IT outsourcing is the usage of service providers externally to effectively deliver IT-enabled business processes, application services, and infrastructure solutions for business outcomes. IT has become a competitive edge for most organizations. IT outsourcing has become more than a simple cost reduction technique with the cloud migrations and options of cloud services. Several studies have suggested that Application Development and Maintenance have become the most commonly outsourced functions amidst the partial IT outsourcing trends.
The future technology adoption plans hover around the adoption of emerging technologies that are predicted to grow exponentially as businesses look to replace outdated infrastructure. Public cloud giants like Google and AW; require on-demand, dynamic, enormous scalability needs. The adoption of 5G is expected to lead to the demand for efficient and scalable network infrastructure in the near future. Also, AI, IoT, and robotic process automation are transforming the customer experience across fintech sectors, enabling the preference for scalable IT infrastructure in the wake of increased P2P transfers and global payments, use of contactless bank cards, and management of cryptocurrency via digital channels. This adoption of software development outsourcing and cloud services has emerged as a viable option for small-scale organizations that want to scale by adding newer customers.
For small or medium-sized businesses, the availability of highly trained technicians is easier with IT operations outsourcing. By employing multiple dedicated IT professionals, the larger companies cannot always find technology generalists to leverage upgraded network maintenance and security. From being a cost reduction tool to a key strategic player, digital transformations and organizations turning to AI, RPA, Cloud, and IoT have opened up the role of IT outsourcing. As a result, enterprises have moved from just focusing on core competencies and leveraging IT as a competitive edge. Managed IT, and service providers, with large teams having trained specialists to address impossible situations. Outsourcing software applications has fastened the time-to-market for companies who do not have a tech background as a core competency.
While focusing on more flexible, tailorable, and evolution-friendly solutions, cloud migration, and adoption of software has made outsourcing customers divert resources from low-value assets to specialized employees. More flexible and asset-free IT services are available on an on-demand basis with the rise of cloud-based services. On the other hand, cloud computing has led to a fundamental shift in how companies pay for and access IT services. Companies that are looking forward to outsourcing cloud services have considered cost optimization as a significant aspect. Therefore, multi-cloud strategies have been gaining momentum and allowing multiple providers in order to reduce concentration risk.
With the onset of COVID-19, the vulnerability of supply chains is high. A fragile ecosystem included providers of critical IT services for many IT organizations. Additionally, work-from-home compulsions have led the service providers to ensure that mission-critical enterprise customers have all the necessary tools and technologies to provide the speed, security, quality, and overall efficacy of services. According to Snow Software, a poll from 250 IT leaders globally was taken to understand how the onset of the pandemic affected their cloud adoption plans. The result was the acceleration in the adoption of cloud technologies. Further, 82% of them portrayed ramped-up usage of cloud as a direct response to the pandemic and shifted to remote working patterns. As a result, the outsourcing vendors are assisting businesses to scale up infrastructure and withstand high loads. Businesses witnessed the development of a reliable offshore outsourcing partner with expertise across the cloud and to scale infrastructure and migrate their solutions to the cloud.
The critical government's support for small businesses was extended to ensure survivability. Traditionally, the preference for in-house IT support is an issue for SMBs. A March 2020 survey of 2,135 UK business owners by Hitachi Capital Business Finance suggested that 20% of small businesses felt that working remotely for months and tech setup (30%) was holding them back. With funds required to be used across marketing and operational continuity strategies, technology spending in SMEs is likely to glow at a slow pace. As per Interactive Advertising Bureau, UK-based SMEs (64%) believe that digital advertising is crucial to the future of their business during the COVID-19 pandemic.
Asia-Pacific will hold the largest market share during the forecast period due to cost factors and talented skill pool. The Asia-Pacific IT outsourcing market was valued at USD 214 million in 2021 and is expected to be valued at USD 349 million by 2030 at a CAGR of 6%. North America will account for the second-largest market share and was valued at USD 172 million in 2021, owing to the cost-cutting, expansion of footprint, and adoption of cloud, RPA, and AI transitioning.
Europe will witness steady growth, with the UK occupying the majority of market value. The business transformation and improvement of service quality are driving the market. Latin America and Middle East Africa will account for a competitively lower growth owing to the developing economy.
The key players in the global IT outsourcing market are