Where is IT Outsourcing going? - The trends and innovations which shaped 2019 and will shape 2020.
Posted by Catherine Stewart on 07 October 2019
The sphere of technology is advancing so quickly because of what futurist and author Ray Kurzweil termed the Law of Accelerating Returns. New technology forms the base which allows technology to evolve faster and faster over time. Since it’s both lucrative and in many ways limitless, it’s a trend that certainly has shaped the contemporary workplace. This year, Gartner projected that global IT spending would reach a staggering figure of $3.79 trillion. The fast-paced change of IT has led many companies turning to the IT Outsourcing Market as a means of delivering IT-enabled business processes, application services and infrastructure solutions. Technavio's research analysts have predicted a steady growth of 4.42% for this industry in the next three years- estimating it to be worth $409 billion by 2022.
So, this leads us to the question.
On which IT functions and services does this money go?
Of course, it's difficult to arrive at a definitive list of IT spending and its impact, but it’s fun to look back at the innovations and trends of one year and predict what could happen next.
Small Business, Start-Ups and SOHOS Increase Adoption
European Countries have been improving their policy frameworks and developing powerful ecosystems for entrepreneurs in the Startup Manifesto roadmap; leading to significant growth of new companies. Clutch reveals that more than one-third of small businesses currently outsource a business process, and 52% had plans to do so in 2019. These rapidly developing companies realize their need to get access to alternative talent pools through outsourcing. They follow the track of many thriving companies such as Slack, WhatsApp, Github who all began with outsourced development.
Shift to Multiple IT Vendors
There has been a significant shift in businesses choosing to work with multiple IT vendors; the prime reason for this can be down to revolutionary technologies. Where once IT giants managed sole tech needs, they now need to acquire new skills to expand their offer into different fields. Working with multiple vendors has advantages, such as flexibility in managing business change and innovation capacity brought on by different people across global teams. Additionally, it presents the opportunity to look at processes, technologies, architectures, cost structures and operating principles through different lenses, that enable improved operational effectiveness and competitive differentiation.
Shortage of IT Engineers
As a whole, the IT skill shortage has intensified throughout 2019, leaving many companies being pushed to outsource development. As demand continues to grow, countries around the world and even Europe will continue to face immense struggles in recruiting expertise and specialized skills. This year, the UK alone saw an immense shortage of skilled developers for Java and Python programming - with 63% of CIO's in the London area unable to fill positions.
Less Focus on Cost Reductions
Let's face the facts, outsourcing development is and will always be about reducing costs. However, this alone will no longer be the deciding factor when it comes to choosing an offshore software development partner. The relationship between the outsourced development partner and the client has become a more human-driven, focusing on the process, rather than being solely price-oriented. The quality of the product(s) delivered in the most effective time frame has become a driving factor for choosing the right partner.
Automation and the Demand for Higher Efficiency
Automation is here and it's happening with impact.
Artificial Intelligence (AI) and Robotic Process Automation (RPA) is evolving at a rapid pace, 80% of GSA correspondents consider these to be the biggest transformational change to IT over the next decade; and with this change comes the desire and need for data scientists, big data analysts and AI experts. To date, companies have dipped their toes into the automation world by introducing the use of bots and virtual agents to effectively streamline routine tasks.
In terms of outsourced software development, AI will lead this to the highest level. First of all, this trend will facilitate the work on the creation of programs. For example, developers will be able to teach a neural network to use some tools to perform the simplest tasks, which will reduce the time it takes to complete tasks. In the end, AI will be implemented directly in the program's functionality with user orientation. Sites will be automated, so the quality of service should increase several times.
Cloud Sourcing and Integrated Platforms
More and more businesses and tuning to Cloud Sourcing; this growing trend will shift and exceed spending of $1 trillion in 2020. With an increasing demand for cloud outsourcing, companies will need cloud platforms from public sources for data storage purpose. It will become important to offer online data centres and the right equipment at the service providers side.
Businesses operating over the cloud will be more concerned about security threats and will look to eliminate all possible threats by outsourcing security services. This way they will be able to make use of the expert knowledge of the vendor and easily delegate the responsibilities. Accelerate your progress today by working with us and our partners at Logicalis on your cloud transformation.
Increasing Switch of Boundaries
India and China were the leading outsourcing countries in 2017, making $150 billion in IT exports. However, they soon began to see stiff competition from a fresh base of Eastern European countries: Serbia, Romania, Ukraine and Poland. Although Eastern European countries don’t have the same labour force as Asia, they provide a more cultural comfortable and time zone friendly environment for the West and the US. It goes without saying that these are not the only merits that make Eastern Europe an attractive location for companies looking for custom solutions in a range of IT fields.
Development through Low Code Platforms
The low-code concept is gaining momentum. Businesses are becoming highly competitive when it comes to their web and mobile applications. This, in turn, is making more and more businesses opt for low-code development platforms, which eliminates the dependency on manual coding, producing a faster time to market. Again, the figures speak for themselves and this industry is anticipated to rise to $15.5 billion next year, as estimated by Forrester.
Modern IT outsourcing companies need to stay up-to-date with changing trends in an ever-changing market. The leading partners will appreciate a customer-centric approach and strategy with transparency and trust at the forefront. In addition, familiarising your knowledge of the latest technological trends and being open to embracing change will set you aside from the competition.
Be brave enough to share the risk and open the door to a successful and fruitful partnership.
I'm Catherine Stewart, a Business Developer for PanonIT. I was born in Ireland before spending six years in Scotland for University and work. In my spare time, I like to travel, cook and read mystery novels.