The Surprising Size Of IT Outsourcing Projects In 2019 And A Look Ahead
Anna Frazzetto’s article from Forbes.com on January 17, 2020.
IT outsourcing was surprisingly small in 2019. The contraction (a word with an ominous sound to it) was not in terms of global market size. In fact, the market remained strong and is predicted to remain so. Procurement intelligence firm Beroe Inc., for example, forecasts that the IT outsourcing market will see an annual growth rate of 6% until 2022.
In reality, the new and unexpected smallness of IT outsourcing applies to resource numbers and engagement size. As opposed to the industry’s bigger, older ways, many businesses in 2019 embraced smaller, targeted tech outsourcing solutions.
Goodbye Big Old Outsourcing
For many years, IT outsourcing was synonymous with big operational changes and resource redistributions. Sizeable segments of a company’s IT operation were outsourced and IT leaders and their teams put in tremendous strategy, planning and change management work into these large-scale outsourced technology operations. No one thought of IT outsourcing as turnkey.
Fast forward to 2019 — the age of getting most anything with a swipe on the phone or the click of the app — and a new, agile mindset has swept the IT outsourcing sector.
Rather than outsourcing sprawling tech teams or initiatives, many businesses have narrowed their outsourcing scope to smaller, more agile solutions in order to advance their innovation capabilities. In 2019, a growing number of businesses were outsourcing just one tech role or one initiative to an outsourcing provider rather than outsourcing sizable tech teams or projects. Why?
The Talent Factor
First, part of the shift is due to the tremendous lack of available talent in emerging technologies like automation, artificial intelligence (AI), robotics, data analytics and machine learning. Agile IT outsourcing providers that can quickly provide small teams of experts — or even just one expert — offer businesses a way to keep projects in-house and advancing. No massive work to shift resources or operations required.
Another impetus for the shift to smaller IT outsourcing strategies is the changing acceptance of new ways of working and collaborating. The gig economy, estimated by Staffing Industry Analysts to include well over 50 million workers in the U.S., is growing the world over. Businesses and their leaders have grown more and more accustomed to tapping into skill sets on a freelance or contingent basis.
Crowdsourcing ideas and solutions has become more common. The idea of turning over one part of a tech project to an outsourced expert sounded scary and risky just a few years ago. Today, IT leaders will often move the work outside of the organization to a skilled, outsourced expert rather than wait to hire an internal (and hard-to-find) resource.
The Automation And Bot Factor
Many big IT outsourcing efforts over the years focused on the outsourcing of large-scale help and service desk work as well as manual testing and quality assurance (QA). With chatbots and automation, many businesses can rely on technology to manage a good part of service and QA work while leaving the more sophisticated needs to in-house service and development experts who know the business and its products/solutions inside and out.
Outsourcing In 2020 And Beyond: What Will Change?
As bots and automation assume more traditional outsourcing work, manually-intensive technical work will continue to fade away and traditional outsourcing will have to adapt. That evolution will require changes in focus for many outsourcing providers in order to claim a higher position in the value chain.
Where IT outsourcing was once focused on non-mission-critical tasks and/or support roles, outsourcing today and beyond needs to tie directly to business innovation, strategic growth and revenue generation. In 2020, I believe we can expect to see IT outsourcing providers that can:
- Solve strategic business problems. As outsourced resources work more with development and research and development (R&D) teams on new and emerging technologies for clients, they will be asked to go beyond completing task work. Over the next decade, outsourced providers are likely to become increasingly strategic technology partners whose business and technology insights will be leveraged to help clients improve products and services and gain a competitive advantage.
- Build new tech. Every business today is a tech company at some level. Health care companies rely on sophisticated technology to care for patients and develop products and medicines. Retailers rely on advanced machine learning to predict customer behavior. Whatever the industry, rapidly advancing technologies are playing a role in how it works, requiring businesses to turn to outside experts to stay competitive. Those outsourcing providers can help build apps, systems and products that incorporate today’s emerging technologies, like AI, machine learning and robotic process automation (RPA).
- Analyze data and guide action. More businesses will likely turn to outsourced providers to support their growing and complex data. And rather than simply scrubbing and storing that data as in years past, outsourcing providers will be asked to analyze and visualize data, helping their clients glean business insights and predictive opportunities from their varied data sources.
Advancement Is Required
Just as manufacturing workers have had to advance their skills, forgoing manual skills and learning to manage the complex machines that line factory floors, outsourcing providers are also having to advance their capabilities.
Focusing on smaller roles with more strategic, innovative impact is just one change of many to come. The size and reach of outsourcing initiatives may fluctuate, but one new factor will remain the same: The value outsourcing delivers will need to be more strategic and more closely tied to the business mission than ever before.