2019 Outsourcing Trends to Watch in APAC

April 9, 2019

Anna Frazzetto’s article from Forbes.com on February 28, 2019.

The Asian-Pacific (APAC) marketplace continues its reign as the world’s dominant IT outsourcing region (paywall) despite growing competition across South America, Eastern Europe and Africa. As businesses worldwide look to propel their business capabilities and customer engagement forward through advanced technologies like AI and blockchain, APAC outsourcing powerhouses and startups alike must both sustain and transform. They must transform to meet evolving technology needs while striving to sustain the value that has made APAC the world’s IT outsourcing hub.

What APAC transformations should we expect as outsourcers work to find the right balance? Here are seven trends to watch.

Trend No. 1: Talent Shortages Will Keep All Outsourcing On The Table

While the push into rapidly advancing areas of tech innovation is a growing reason for businesses to outsource, companies will also continue to leverage APAC providers for more traditional IT outsourcing, such as help desk and support services. The reason is simple: resource shortages.

The acute IT skill shortage across the U.S., which is keeping tech unemployment at historically low levels, is mirrored in skill shortages around the globe. For example, the Edge Foundation, an independent education foundation, calculates that the U.K. economy loses £63 billion annually due to around 600,000 tech job vacancies. Businesses will continue to rely on outsourcing partners in Asia to fill those costly IT talent gaps, whether they are in support functions or in areas that are pushing into ground-breaking frontiers.

Trend No. 2: Senior Project Leaders Move In-House

In an effort to maintain control and visibility amid a shifting technology landscape, more outsourcing buyers will choose to have the senior-most outsourcing project leader on their own payroll. The rapid pace of digital change and complex emerging technologies like AI, robotics and sophisticated analytics have many executive business leaders feeling disconnected from the disruptions that affect their business.

 

Putting an internal staff member in charge of more technically advanced outsourcing efforts is one way businesses can maintain control over how closely the transformation aligns with business strategy. For APAC outsourcing organizations, this may add a layer of project complexity while also providing an opportunity to elevate the role and work of the outsourcing team by winning over a powerful internal stakeholder.

Trend No. 3: Shifting Models Among The Biggest Players

APAC is home to some of the world’s largest global IT services outsourcing companies, and many are changing their models to compete differently. Rather than employing tens of thousands in outsourcing centers, these industry giants are cutting back local APAC talent and building up smaller, localized teams in key geographies. This evolution toward a higher-touch consulting model is in part a reaction to clients wanting more executive-level engagement and oversight as well as a way to better address local market IT skill shortages.

Trend No. 4: Evolving From Customer Service To Customer Experience

Business drivers for outsourcing have changed recently. Whereas once businesses named “cost savings,” “increasing operational efficiency” and “accessing new skills” the top three reasons to outsource, “improving the customer experience” is now the second most-cited reason for outsourcing.

Across APAC, outsourcing providers are seeing this new emphasis on customer experience play out in the work they do. For example, rather than only providing direct customer service through call centers, APAC outsourcing companies are increasingly engaged to build digital support tools, such as AI-driven “bots.” As more bots take over customer service tasks once managed by outsourced agents, many APAC outsourcing organizations are elevating their capabilities to become the developers of sophisticated digital support solutions.

Trend No. 5: Re-Skilling Becomes A New Normal

Training departments are a new and/or expanding addition for many outsourcing centers across APAC. The digital skills required to support AI, deep computer learning, data analytics and robotics projects change quickly. To keep pace with client demands, many outsourcing organizations in APAC are also serving as centers of education and training. In addition, they are finding that many workers in APAC are eager to adapt skills and keep pace with technology changes.

Trend No. 6: Salaries Will Rise

As the complexity of outsourcing work rises, the salaries of tech workers across APAC will also go up. Because APAC still maintains a much larger skilled IT workforce than anywhere in the world, local salary rises will be moderate and nothing like the soaring salaries in the tech corridors of Silicon Valley or Manhattan. Businesses seeking to outsource work to APAC will still benefit from substantially lower labor costs.

Trend No. 7: Malaysia To Take Off

Malaysia has long been a smaller player across the APAC outsourcing market, but look for that role to grow. While countries like Cambodia and Laos are still behind in some areas of education and workforce development, Malaysia has made large strides. Recent government investments in education and business have created a dynamic marketplace with a strong, growing talent base. As businesses see salaries rising in more established regions or consider the high cost of outsourcing in high-end destinations like Singapore, Malaysia will become a more attractive option.

IT outsourcing has always been an industry that must adapt with its customers, and APAC has been a region ready to adapt with the global marketplace and technology engine that drives it. As U.S. companies continue to embrace innovation and local players continue to evolve, I expect APAC’s title as the world’s center of technology outsourcing to endure for the foreseeable future.

2019 Outsourcing Trends To Watch In APAC on Forbes.com