland, Belarus, and Romania will present a formidable competition to them. The latest software development report in the CEE region states that CEE outsourcing grows at 4-5 faster than globally (20-25% y-o-y vs 5% globally), with the US and the EU being the main customers. This tendency will continue in 2021. And in the face of globalization, businesses will prefer offshoring to nearshoring to be able to tap into the best tech talent in CEE.
Against all odds, 2020 has been a record year of investments in the tech space in Europe. According to a report by Atomico, $41B was invested into European tech. For instance, Ukrainiaian capital investments in tech increased by $4M in comparison to the results of 2019.
3. Strategic partnerships
Finding a reliable provider and building productive relationships with remote teams is not an easy task. Although in the previous years there was a trend to outsource services within one project to multiple vendors, in the years to come companies will focus more on single-vendor outsourcing. It means that they will want to avoid all the headaches and risks associated with managing multiple vendors. Companies will avoid outsourcing to multiple vendors, instead they will concentrate on building partner relationships with one vendor.
As supplier-customer relationships will become more trustworthy, the difference between outsourcing core and non-core tasks will become less significant. Offshore teams will become part of the clients’ organizations. So they will cover any type of tasks necessary for the success of the client.
Here at N-iX, we have built long-term strategic partnerships with a number of companies across the globe. Currencycloud (8 years), Fluke Corporation (8 years), Lebara (7 years), Orbus Software (7 years), Vable (6 years) are among our top loyal clients.
4. Companies want vendors to be more flexible
As the nature of IT outsourcing relationships is changing, so are the expectations of the clients. They will want their providers to be flexible in several aspects. First of all, they will expect that their providers will have the ability to ramp things up and down depending on their needs. So vendors will need to be ready to restructure teams within the shortest time frame and be agile to deliver results faster.
Companies will also look for IT outsourcing partners who can accept their business ethics and adapt to it quickly. They will appreciate it if offshore developers can easily integrate into their company and feel connected to the in-house team.
Another thing that modern clients want is to keep up with innovations. Thus, they expect that their remote IT specialists will be eager to put the latest technologies to good use. Also, they will first consider the vendors who are ready to invest in upskilling its workforce if needed.
5. Regulatory agility
2021 is going to be full of new regulations. So service providers and tech companies should be flexible enough to adapt to new standards. They should carefully negotiate contract clauses according to new procedures and back-end processes taking into account all the costs their implementation may presuppose.
Since 1 January 2021, the UK has no longer been part of the EU single market or the EU customs union. Partnership relationships with clients from the UK will change on the legal level. Also, the EU plans to introduce two new laws, one called the Digital Services Act and another called the Digital Markets Act. Their main goal is to halt the spread of harmful content and improve competition. Similar new regulations are already in place in other countries as well. In the United States, regulators sued Facebook last week for illegally squashing competition, and Google was hit with an antitrust lawsuit in October. In China, the government has begun to clamp down on local tech giants like Alibaba. Australia, India and Brazil are among others debating new regulations. This trend will continue in 2021.
HOW WE CAN HELP YOU EMBRACE THE IT OUTSOURCING TRENDS
Here at N-iX, we are on our clients’ side in terms of innovation and are always ready to lend a helping head in adopting emerging technologies. Our company invests heavily in upskilling its employees to steer in the right direction.
- N-iX has been providing offshore development services for over 18 years. We have established long-term partnerships (5+ years) with such global companies as Lebara, Currencycloud, Fluke Corporation, and many others;
- N-iX has helped over 100 companies, from small businesses to Fortune 100 leaders, build and extend their engineering teams (up to 100 people).
- N-iX boasts a team of 30+ professional recruiters that have collected an extensive internal base of candidates that we’ve been building up since 2002 and which now comprises over 57,000 experts;
- You can benefit from our expertise in such domains as Cloud, Big Data, Business Intelligence, Data Science, Artificial Intelligence & Machine Learning, and more;
- Our cloud expertise includes cloud-native development, on-premise-to-cloud migration, cloud-to-cloud migration, as well as multi-cloud and hybrid cloud management;
- N-iX professionals build solutions for clients in healthcare, manufacturing, automotive, retail, telecom, and other industries;
- N-iX complies with the security standards and regulations, such as ISO 27001:2013, PCI DSS, ISO 9001:2015, GDPR, and HIPAA to ensure secure software development;
- The company has offices in Ukraine, Poland, Sweden, Malta, and the USA, which allows you to tap into an extensive pool of tech specialists.
We monitor the IT outsourcing trends and take an active part in bringing them to our local community, organizing workshops, tech talks and participating in conferences. We are a flexible company in terms of both innovations and cooperation. We easily integrate into our clients’ companies, can adapt to their changing needs, and we do care to find the best solution to each problem.
Do you want to be on the curve of IT outsourcing trends in 2021? Contact us and we will help you drive growth in your company.