| What is IT Outsourcing |
IT Outsourcing is defined as the external contracting of IT-related services such as Business processes, Application service & Infrastructure solutions for best outcomes instead of relying on Company-owned resources.
The Global IT Outsourcing market has accounted for USD 551.15 billion as of 2022 and is expected To reach around USD 1.06 trillion by 2030, projecting a yearly growth rate (CAGR 2023-2030) of 9.1%.
This method is gaining momentum since its inception & not showing any signs of slowing down.
Below are some Top Outsourced IT Functions: –
Application Development– A service provider oversees creating new applications or improving ones that already exist.
Maintenance & Support– A service provider holds responsibility for continuous application maintenance.
Datacenter operations– The data center is managed by a service provider (alone or with the help of an in-house team)
Database Administration– A service provider follows up and updates databases (can be done at the physical or logical levels)
IT Security– Service providers perform security-related tasks (security assessments, penetration testing, managed security services, etc.)
Why do Companies Outsource Following the Research made by Deloitte below are the factors due to which Companies opt for outsourcing:
1) 65% of companies outsource to Enables focus on Core functions/operations.
2) 63% of companies outsource to control/reduce Costs.
3) 53% of companies outsource to Solves Capability issues.
4) Companies also opt for Outsourcing for Global Scalability.
5) 28% of companies outsource to Enhance Service Quality.
6) Outsourcing gives companies Access to Intellectual Capital & Industry experts to lead projects.
7) Drives broader Transformation.
8) Helps meet Regulatory compliances.
Forms of Outsourcing
Onshore Outsourcing: – Hiring a service provider within a country’s borders. The chosen location often offers lower labor and operational costs.
Nearshore Outsourcing involves outsourcing to a firm or person nearby the business location. Because of the smaller time difference and cultural overlap, nearshoring may lead to more effective communication than offshoring. There is a 2–3-hour time difference with the service provider.
Offshore Outsourcing: – It is the outsourcing of services to a distant organization or person. Typically, overseas outsourcing leads to lower labor costs, improved economic conditions, a wider talent pool, or time zone differences. There is a minimum of a 5- to 6-hour time difference with the service provider.
Multisourcing: – Multisourcing (multi-sourcing) is an outsourcing strategy in which IT operations and infrastructure are contracted to several vendors, typically in combination with some information technology features that are internally produced.
IT Outsourcing Models
Staff Augmentation: A sort of outsourcing service called staff augmentation comprises a tech company providing its engineers as external hires, typically under a time & materials contract.
Project-based Outsourcing: This is a Tactical model to reduce & control operational costs. The outsourcing company will be fully responsible for the development of the entire project.
Managed Team model: This is the most in-demand & successful model of outsourcing, known by many terminologies like GIC (Global In-house Centers), Managed GIC & here at Systems Plus we call it the Virtual Captive model.
Here a client could be any Company in need of tech resources & talent to meet their desired goal. Likewise, the Service provider Company has expertise in that specific Technology & has resources as well as talent to meet clients’ objectives.
Top 5 IT Outsourcing Trends in 2023
One of the most prominent IT trends right now is the expansion of cloud computing. For increased efficiency, businesses are continuously striving to migrate their on-premises infrastructure to the cloud.
After the COVID pandemic, it has become a challenge for Companies to retain employees in traditional work environments. 70% of employees prefer a hybrid work arrangement that gives them the freedom to work from anywhere. As employees are prioritizing their health & well-being over work.
Companies need solutions to support the shift in the working environment. Cloud Computing & Virtual screens have become the need of the hour for businesses.
Cloud spending is expected to grow by 22.1% in 2023. This is a huge opportunity for outsourced service providers since more companies adopt cloud computing.
Protecting data is one of the most pressing challenges for everyone in the cyber world, including companies. Service delivery, support, consultation, planning, project execution, and the proper management of sensitive data are all areas of concern.
The possibility of a data leak, which could result in a vulnerable situation and endanger the confidence of those who matter most-the customers has made the corporate world pay more attention to the issue, not only because it was essential to follow rules and laws but also because it was necessary to be able to reduce the risk and protect customers.
Independent security audits can be performed by outsourcing companies. Additionally, remote workers can offer information on all the risks connected to your company’s data protection system. In this way, outsourcing may provide an additional chance to broaden the range of services a business offers and take on the role of security auditor.
According to Fortune Business Insights, The Global Cyber Security Market is expected to reach $376.3 billion by 2029.
Although automation was important in the pre-COVID era as well, the pandemic has accelerated technology adoption. Businesses across industries now invest in automation, whether it be for sales, marketing, or other operations, to get quicker results, more productivity, better staff engagement, and improved customer experience.
The essential technologies for providing revolutionary automation will be AI (Artificial Intelligence), ML (Machine Learning), and robotic process automation. These technologies are already making a big impact in the commercial world. According to a recent IDC report, global spending on the artificial intelligence market is expected to increase 19.6% annually in 2023 to reach $500 billion.
Better deliverability and Customer-centricity
Clients in the modern market looking for IT outsourcing companies are in constant flux, Today and their expectations are high. They want quality solutions and performance time still matters to them. Providers need to stay up to date with the latest trends so they can avoid disappointing their potential clients.
Nowadays, many buyers are dissatisfied with their outsourcing providers because they’re not flexible enough, they’re afraid of trying new things, and they’re not using the latest technologies. Outsourcing companies who don’t already have a focus on becoming a customer-centric need to start making this a priority.
With the current trend, it’s more important than ever to be customer-centric to win bigger deals and acquire strong partners. Staying competitive is also contingent on being customer-centric.
Increased demand for Outsourcing among Start-ups
In addition to huge enterprises, smaller businesses are also choosing to outsource their IT services. Up to 40% of small firms outsource them IT work to outside companies. This enables them to save expenses associated with maintaining permanent employment, which is not frequently required in start-ups.
However, by 2023, start-ups will also be a part of the IT services outsourcing trends. Working together with outside vendors will help start-ups minimize expenses while improving the effectiveness of product launches, giving them an advantage over their competition.
How we can help
Outsourcing can be a great way to save money and increase efficiency – but only if it’s done right. The key to successful outsourcing is to find an expert partner who can help you set up and manage your operations. With a model like Managed GIC, you can minimize risk and maximize benefits.
At Systems Plus, we have been providing Managed GIC, also known as Virtual Captive, solutions to our clients for over ten years. Our Virtual Captive model takes all the pain points out of legacy outsourcing, making it the ideal solution for businesses of any size and scale.
Contact us today to learn more about how we can help you enable digital via smarter outsourcing.