The Future Of Outsourcing And How To Outsource The Right Way

We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place. All through 2020, as the pandemic raged and governments around the world were forced to impose, and then reimpose, national lockdowns, the world’s economies were paralyzed. To understand the impact of the COVID-19 crisis on outsourcing, BCG conducted a survey of 200 global companies with large IT and business-process outsourcing footprints.

future trends of outsourcing

The global market for in-house and outsourced facilities management is estimated to reach $1.9 trillion by 2024. The outsourced segment accounts for more than half the total and has attracted a growing number of vendors with new service offerings. Still, charting a clear path forward—one that enables companies to extract the most value—is an increasingly complex task. Outsourcing has certainly revolutionized how businesses operate today. When outsourcing first started out, it was restricted to low-risk functions such as payroll processing and data entry. Later, contact / customer service operations were outsourced on a large scale.

Experts projected the fall of traditional outsourcing with the rise of automation and AI. Luckily, BPOs saw this as an opportunity to advance with their game even pre-pandemic. Aside from this, small businesses could not hire suitable talents in-house with budget and travel restraints.

Trends that will change the future of outsourcing

Because of the better solutions, a larger pool of potential clients, and advanced security, outsourcing will become more beneficial and reliable. Outsourcing customer services is one of the most frequent business practices. Consequently, 95% of IT professionals have seen their organizations redefine technology priorities following the Covid-19 outbreak, and 63% of Fortune 500 CEOs expect the 2020 crisis to propel tech innovation in business. Ten years ago, Forbes heralded “the end of the age of outsourcing” , envisioning downgrades in outsourcing contracts in favor of expanding in-house teams.

Outsourcing dates back to the 1970s when manufacturing companies looking for process efficiency began hiring third-party vendors to manage their less-than-essential processes. This approach made its way to IT operations and entire back-office operations, including human resources, payroll, and accounting. As a result, many companies are now devoting a significant portion of their software development spending to outsourced professionals. By partnering with experts who are comfortable with the newest emerging technologies, companies can gain a competitive advantage and reduce the unnecessary costs of permanent, in-house developers. In addition to controlling capital costs, increasing efficiencies, and reducing labor costs, one of the most important reasons why small businesses benefit from outsourcing is the ability to mitigate risk.

Outsourcing can be a great resource for helping to avoid employee burnout, but the way you plan to use outsourcing needs to be communicated clearly. Before signing a contract with an outsourced service provider, be sure you read all the fine print. You should understand exactly what services you are purchasing, the nature and rules of your subscription or contract, and also the pricing structure. Ask whether there are any limitations with your outsourcing plan and if there are ever any surcharges or fees that you could encounter. Instead, think carefully about the non-core business functions that slow you down and drain the largest portion of your resources. To get the most bang for your outsourcing buck, begin with outsourcing these areas.

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“61% of companies thought backsourcing will be less significant in 2020, with 57% of outsourcing service providers saying the same,” claims the National Outsourcing Association’s “Outsourcing in 2020” survey results. Small businesses have moved toward outsourcing a majority of their processes in order to cut costs, focus on core business, resolve capacity issues, get better quality, and much more. Value networks are connections you build to create value for your company or its processes. By the time the calendar rolled over to 2022, the outsourcing world had nearly two years of experience with the widespread remote work that started at the beginning of the COVID-19 pandemic.

future trends of outsourcing

Nevertheless, all of those cons can be overcome by implementing the most appropriate strategies and organizing the scope of work properly. That is – every issue or impediment is easy to soften or vanquish if you choose the right outsourcing partner. That way, you will be capable of building mutual trust, and maintaining excellent and transparent communication. Considering the soaring prices of oil, logistics, and materials, the possibility of outsourcing is becoming more worthwhile for many businesses across the globe. Hence, companies that are more stable and competent in enabling crucial functions outsourcing are predisposed to a competitive advantage.

The future of outsourcing: Labor challenges will mean more remote work and automation

The global business process outsourcing spend could increase 19% over 2019’s numbers to reach $212 billion in 2023. Grandview Research predicts that the business process outsourcing industry will reach $525 billion by 2030. The biggest advantage of hiring an RPO provider is achieving top quality talent available in the market. They help organizations save a lot of hard work and research involved in effectively managing recruitments. The HR professionals are under a lot of pressure to hire the best candidate who will serve as a valuable employee to the company for many years in the future. Therefore, a slight mistake on the part of hiring managers can cost the company a valuable amount of time and money.

