The latest outsourcing statistics from 2021 reveal interesting trends in business practices and why several companies invest in third-party services.
So, what’s the outlook for outsourcing in 2022?
Let’s take an in-depth look at 20 crucial outsourcing stats 2021 and three FAQs that provide a market overview of the outsourcing industry.
This Article Contains:
(Click on a link below to jump right into a section)
- 10 Key Outsourcing Stats 2021
- How the Global Pandemic Affected Outsourcing
- The Cost of Outsourcing
- The Use of Cloud Services to Improve Outsourcing
- The Expected Growth of BPO
- Jobs Outsourced by Small Businesses
- The Rise of Financial Outsourcing
- The Tech Talent Shortage
- The Need for Managed Service Providers
- Investing in AI – Chatbots and Robotic Process Automation
- Outsourced Customer Care Services
- Other Crucial Outsourcing Statistics
- 3 Frequently Asked Questions on Outsourcing
Let’s talk numbers.
10 Key Outsourcing Stats 2021
Here are 20 of the latest outsourcing statistics from around the world:
1. How the Global Pandemic Affected Outsourcing
The pandemic had a bittersweet effect on outsourcing.
A 2020 Boston Consulting Group (BCG) survey of 200 global outsourcing companies found that most surveyed companies faced operational challenges, saw a decline in revenue, and struggled with service provider changes during the Covid pandemic.
However, the digital transformation brought about by global lockdowns accelerated the growth of IT, cloud computing, and Artificial Intelligence (AI). And companies looked to outsourcing to fulfill the requirements for taking their businesses online.
Large corporation IT departments increased their outsourcing budget from 12.7% in 2019 to 13.6% in 2020, according to Computer Economics’ IT Outsourcing Statistics 2020/2021. And as per a global IT outsourcing market study, the industry is expected to grow by 98 billion USD by 2024, with a Compound Annual Growth Rate (CAGR) of 5%.
Moreover, based on the NTT 2020 Global Managed Services Report, 45% of global corporations planned to outsource more IT services, including jobs for software developers.
2. The Cost of Outsourcing
The global pandemic led to costs becoming a major factor in outsourcing.
Here’s a look at the labor costs of popular outsourcing destinations:
- In the Philippines, the average compensation for professionals in outsourced positions is 8,300 USD annually.
- In China, it starts at 7,815 USD for an IT position, compared to an average 9,723 USD in India and 82,000 USD in the US.
- In Southeast Asia and South America, call center rates run between 8 to 18 USD/ hour per representative while costing 25 to 65 USD/ hour in the US.
However, cost isn’t the only factor. 49% of companies state that freeing up resources to focus on core tasks is one of the leading factors supporting outsourcing.
3. The Use of Cloud Services to Improve Outsourcing
Most global outsourcing practices moved towards cloud computing since it supports the digital transformation of businesses.
According to a 2019 Nutanix study, more than 93% of outsourcing businesses have already integrated with cloud technology.
So what does the future hold for outsourced cloud services?
Gartner predicts that the total cloud market value will grow to 331 billion USD by 2022.
And as it grows, cloud computing paves the way for companies to offer IT services, including server and software outsourcing.
4. The Expected Growth of BPO
Based on a 2021 Grand View Research study, the global Business Process Outsourcing (BPO) market share is estimated to reach 405.6 billion USD by 2027, with a CAGR of 8%. The market covers fields such as healthcare, retail, banking, and more.
The growing market is largely supported by outsourcing deals originating in the US. In 2017, KPMG found that the US accounts for 85% of global business process outsourcing deals. And according to Statista, business process outsourcing was expected to produce an estimated 113 billion USD of revenue in the US in 2021.
On the receiving end, China (one of the top outsourcing destinations) is expected to reach a BPO market volume of 28.5 billion USD by 2025.
Overall, the global BPO total contract values (TCV) increased by 251% in 2021 from 2020 based on an HSF market analysis, with the telecommunications, banking, finance, and public sectors gaining the most traction.
So, you can expect that BPO services from these sectors will increase in 2022.
5. Jobs Outsourced by Small Businesses
Small companies rely heavily on outsourcing for technical tasks and adopting emerging technologies.
The Clutch 2021 Small Business Survey found that 80% of small businesses planned to outsource in 2021 to improve efficiency and access to resources.
