The global IT outsourcing market size was valued at USD 528 billion in 2021 and is anticipated to generate USD 781 billion by 2030. The market is projected to grow at a CAGR of 5% during the forecast period (2022–2030).
IT outsourcing is the external use of service providers to efficiently deliver IT-based business processes, application services, and infrastructure solutions for business results. IT outsourcing means that a company provides part of its software development outside the internal structure in order to reduce costs and control all processes. IT outsourcing services include application development, infrastructure and software support and maintenance, data center management, and other processes.
IT has become a competitive advantage for most businesses. IT outsourcing is a technique for cost reduction 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 market trends. Additionally, distinction in offerings amid the presence of multiple players has led to the development of specialized teams. New contract models transform IT outsourcing into value-driven and interpersonal value, as well as the development of technical teams.
The future technology adoption plans hover around the adoption of newly emerging technologies that are predicted to grow significantly since many businesses have replaced outdated infrastructure. Public cloud giants like Google and AW; entail on-demand, dynamic, enormous scalability needs. The adoption of 5G is anticipated to lead to the need for efficient and alterable network infrastructure in the near future. The crush of the fifth generation networks is causing existing IT infrastructure to change across automotive, AR/VR, mobile connectivity, and telecommunications. Also, AI, IoT, and robotic process automation are changing the customer experience across fintech sectors, which enables the inclination for scalable IT infrastructure in the rouse of increased P2P transfers and global payments use of no-contact bank cards and management of cryptocurrency via digital channels.
Large enterprises have placed a priority on IT by adopting emerging technologies up to 5 times faster than small businesses. For example, according to SpiceWorks, 31% of large enterprises (companies with more than 5,000 employees) have chosen blockchain technology compared to 6% of small businesses. Approximately 70% of large enterprises plan to use hyper-converged infrastructure by 2021, while 68% plan to use edge computing technologies. Alternatively, as per Clutch. co, 52% of small business executives may continue to outsource jobs in 2020, with a preference for upgraded and scalable infrastructure. 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 opting for AI, RPA, Cloud, and IoT have opened up the role of IT outsourcing. Security risks have increased with the software giants moving to the software-as-a-service (SaaS) model. Outsourcing security IT provides the benefit of 24/7 monitoring, with professional technicians who work to prevent and patch security breaches.
As a result, enterprises have started to focus on central competencies and influence IT as a competitive boundary. Managed IT service providers having large teams with trained specialists usually address the impossible situations. Outsourcing software applications has fastened the time-to-market for organizations that do not have a tech background as a core capability. As per Wipro’s State of IT Infrastructure Report 2020, 24% of organizations do not have a cloud partner. The study also states that the rapid evolution of software-defined resources and the emergence of AIOps to advance automation programs are likely to fuel revenues for the outsourcing vendors. IT outsourcing market companies are witnessing forming partnerships with vendors that have the expertise of working in specific areas, thus indicating a focused and narrower specialization in the future. The preference for a trusted service provider will increase because customers are increasingly concentrated on the place where their confidential information is hosted.
Many established and technologically driven players are available worldwide. The development of specializations is seen to fragment the market with the vendors being studied. The rivalry is expected to be high as multiple strategies have been adopted to enter into new emerging markets and acquire/partner with allied technology-driven companies. This has led to the development of incompatible technology stacks, forcing prospective buyers to remain with a vendor choice to obtain products and services. Such challenges to outsourcing are leading to companies being prone to multiple challenges like operational issues pertaining to communication challenges, scope understanding, ambiguous stakeholder views, and code quality lowering.
Moreover, the IT security budgets were averaging around USD 18.9 billion in 2019, with savings credited to internal cyber security, as per Kaspersky’s report. The companies with internal cyber security or security operation center (SOC) experienced around 50% of the financial loss. Outsourcing security to Managed Service Provider (MSP) has increased the financial impact, while the companies outsourcing SOC did not reduce financial loss due to data breaches. The report also suggested that nearly 23% of companies that use an MSP experienced a financial impact of USD 100,000 to USD 249,000. Comparatively, only 19% of businesses featuring an in-house IT team reported the same level of damage.
The global IT outsourcing market share is categorized by organization size and end-user verticals.
The large enterprise is the major shareholder in the global IT outsourcing market. The market revenue was valued at USD 329 billion in 2021. Reduction in implementation costs, reduction of wait times, and increased productivity are the factors leading the larger enterprise to outsource IT. Increasing cloud adoption trends across large enterprises are driving the market revenues. The large enterprise segment is projected to generate USD 488 billion in 2030 and grow at a CAGR of 5% by 2030.
BFSI is the largest market holder. It was valued at USD 151 billion in 2021. Media and telecommunications is anticipated to be the second-largest market holder. The packaging industry is driven by the growing demand for personal protective kits, face masks, face shields, and others, along with high consumers in developing economies. By outsourcing IT, banks can cut a lot of expenses, focus more on the core tasks and build user-friendly interfaces for the customers. Personal and streamlined bank services and real-time data collection and analysis are added advantages to the banks. These developments are boosting IT outsourcing market in banks. The BFSI segment is projected to generate USD 226 billion in 2030 and grow at a CAGR of 5% by 2030.
Based on region, the IT outsourcing market share is segmented into North America, Europe, Asia-Pacific, Latin America, and Middle East Africa.
Asia-Pacific is anticipated to hold the largest market share of USD 349 billion by 2030 at a CAGR 6% during the forecast period. The market in Asia-Pacific was valued at USD 214 billion in 2021. Cost factors and talented skill pool have played a key role in driving the market in this region. India is the largest contributor to the market compared to other countries, which was valued at USD 55 billion in 2021. China is growing its market gradually, with market revenue of USD 40 billion in 2021.
North America is the second contributor to the IT outsourcing market, with revenue of USD 172 billion in 2021. The cost-cutting, expansion of footprint, and adoption of cloud, RPA, and AI transitioning are the factors for the soaring market. The US contributes maximum to the market with USD 161 billion in 2021.
The IT outsourcing market in Europe is expected to witness steady growth with a value of USD 16.655 billion in 2021. Cost reduction is the main driver in planning to outsource more, followed by the business transformation and improvement of service quality. The UK and Germany have more market revenue compared to Italy and France. The market revenue of the UK and Germany were valued at USD 28 billion and USD 22 billion, respectively.
Latin America and Middle East & Africa have the lowest market. In 2021, the market revenue in Latin America was valued at USD 14 billion, with Brazil being their major contributor. The market value of Middle East & Africa was USD 9 billion in 2021, with GCC being their major contributor.
|Report Coverage||Revenue Forecast, Competitive Landscape, Growth Factors, Environment & Regulatory Landscape and Trends|