IT Services Outsourcing

Global IT Services Outsourcing Market Outlook

• The global IT services outsourcing market was valued at $573 billion in 2022. The market is gaining momentum, due to the increased adoption of digital technologies and cloud initiatives by enterprises across the globe. The IT services market is forecasted to grow at a CAGR of 8.06 percent and reach $1065 billion by the end of 2023

• There is a high need for cutting-edge infrastructure, both of which will help the industry expand in the upcoming years

• Regions, such as Asia Pacific and Western Europe, have high market maturity, and Africa has the least maturity region

IT Services Outsourcing Supply Market Outlook

• India has captured a majority of the global offshore market and is positioned to be the leader in IT offshoring

• Combination of skills, low cost, large labor force, quality service, and strong governmental support provide India an edge over other countries in the region

• Currently, the Philippines and Vietnam are fast growing regions in Asia

• Ukraine, Poland, Romania, Hungary, Belarus are major locations for near shore IT outsourcing in Europe

IT Services Outsourcing Demand Market Outlook

• IT automation technologies is expected to drive the demand in North America, while in Europe, artificial intelligence and blockchain would be the key driver

• In both regions, BFSI is the earliest adopters of most emerging and automation technologies

• Adoption of digital technologies and cloud initiatives are the priority for many enterprises in Europe and North America

Supplier Engagement Models for IT Service Outsourcing

• It is recommended not to have more than three key IT service providers, as it would create relationship complexity and increase project cost

• Buyers should have a vendor mix of large and mid-size service providers. Large service providers can bring best practices followed in the industry and to support mission-critical applications. Mid-size supplier can offer competitive price and can deliver specialized expertise

Global IT Services Outsourcing: Drivers and Constraints

Drivers

Emerging technologies/outsourcing needs

• The IT services outsourcing market is driven by end-user computing services and technologies such as process automation and virtualization. These factors, along with an increase in security service outsourcing and Cloud adoption, will continue to drive the market over the next 3–5 years

IT Service Providers Opt Multi-shore Delivery Model

• In the past few years, Tata Consultancy Services, Infosys, Wipro, and Tech Mahindra have ramped up their nearshore presence in countries, such as Canada, Mexico, and Brazil

• In 2020, Infosys has hired 12,000 US workers and have plans to employ 25,000 US workers by 2022. In addition, Infosys opened six delivery centers in the US and two development centers in Canada, to bring Canadian workforce to 4,000 employees by 2023

• Wipro has delivery centers in nearshore locations, such as Romania, Australia, and Brazil. Tech Mahindra has built global delivery centers in the Philippines and development centers in the US, Europe, Canada, and Latin America

Increasing competition in the market

• Currently, the IT outsourcing services are dominated by Top 8-10 Tier 1 players. However, there has been an increase in competition from Tier 2/3 players in the market owing to demand from mid-size enterprises

Constraints

Breach of intellectual property

• Protecting IP is one of the major challenges confronting the global IT outsourcing services market. Outsourcing business critical tasks to other countries’ raises IP concerns, given several risks associated with theft, misuse of trade secrets, or loss of IP rights

• Service providers are limited to work on the products of their customers, and they do not possess any ownership. Any innovation that emerges out as a result of the work carried out belongs to the provider. Therefore, the enterprises that outsource their services always have concerns for IP loss as the providers serve multiple customers, including their competitors

Volatile labor market

• The market is encountering challenges, due to volatility in the labor market. This is being shaped by:

• The continuous movement of low-cost labor offshore

• A shortage of high-value skills around digital technologies

Supply Trends and Insights : IT Services Outsourcing

Global/Regional Supplier

• Key service providers: Accenture, Tata Consultancy Services, Cognizant, Wipro, HCL, IBM, Capgemini, Infosys, DXC Technology, NTT Data, Fujitsu, Hewlett Packard Enterprise etc.

• Fragmented and commoditized: Though this market is fragmented, the top ten vendors command a larger share of the market. The IT services supply landscape is commoditized; most leading vendors have a global presence (across multiple locations)

• Expanding service lines: IBM, Accenture and TCS are on an acquisition spree

• Owing to these acquisitions there will be more new service lines added to their existing portfolio thereby increasing their market share

• Vendors shift toward near-shoring model: IBM, Accenture, and India-based IT vendors are building operations in Latin America and Eastern Europe to offer near shore benefits

Tier 2-3/Local Supplier

• Key service providers: Larsen & Toubro Infotech, Atos, EPAM Systems, Tech Mahindra, CGI Inc. etc.

• Differentiation and focusing on specialization: Startups and mid-sized IT companies are growing by differentiating themselves, based on industry vertical, geographical market focus, niche IT service offerings, such as Software Product Engineering, IT Modernization Services, Data Engineering, Cloud and Infrastructure Management Services, etc., along with limited application service offerings (SAP, Oracle, etc.)

Engagement Trends

Shift from cost toward value 

• Companies are expecting more value to the service in addition to economies of scale and inexpensive labor and cost of doing business

• Matured IT outsourcing buyers are looking for service partners and arrangements that will enable them to take advantage of future changes in the IT landscape

Most adopted model globally: Multi-vendor model

• Companies are starting to engage with multiple service providers and benefitting from the capabilities of smaller, niche supplier

Technology Developments : IT Services Outsourcing

The IT outsourcing market is constantly evolving and incorporates new technology updates and innovations very quickly. Innovation and new developments affect the global IT outsourcing market very quickly. This report details the latest innovations as well as how it has affected and is likely to continue to affect the global IT outsourcing market. Innovations in the business and contract models also affect the IT outsourcing market dynamics.

Why You Should Buy This Report

The report provides you with the IT outsourcing market overview, drivers and constraints, regulatory and technological trends, etc. It offers Porter’s five forces analysis of the global IT outsourcing market. The report provides insights on IT outsourcing market size, market share, and price trends, to name a few. It delves into the IT outsourcing market that is vital to get an overall perspective of past historical trends and the reasons behind them as well as understand the reasons for the market forecasts. The major drivers and constraints of the IT outsourcing market are listed and explained. The peculiarities of the IT outsourcing industry that fuel its growth are detailed for a complete understanding. The global market overview and global IT outsourcing market trends are illustrated and explained.

Moving forward, the IT outsourcing market research study offers a comprehensive analysis of the unique aspects and market dynamics of each region. The market size, rules and regulations as well as the key players in the region are detailed. The market maturity and preferred verticals such as near-shore outsourcing, offshore development, business process outsourcing (BPO), application development & maintenance, IT subcontracting, IT offshoring (ITO), KPO, HRO, and LPO for each region are specified. This report analyzes the dynamics of the import of IT outsourcing services as well as the countries that provide or export the services, along with the leading global players in the industry.

Further, it provides details of new innovations in the IT outsourcing industry and their impact on the entire industrial landscape and future trends.