IT outsourcing is in demand since ages. Here is a complete analysis slide to look into the statistics IT Outsourcing 2020.
What is IT Outsourcing?
IT outsourcing is practice of seeking resources -- or subcontracting -- outside of an organizational structure for all or part of an IT relate functions such as infrastructure, software development, maintenance & support.
Types of Outsourcing
• Offshore outsourcing
• Near shore outsourcing
• Onshore or domestic outsourcing
• Cloud computing
• Managed services
Common Outsourced IT Services
• App/Software/Web Development
• App support or management
• Technical support or help desk
• Database development or management
• Cyber Security
• Infrastructure supply & management
• Networking and communications
• Disaster recovery
• Data centre management
• Data storage
• According to the Deloitte 2016 Global Outsourcing Survey, 78% of business owners across the globe are satisfied with their outsourcing partner.
• North & South America constitutes 42% of the outsourcing buyer region. Europe, Middle East, and Africa constitute 35%. The remaining 23% comes from Oceania & Asia!
• GLOBAL MARKET SIZE OF OUTSOURCED SERVICES 92.5bn USD
• INDUSTRYWIDE HIGH-VALUE CONTRACT REVENUE FROM THE BPO MARKET 26bn USD
• Forecasts indicate that the market revenue for the data analytics outsourcing will experience steady growth in the coming years, with revenue reaching 2.24 billion U.S. dollars by 2025
IT Outsourcing Trends 2020
• According to Clutch.co, about 52 percent of small business executives will continue to outsource jobs in 2020.
• According to HfS Research, over 80% of enterprises view increasing operational efficiency as the primary motivation to outsource.
• According to the GSA UK, nearly 90% of respondents strongly believe that both buyers and providers will be signing outsourcing contracts focused on outcomes and value in 2020+
• Process and People are More Important Than Price - focus is shifting onto the process and the people
• SMB or Startups. Started increasing outsourcing their work to reduce cost - to reduce overhead costs and operational costs, small business owners are turning to outsourcing their tasks instead.
• Flexible contracts is in demand
• Along with smaller task companies start providing large scale business operations in 2020
• With more outsourcing services on the list, companies will also seek to minimize inconveniences by providing better support.
Top reasons for technology outsourcing worldwide
• 59% – Reduce or control costs
• 57% – Focus on core functions
• 47% – Solve capacity issues
• 31% – Improve service
• 28% – Gain access to expert talent and knowledge
• 17% – Manage business environment
• 17% – Accelerate organisational transformation
Pros and Cons of Outsourcing
• Reduce and control operating costs
• Improve company focus
• Gain access to exceptional capabilities
• Free internal resources for other purposes
• Maximize restructuring benefits
• Quick access to expert-level knowledge & skills
• less overhead and leasing options
• On-demand access to the latest technology
• Higher level of service as defined in the contract
• Predictable expenses with subscription-based pricing models
• Faster product launches products to market.
• Quality expectation gap
• Might influence negatively on company culture
• You may get "locked in”
• Risk of Exposure of sensitive data
• Difficult to judge between quality vs cost
• Loss of institutional knowledge
• Loss of direct control over project management
• Difficult to establish regulatory compliance
• Possibility of delay in Delivery
• Verbal and written communication barriers while dealing with foreign company
• Language/cultural barriers
• Different time zones impact productivity
Things to Consider while Planning Outsourcing
• Actual vs Hidden Cost
• Region & Time zone Difference
• Business Expectations
• Quality and Timeliness
• Skills and Expertise
• Who’ll Lead The Team
• Resources & Technology fulfilment
• Ability to Meet Deadlines
• Minimal Supervision required
• Limiting the Liabilities
• Communication Gap
• SLA - service-level agreements –NDA
• White Label Solutions
Risk & Challenges of outsourcing
• Lack of coordination between business goals and IT goals
• Selecting the Right Service Provider
• Deciding What to Outsource
• Dealing language & Communication Barrier
• Project Control And Decision Making
• Legal Tangle and Lack of Understanding of the Contract
• Lack of Transparency
• Streamlining Business Operations
• Risk of Idea Theft
• Maintaining Compatibility
• Dealing with Security
• Neglecting International Issues
Common Outsourcing Mistakes to Avoid
• Going cheaper is not always the best option
• Neglecting the importance of location
• Ignoring team & task management requirement
• Misunderstanding the cost(Ignoring the hidden cost)
• Believing that an outsourced team comes fully prepared
• Ignore communication barrier
• Ignore Security concerns
• Doubling team sizes will double the output in linear fashion.
• Keeping no clear requirement
• No manager to keep eye on development
• Keeping short term goal
How to negotiate in outsourcing
• Mention your expectations clearly
• Negotiate as early as possible
• State your performance metrics clearly up front
• Dig into your Service Level Agreements (SLAs)
• Clear transition service such as Entrance and Exit of service provider
Key Negotiating Points:
• Pricing: Ask for flexible pricing in complex projects to correctly align both parties’ interests.
• Services: Ask for detailed services description in order to avoid future conflicts.
• Perfection: Prefer warranties and time to close other performance and contractual gaps.
• Delivery Delay Penalties: Make sure to include penalties on SLA to deal with delay in delivery issues.
Outsourcing Costs - Standard Cost vs Hidden Cost of Outsourcing
The report shows IT outsourcing leading the increase, with companies giving 38% of their IT functions to vendors. One reason is reduced cost.
• Costs of choosing a vendor
• Cost of transition & relationship building
• Cultural difference costs
• Productivity lagging cost
• Costs of improving internal processes
• Costs of managing the outsourcing relationship
IT Outsourcing for Small business
• More than one-third of small businesses (37%) currently outsource a business process – Source - Clutch
• Businesses with 50 or fewer employees (29%) are less likely to outsource compared to businesses with more than 50 employees (66%)