On top of that, 26% of smaller companies with fewer than 10 employees looked to outsourcing as an opportunity to learn from an expert.
Here’s what the survey found in terms of jobs outsourced:
- 27% of small businesses planned to outsource their IT functions.
- 23% will outsource finance operations.
- 21% are looking for legal services.
- 20% will outsource their digital marketing.
- 18% of small companies will outsource development tasks.
- 10% were looking to outsource human resource operations.
Outsourcing allows small businesses to focus on core processes and strategies while delegating technical processes to experienced third-party professionals.
6. The Rise of Financial Outsourcing
US outsourcing statistics indicate that outsourced financial services will rise by 7.5% annually.
The rise in finance and accounts outsourcing services is mostly due to the efficiency of third-party professionals. It reduces the cost of training staff, removes the need for expensive accounting software, and minimizes the effort of hiring new talent.
7. The Tech Talent Shortage
Information technology (IT) is one of the biggest sectors, with a market value of 5 trillion USD in 2020, according to the International Data Corporation (IDC).
However, there has been a significant barrier to its growth – a tech talent shortage.
54% of companies worldwide, including tech companies, have reported a shortage of tech experts based on the ManpowerGroup 2020 Talent Shortage report.
And according to a 2021 report from Gartner, 75% of business leaders believe that talent availability is the main risk factor in IT and tech businesses.
The consulting firm Korn Ferry estimated that there will be a shortage of more than 85 million tech workers by 2030. And according to Daxx, this will lead to loss approximating 8.5 trillion USD in revenue over the years.
Here are a few countries with an evident shortage of tech talent:
- Israel, a top startup nation, has a 15% shortage of developers.
- The US fell short by 72% while trying to fill its 1.4 million open tech vacancies in 2020.
- 43% of the UK’s digital leaders report a shortage of skills in tech employees.
- Stockholm, the tech capital of Europe, will have a 70,000 shortage of tech talent by 2022, along with Nordic countries like Norway, Denmark, and Finland.
So, tech outsourcing is likely to grow, and global businesses are racing to secure deals with outsourcing providers or offshore development companies.
The talent and skill shortage is especially beneficial for IT outsourcing provider nations, like India, Ukraine, and Poland, with a large and growing population of tech businesses and professionals.
However, this also means that outsourcing providers may increase their fees as the costs of hiring professionals and the competition between providers to acquire talent have increased.
Based on the IT Outsourcing Market findings, the IT outsourcing trend will register a CAGR of 4.5% between 2021 to 2026, indicating that the IT outsourcing industry will grow slowly due to the talent shortage.
8. The Need for Managed Service Providers
The worldwide digital transformation came with many benefits, but it also brought about vulnerability to cybersecurity attacks.
According to Ponemon Institute research from 2020, cybersecurity was the top concern of 68% of outsourcing firms planning to integrate with cloud technology.
A Syntax survey revealed that over 77% of IT leaders had faced regular cyberattacks since March 2020. Moreover, out of 500 IT decision-makers surveyed, 83% planned to move from in-house security teams to a Managed Service Provider (MSP).
What’s a Managed Service Provider?
An MSP is a third-party company that remotely manages IT infrastructure and end-user systems for businesses. It offers specialized services for network, application, and data security, ensuring that systems run smoothly by keeping them secure and up-to-date.
The Syntax survey revealed that more than half of the leaders were willing to invest over 40% of their overall IT budget on improving cybersecurity via MSPs.
And due to its importance in the digital world, Allied Marketing Research estimates that the MSP outsourcing market is expected to reach about 41 billion USD by 2022.
That said, the 2020 HLB Cyber Security Report revealed that most cyberattacks targeted governments, making them the main investors in cybersecurity.
Nonetheless, the MSP and cybersecurity outsourcing trend is expected to grow as we all move further into the digital world.
9. Investing in AI – Chatbots and Robotic Process Automation
Businesses are looking to AI to improve their customer services.
Juniper Research predicts that AI chatbots will successfully drive 90% of all customer interactions in the banking sector in 2022, as they are viable for businesses and customers. Chatbots improve customer experiences by promptly resolving common queries and keeping agents available for complex issues.
