IT Services Outsourcing
Market, Supplier, Risk and
Competitive Intelligence

Industry Outlook & Drivers

Global IT Services Outsourcing Market Outlook

• The global IT services outsourcing market revenue clocked $428 Bn in 2019. However, the COVID-19 pandemic has adversely affected the market revenue pool and is thus anticipated to slump. While the previous expansion rate of IT outsourcing market size was expected at an 8% CAGR until 2023, the figure has been adjusted to 5.3% CAGR due to COVID-19 induced stressors.

• Western Europe, North America, Asia Pacific (APAC) countries including China, India, Australia, and Singapore, have high market maturity, and Latin America (LATAM) 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 the evolution phase, primarily driven by changes in demand (technology, and cost-effectiveness), thereby, shifting from the existing markets such as Western Europe, North America, and APAC to least-penetrated markets such as LATAM and the Middle East and Africa (MEA).
• In 2017, 700+ ITO contracts worth more than $130 Bn and 150+ BPO contracts worth $25 Bn 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

• Increasing vigilance regarding data security and customer-centricity in projects, particularly in BFSI and aerospace & defense industries, are fuelling the demand for IT services outsourcing. 
• The market is also mushrooming given the ever-growing demand for consultancy-associated projects. The rising need for expertise in formulating and simplifying IT tactics, business architecture advisory, portfolio consulting, and ensuring efficient and fluid digital transformation is further boosting the IT outsourcing market size.

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

Volatility in the labor industry is another factor that is adversely affecting the IT outsourcing market. This is being shaped by:

• The continuous movement of low-cost labor offshore.

• Shortage of highly skilled workers in terms of digital technologies.

Rise in GICs

Further, the rise in the number of global In-house Centers (GICs) of organizations is hampering the growth rate of the global IT outsourcing market. Nasscom has revealed that in FY2019, about 1,250 MNCs globally established over 1,750 global capability centers (GCCs) in India.

Market Analysis - IT Services Outsourcing

Shift toward third-party vendors

• Traditionally, enterprise resource planning (ERP) players such as SAP and Oracle have been deriving huge chunks of revenue from maintenance fees. This has compelled buyers to engage with third-party vendors such as Rimini Street and Spinnaker for maintaining and supporting the ERP system to optimize costs.
• Buyers’ preference to engage with third-party system integrators for infrastructure management instead of OEMs such as IBM and HP will 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 influenced several 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 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.