Global IT Services Outsourcing Market

  • The global IT services outsourcing market was valued at $394 billion in 2017. The market is forecasted to grow at a CAGR of 6 percent to $531 billion between 2022
  • Regions, such as Western Europe, North America, and some parts of APAC, such as China, India, Australia, Singapore, have high market maturity, and parts of Latin America are expected to be the future growth-driving markets for IT services outsourcing

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IT Services Outsourcing Best Practices

The SLA structure for application development service consists of three main parts

  • Contract Definition: This specifies the terms and termination of the contract, dispute resolution terms and proprietary rights of the technology involved in the service 
  • Performance Measurement: This specifies the application specifications, functionalities of the tool to be developed, in terms of KPIs and warranty provisions
  • Work Payment : This explains the phased payments during the development cycle and the respective payment options

Global IT Services Outsourcing Market Maturity

  • The IT outsourcing industry is currently in an evolution phase, and this will continue to be driven by changes in demand (technology, cost effectiveness etc.) thereby, shifting from the existing markets, i.e. Western Europe, North America, APAC etc. –to the least penetrated markets such as LATAM and MEA 
  • In 2017, 700+ ITO contracts worth more than $130 billion and 150+ BPO contracts worth $25 billion were signed across the world

Market Analysis - IT Services Outsourcing

Shift toward third-party vendors

  • Traditionally, ERP players, such as SAP and Oracle, derived a large chunk of revenue from maintenance fees. This has forced the buyers to engage with third-party vendors such as Rimini Street and Spinnaker to maintain and support the ERP system to optimize costs 
  • Buyer preference to engage with third-party system integrators for infrastructure management instead of OEMs, like IBM and HP, is expected to continue, as third-party suppliers offer a quality of service similar to that provided by OEMs at lower cost
  • Increasing cloud adoption: Increase in SaaS adoption is expected to lower the demand for application maintenance outsourcing. This has forced many suppliers to invest in cloud-based offerings to stay competitive in the market 
  • In the IT application outsourcing vertical, suppliers are experimenting with new models, including risk-shared partnerships
  •  IT outsourcing buyers are increasingly looking for more vertical expertise from their suppliers