Two of the most important factors in running a successful business are reducing costs and increasing efficiency.
Outsourcing enables a huge number of businesses to do all of that and more. Entities can save money on payroll and training by outsourcing certain company functions to other companies. These outsourced teams then permit in-house staff members to concentrate on crucial business operations that they are better suited to. Or allow a smaller business to function like a much larger one and compete more efficiently in their industry
A genuinely global industry, outsourcing has grown massively over the past decade, and continues to do so. Companies frequently outsource IT, admin, and customer support work to countries with lower labour costs so they can achieve the same results. Outsourced work accounts for a sizable percentage of the economies of some developing countries.
What will outsourcing look like in 2023, based on what’s going on in 2022? Find out by reading on.
Here are some of the most startling figures about outsourcing before you move on to read the complete list:
Cloud computing services, web hosting, cybersecurity, and data backups are all part of ITO.
BPO encompasses a wide range of tasks, including admin, marketing, customer support, payroll and other HR services, and logistics.
By the end of 2022, it is anticipated that firms will spend over $700 billion annually on outsourcing. When segmented, it is predicted that IT outsourcing investment will increase by 22% from 2019 levels to $519 billion in 2023. Spending on business process outsourcing is anticipated to reach $212 billion in 2023, up 19% from 2019.
Between now and 2030, it is predicted that business process outsourcing will increase by more than 9% annually. The largest forces behind such expansion are anticipated to come from the financial services, IT, and telecommunications sectors.
That’s not to say these companies will stop outsourcing, just that they will be looking for a lot more in terms of ROI and flexibility. Finance and accounting firms are reviewing their outsourced contracts due to outdated pricing strategies. Traditional “headcount-based” pricing methods have essentially grown too expensive and out of date as outsourced activities become more and more automated.
What criteria do businesses use to decide whether to outsource? These outsourcing statistics look at how and why businesses outsource certain business functions.
In 2021, more than 90% of the top 2000 worldwide corporations had agreements for IT outsourcing. Compared to IT, business process outsourcing was less common, with contracts held by only 59% of G2000 enterprises.
Since the COVID-19 pandemic started, an increasing number of businesses have been attempting to become “cloud first.” Although the vast majority of businesses are aware of the advantages of a cloud-first approach, data security concerns and other dangers prevent many from making the switch.
IT teams are looking for outside cybersecurity solutions as a result of employee reductions, budget cuts, and rising cyberthreats. While 83% of IT professionals are considering outsourcing security in the future, 91% already have their own internal security teams but are looking to at least supplement them with outside help as the issue becomes more of a concern.
App development is a popular field for outsourcing since app developers have specialised knowledge and earn high salaries. The cost of outsourcing varies by industry. 72% of businesses in the financial services industry contract out app development. That figure falls to just 31% in the healthcare industry.
Employers can reduce expenses by outsourcing HR tasks including hiring, recruiting, compliance, and monitoring unemployment claims to professional employer organisations, or PEOs. According to a NAPEO research, hiring a PEO typically results in cost reductions that yield an ROI of 27.2%.
The top selling factor for outsourced teams among small enterprises is their capacity to handle problems in the business world in novel and inventive ways. In Upcity’s 2022 survey, problem-solving abilities even outranked years of experience, overall cost, and internet reviews.
How does your organisation view the advantages of outsourcing? was the question posed to respondents in Deloitte’s Global Outsourcing Survey. 65% stated outsourcing allows them to concentrate on their core duties. Cost-cutting was cited by 63% of respondents as a top advantage of outsourcing.
Due to the unprecedented level of global connection, businesses can outsource their work to businesses anywhere in the world. Companies use low-cost, highly skilled labour from other countries to reduce costs and streamline operations.
A measure to assess a nation’s suitability for outsourcing corporate services is the Global Services Location Index (GSLI). Financial allure, people skills and availability, the corporate environment, and digital resonance are taken into consideration. In 2021, India earned the highest GSLI rating. In fact, 7 of the top 10 nations—India, China, Malaysia, Indonesia, Vietnam, Philippines, and Thailand—are in the Asia-Pacific region.
Almost a tenth of the economy of the Philippines is made up of revenue from outsourcing, an industry worth close to $27 million that employs about one million Filipinos. The Philippines’ high literacy rate of 97% and modest minimum salary (a graduate in the country makes about $300 per month) draw businesses wishing to outsource business operations there.
Since 2016, the Chinese services outsourcing market has consistently expanded. Over 5,000 new outsourcing businesses are established annually in addition to the million new jobs.
IT support is the most often outsourced function in the UK, where 34% of B2B firms do so. Payroll (28%), marketing (24%), and accounting (24%) are further significant outsourced services.
Many small enterprises outsource their operations. When deciding whether to outsource, cost-effectiveness is a major factor. In other instances, businesses use outsourcing to get particular capabilities they can’t otherwise access.
In 2021, more than one-third of small enterprises outsourced some of their operational tasks. Additionally, more than half (52%) of respondents stated they expect to outsource at least one more company function in the near future.
37% of small firms contract out their IT and accounting needs. Small firms also frequently outsource development (28%), human resources (24%) and customer service (24%) as well as a lot of digital marketing (34%).
By offloading tedious activities like coding or data entry, outsourcing enables small enterprises to capitalise on their talents. Clutch questioned small firms, and 24% of them cited better productivity as the main justification for outsourcing. Other explanations included expanding the pool of available knowledge (18%), flexibility (16%), and enabling people to take on other responsibilities (15%).
According to a 2022 Upcity survey of 600 small businesses, 23% of those surveyed see high expenses as the top obstacle to working with an outsourced team. Other difficulties were interpersonal in nature; according to 21% of respondents, outsourced teams were difficult to interact with, 14% of teams missed deadlines, and 12% of teams disobeyed instructions.
25% of businesses with 2,500 or less workers completely outsource their payroll functions. However, just 8% of companies with 10,000 or more employees use this practise.
Many businesses use independent contractors for specialised or creative work. The rise of freelancing over the past few years will undoubtedly have an impact on outsourcing in the future.
Between 2020 and 2021, the number of independent workers in the US increased by 34%. 17 million of the 51.1 million Americans who work independently on a full-time basis. Since the COVID-19 pandemic started, interest in freelancing has soared. The UK has followed suit, since as of September 2022, there were around 4.3 million self-employed workers in the United Kingdom.
A record number of skilled employees are going independent. 51 percent of people with postgraduate degrees work freelance, many in the skilled services sector. Computer programming, marketing, IT support, and business consulting are examples of skilled services that are increasing in popularity.
These statistics demonstrate the widespread usage of outsourcing by businesses of all sizes and in all sectors. Every year, businesses spend hundreds of billions of dollars outsourcing a portion of their operations to external companies. Companies are simultaneously figuring out how to complete outsourced work quickly and inexpensively.
Although the widespread use of outsourcing means that many jobs in affluent nations are exported, poorer countries benefit economically from it.
In reality, a growing number of experts are choosing to work independently as freelancers in many industrialised nations, bringing yet another facet to the outsourcing environment.