8 Trends in Global Outsourcing That Are Reshaping the World
Globalization has connected our world in ways never before imagined. Countries and companies now regularly collaborate across borders to access talent, reduce costs, and boost innovation.
This interdependence has fueled the rise of global outsourcing, which lets organizations tap into skills and solutions worldwide. As outsourcing matures, new trends are emerging that will reshape global business.
Understanding these trends can help companies capitalize on the benefits of outsourcing while avoiding the pitfalls. Let’s explore the 8 major trends set to define the future of global outsourcing.
Trend 1: Outsourcing Spend Will Keep Rising Across All Markets
Outsourcing is big business, with spending on IT outsourcing (ITO) and business process outsourcing (BPO) steadily climbing. This growth will continue as digital transformation drives demand for tech skills and solutions.
Research suggests ITO and BPO spending could rise 25-30% by 2027. Fueling this growth are both large multi-year “mega deals” worth over $100 million each, and a proliferation of small specialized contracts under $10 million.
What’s driving this demand? As every industry digitizes, companies need expertise and technologies they often lack in-house. Outsourcers provide innovative solutions for competing in a digital world.
Rather than just cost savings, outsourcing now enables revenue growth and new business models. This shift from tactical outsourcing to strategic partnerships will sustain growth.
Trend 2: “Digital Resonance” Becomes a Top Location Factor
Traditionally, outsourcing location decisions were based on labor costs, talent availability, infrastructure, and business environment.
But as technology redefines outsourcing, a new factor is emerging – a country’s “digital resonance.” This refers to digital skills, cybersecurity, startups, and overall tech prowess.
Countries like India and China have led outsourcing for their huge talent pools. But modest-sized countries are now rising stars if they invest heavily in digital capabilities.
Watch for countries like Germany, Portugal, Estonia, and Chile to become major players. Digital resonance is a key edge, letting them punch above their weight.
Trend 3: China Makes a Big Outsourcing Push
While India has dominated offshore IT and business process outsourcing, China aims to be a major contender.
The Chinese government and businesses are investing hundreds of billions in digital infrastructure and skills training. English language programs target global services.
Domestic outsourcing in China is booming. Homegrown outsourcing firms like Lifewood are also expanding globally, led by efficiency gains from AI and automation.
China’s outsourcing rise faces hurdles like privacy concerns, IP protection and language barriers. But make no mistake, China is a growing outsourcing force.
Trend 4: Vendor Ecosystems Drive Digital Innovation
Innovation is vital to digital success, but no single vendor provides everything you need. The solution? Building a “vendor ecosystem.”
Ecosystems involve strategic partnerships between clients, large multi-service vendors, and small specialized players. Each brings complementary strengths.
Clients get the benefits of innovation and specialization. Large anchor vendors provide scale and cross-vendor coordination. Small players deliver niche skills.
The most effective ecosystems have both large and small vendors. Too many large vendors create unhealthy internal competition.
Trend 5: COVID-19 Reshapes Outsourcing Relationships
The pandemic caused unprecedented disruptions. But it also stress tested outsourcing, revealing strengths and weaknesses.
Companies with strong in-house tech teams proved more resilient. Outsourcing works best when clients have strategic internal capabilities.
Firms will outsourcing more to tap innovations in areas like AI, cloud, and analytics. But COVID-19 showed that over-dependency is risky.
Expect clients to keep more mission-critical work in-house. Vendors must prove their reliability to regain trust after pandemic struggles.
Trend 6: Data-Driven Outsourcing Takes Off
“Data is the new oil” is a common refrain. But most firms find turning data into insights extremely challenging.
Enter data science outsourcing. By tapping external analytics and AI talent, companies can unearth data-driven opportunities.
Research suggests spending on outsourced data science could grow from $7 billion now to $60 billion by 2028 – an 8X increase!
As data explodes from IoT, AI, and other sources, specialized data skills become even more crucial. Outsourcing provides targeted scale.
Trend 7: Sustainability Transforms Outsourcing
Climate change and social responsibility are pivotal issues facing every organization on Earth.
Businesses are just starting to confront their environmental and social impacts. This extends to supplier relationships too.
Sustainability is becoming vital in choosing outsourcing partners. Vendors must show commitment through transparency and reporting.
“Green outsourcing” will assess vendor ethics, carbon footprints, and contributions to sustainability goals. It’s not just about profits anymore.
Trend 8: Geopolitics Adds New Outsourcing Uncertainty
Global events like the pandemic, war, nationalism, and more have revealed outsourcing’s fragility.
Heavy geographic concentration of services in countries like India and China creates risk. Conflict or instability can suddenly disrupt supply.
Firms are responding by adopting a “China + 1” strategy, adding secondary supply sources as a backup.
But geographic redistribution of outsourcing will take years. Meanwhile, uncertainty remains high. Developing contingencies is key.
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Outsourcing Must Evolve for a Changing World
Outsourcing’s future seems brighter than ever as digital transformation accelerates. But simply relying on what worked in the past is a recipe for failure.
The trends reshaping outsourcing require companies to rethink everything – from geographic strategies to vendor selection to in-house vs. external deployment of emerging technologies.
By staying abreast of these trends and innovating boldly, outsourcing can fulfill its promise as a catalyst for global growth and progress. The world’s problems demand nothing less.
