IT Services Outsourcing
Market, Supplier, Risk and
Competitive Intelligence

Industry Outlook & Drivers

Global IT Services Outsourcing Market Outlook

• The global IT services outsourcing market was valued at $428 billion in 2019. The market is being impacted by Covid and is anticipated to see stagnation. Previously the IT outsourcing market size was expected to grow at a CAGR of 8 percent until 2023. Now the CAGR would reduce to CAGR 5.3 percent during the same period.
• 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.

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.

Global IT Services Outsourcing: Drivers and Constraints

Drivers

Emerging technologies/outsourcing needs

• The global IT 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.

Increase in adoption

•  Outsourcing market research shows high adoption in IT outsourcing by industry verticals – BFSI, manufacturing, communication, etc. The prime factors that are driving this adoption are process optimization, cost saving, and risk reduction.

Delivery centers in offshore locations

• Companies, such as IBM and Capgemini, are setting up delivery centers at low-cost offshore locations, like the Philippines, China, Brazil, Poland, Mexico, etc. The Indian vendors, such as TCS, HCL, etc., no longer possess this offshore advantage.

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 don’t 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 about 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.

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 a 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.

Technology Developments

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 gives information about IT outsourcing market size, IT outsourcing market research, IT outsourcing market share, etc. It gives an insight into the IT outsourcing market that is vital to get an overall perspective of past historical trends and the reasons why they happened 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.

The report also gives a detailed analysis of the unique features of each geography and the market dynamics that differentiate the 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 nearshore outsourcing, offshore development, Business Process Outsourcing (BPO), application development & maintenance, IT subcontracting, IT Offshoring (ITO), KPO, HRO, and LPO for each region differ and this report analyses the market dynamics of each of the regions specified. This report also analyses the dynamics of the import of IT outsourcing services as well as the countries that provide or export the services. The leading global players in the industry are also analyzed.

This report gives details of any new innovations in the industry and how they will affect the entire landscape of the industry and future trends.