How to get IT outsourcing ‘done right’ in 2020? What do companies expect from service providers? Will they increase their collaborations with offshore software developers? What technology outsourcing trends should vendors and clients embrace?
The future of IT outsourcing is brimming with a lot of opportunities and changes as well. Here we’ve assembled the top 5 IT outsourcing trends that will rule in 2020. So let’s take a closer look into what a new decade holds in store.
A brief overview of the IT outsourcing market for 2020
In 2019, the market size of information technology outsourcing amounted to $66.52B according to Statista. By 2021, the IT outsourcing market is expected to reach approximately $413.7B. So we are going to witness a steep growth in global IT outsourcing spending.
National Outsourcing Association claims that 70% of companies plan to increase their use of outsourcing, with 35% planning to do it significantly. 10% will decrease their outsourcing slightly. But nobody plans to decrease the scope of IT services they outsource significantly.
Indeed, more and more companies will be turning to IT outsourcing. Although cost savings will remain the primary reason why organizations outsourced, customer-centricity and technological excellence will also become just as important. Clients and service providers alike will focus more on outcomes rather than outputs. As a result, IT outsourcing relationships will grow into strategic partnerships.
In 2019, the shortage of tech talent was represented in thousands, whereas in 2020 it is going to be in lakhs (hundreds of thousands), according to estimates by headhunters such as TeamLease, Randstad, Magna Infotech, and ABC Consultants. The global expected demand for new-age tech professionals in 2020 will be 4.4 lakh, while the supply is projected to be 2.4 lakh.
For instance, tech-related vacancies in the UK are expected to rise to 1M by 2020, costing the economy an estimated £63B in lost GDP, annually, according to the report by the Edge Foundation. The same is true of the USA. The U.S. Bureau of Labor Statistics predicts that in 2020 there will be 1.4M more software development jobs than applicants who can fill them. So businesses will be increasingly looking for tech partners offshore trying to make the most out of their investment.
According to the 2019/2020 European IT Sourcing Study by Whitelane Research, over the next two years, more outsourcing is predicted for Europe. 74% of organizations plan to outsource at the same rate or more. Most outsourcing is expected in the financial services sector with 43% citing they are planning to outsource more, followed by the public sector with 39% (up 13% from last year). And Ukraine is going to be placed high on the companies’ wish list of the most lucrative IT outsourcing destinations.
Top 5 IT outsourcing trends that will shape 2020
Finding a reliable vendor 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 try to mitigate all the headaches and risks associated with managing multiple vendors. Companies will avoid the process of multiple vendor searching and instead, they will concentrate on building partner relationships with the vendor. Also, they will take into account how vendors could help them innovate their future projects.
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.
Companies want vendors to be more flexible
As the nature of IT outsourcing relationships will change, so will 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.
Changes in contracts
Both clients and vendors agree that it will be easier to measure the success of an outsourcing relationship through outcomes. So in the future, we expect contracts to be outcome-based. They will be focused on the quality of results specifying contract requirements in terms of expected performance levels, rather than output levels. IT outsourcing is going to become a more collaborative practice. Sharing risks can result in greater benefits for both sides. Also, procurement is set to become a more important part of the contracting process. So IT providers who want to work with large-scale companies will need to learn how to work with procurement departments and negotiate a win-win contract.
Trending tech skills
Udemy predicts that in 2020 we will see robust demand for AI and data science skills, in addition to web development frameworks, cloud computing, and IT certifications, including AWS, CompTIA & Docker. They have released fascinating insights in their recent report, predicting that IT companies will be upskilling employees on robotic process automation tools, cybersecurity, and AWS cloud. Also, emotional intelligence and design thinking are placed high on the list of fastest-growing soft skills in 2020. So IT services vendors need to learn how to apply these technology trends in IT outsourcing in 2020 to stay attractive and promising for their clients.
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 x4-5 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 2020. Moreover, unlike in the US and Asia, where investors pulled back from record levels of investment in 2018, investment in the European tech continues to grow.
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. We boast more than 1,000 IT specialists and keep all the necessary skill sets under one roof. Also, our company invests heavily in upskilling its employees to steer in the right direction.
We monitor the IT outsourcing industry 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 adoption as the innovator, or the one that lags behind IT outsourcing trends in 2020? Contact us, and we will help you drive growth in your company.