  • Robotic automation is well suited to take over repetitive and hazardous tasks.
  • The result has been a global shift in the way that people look at how work fits into their lives.
  • But business leaders must strike a tricky balance to reduce non-core costs without affecting the performance of core operations.
  • In the early stages of running a business, the key members may have to wear several hats.
  • Today, many early-stage startups and small companies consider hiring a third-party organization to overcome operational shortcomings and improve their time to market.

In fact, the sudden boom in digitization has caused the SMBs that are in the prototyping stage to push their products forward for quick launch. A study by Clutch reveals that over 37% of small businesses outsourced their business processes in 2018 and over 52% have outsourced development to India in 2019. As outsourcing helps them increase efficiency and get expert assistance, more small businesses are shifting to outsourcing in 2020. You can often more it outsourcing trends easily execute diversity initiatives and meet corporate goals when you utilize outsourced service providers from a different geographic area. It is important to note, however, that if outsourced workforce diversity is a key goal, that objective should be a prime factor in the selection and engagement of outsourced staff. Outsourcing business processes empowers the company to maintain a strategic focus on its core competencies and competitive advantages.

For more than a decade, our biennial survey has been the cornerstone of our outsourcing market research. Instead of releasing a broad online survey to generate outsourcing statistics, we interviewed 40 client executives, service providers, and lawyers to bring a more qualitative perspective to our findings. Respondents are spread across the globe, giving us a more complete view of the outsourcing ecosystem. The interviews were conducted before and after the start of the COVID-19 pandemic, enabling us to identify how industry leaders have responded and where they plan to go.

By 2028, the global data analytics outsourcing market will grow at a 34% rate and be worth $60.3 million. Research shows that the legal process outsourcing market size will rise with a CAGR of over 40% by 2024. Considering that this market size was $3 billion a few years ago, we can imagine how high this increase will be. Companies will approach service providers as service integrators who will not just complete the project but also share the risks and rewards for a more value-driven delivery.

Beginner’s IT Outsourcing Guide: Everything You Need to Know

It would also allow companies to hedge their risks by diversifying their delivery locations. • Clients’ portfolios of service providers are becoming more complicated and require management comparable to looking after a portfolio of stocks. • The biggest barrier to RPA adoption is the inability to capture immediate value. Some clients find it difficult to justify the investment, as they don’t see a positive business case in the short term.

future trends of outsourcing

One popular managed service that businesses large and small are favoring is 24/7 virtual receptionists, business texting services and call answering services. But, what is a virtual receptionist and how do they function within a business? With this outsourced model, virtual receptionists manage a company’s calls, texts, chats, and appointment schedules. A virtual receptionist can serve as an extension of the business, handling anything from inbound and outbound calling to lead generation and ongoing client retention. With unprecedented bottle-neck in business due to the pandemic and lockdown policies. Many organizations have created multiple strategies to ensure business continuity in even the most extreme circumstances.

Revamping Service Provider Strategies

All of the tasks that are involved in maintaining a facility, such as equipment maintenance and building services. Finally, technological advancement also enables companies to outsource jobs reliably and efficiently, contributing to outsourcing popularity. Outsourcing statistics suggest that outsourcing cybersecurity is becoming an attractive solution for IT leaders. Nearly 90% of survey respondents believe both providers and buyers will be focused on value and outcomes. A business owner can save around 60% of overall costs with outsourcing.

Encouraging remote work

There is a strong belief that outsourcing is set to become more popular as a business practice over the next five years. Similarly, new sectors–such as health care and fintech–are predicted to invest heavily in outsourcing in the coming years, along with IT which continues to remain the No. 1 sector. That way, you will be able to free up funds that can be used to reinvest back into the growth of your business.

Instead, the company outsources the work to 500,000 people in the Philippines, Vietnam, China, Indonesia, and Taiwan. The outsourcing industry is undergoing a digitally disruptive change in 2020. The technologies that are now erupting in the digital ecosystem will seep deep within and influence the majority of outsourcing operations. As businesses are faced with an unprecedented situation, managing offshore teams could be a challenge. With the majority of the employees moving their workstations home, there has been a confluence around the security of projects and setting up VPNs. This has caused businesses to go through their outsourcing contracts once again, set-up new pointers for WFH, etc.

Moreover, outsourcing statistics highlight the Philippines as the country ideal for business outsourcing. When all statistics are taken into consideration, we can say that outsourcing will continue to grow in the future. In fact, around 80% of logistic leaders plan to increase their outsourcing budget by 5%.

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