According to the 2021 Deloitte annual global survey, 73% of respondents mentioned that their companies had adopted intelligent automation, like Robotic Process Automation (RPA) to automate various processes.
The automation trend is also visible in HR outsourcing companies where bots automate processes, including:
- Candidate sourcing.
- Interview scheduling.
- Payroll management.
And according to PwC’s 2020 HR Technology Survey, about 45% of leaders planned to invest in automation technology.
Moreover, leading tech companies like IBM, Samsung, and Microsoft are highly invested in AI.
IBM has even announced its next-generation operating system, IBM z/OS V2.5, which is designed to aid the adoption of AI and drive application modernization. (Mordor Intelligence, 2020)
The PwC’s Global Artificial Intelligence Study forecasts that the global AI market is expected to contribute 15 trillion USD to the global economy by 2030. So, AI technology will play a large role in IT outsourcing.
10. Outsourced Customer Care Services
Call centers have become an important part of businesses’ customer care services, creating a large industry for outsourced employees.
Even with the Covid pandemic, companies saw a 14% volume increase in call centers in 2020. And according to Morph Networks, over 50% of all businesses already use a third-party customer support service to improve their customer experience in 2021.
Also, as mentioned above, businesses can save about 70% of their customer service costs by employing offshore customer support call centers.
What can you expect from call centers?
According to StrategyR’s market study in 2020, the global call center market share is expected to reach a valuation of 496 billion USD by 2027 – growing at a CAGR of 5.6%.
So, call centers will remain a key player in the customer service outsourcing industry.The global call center market share is expected to reach a valuation of 496 billion USD by 2027 – growing at a CAGR of 5.6%. Check similar #outsourcing #stats for 2021. Click To Tweet
Other Crucial Outsourcing Statistics
Here are other interesting outsourcing statistics:
11. 71% of global outsourcing and shared service (OSS) buyers believe technology would make location less relevant in outsourcing decisions, according to a Deloitte OSS 2019-2023 report.
12. 92% of respondents in a GSA UK survey believe that both buyers and sellers will focus on providing value and outcomes from 2020.
14. According to Clutch’s 2019 small business outsourcing statistics, large companies are 66% more likely to outsource than smaller companies. This adds to the earnings divide between small and large companies.
15. As of 2021, American footwear giant Nike reportedly has less than 1% of its total workforce in America, with the remaining 99+% working in outsourced jobs globally.
16. Accenture, the largest outsourcing company, employs over 500,000 people worldwide, and its outsourcing revenue accounted for 44% of its total revenue in 2020.
17. As per the OutsourcingAccelerator.com, the US is the top outsourcer, with 68% of companies hiring third-party services in 2021. Its biggest outsourcers are the government and defense sectors, representing 81% of the total contracts.
19. NASDAQ predicts that 95% of retail purchases will be online by 2040. The online purchase increase will accelerate the growth of digital marketing, social media marketing, application development, and e-commerce outsourcing.
20. One of the bests in the global outsourcing market, data analytics is expected to grow at 34%.
Now that you’ve seen the statistics, let’s resolve a few common queries on outsourcing.
3 Frequently Asked Questions on Outsourcing
Here are the answers to three frequently asked outsourcing questions:
A. Is Outsourcing Common?
Yes, outsourcing is common. It’s especially prevalent in the IT sector, where 94% of companies outsource some part of their business process.
Moreover, the benefits of outsourcing are extremely attractive. Companies can provide services at a reduced cost while finding the space for in-house employees to focus on core tasks.
B. Which are the Leading Outsourcing Countries?
The US is the leading outsourcer with 68% of companies outsourcing jobs, followed by the UK with 48%.
On the other hand, the leading countries for outsourcing services are:
- India and Ukraine for IT.
- The Philippines for customer service.
- China for manufacturing services.
The workforce cost is cheaper in these countries than in most other countries due to the low cost of living.
C. Is Outsourcing a Big Industry?
As mentioned before, the global outsourcing market is estimated to reach a valuation of 405.6 billion USD by 2027. The industry is expected to play a large part in the growth of major global sectors like finance, investment, banking, retail, and information technology.
In fact, the IT and Telecommunications sector dominated the outsourcing market with a revenue share exceeding 34% in 2021. Moreover, many top outsourcing companies are some of the largest multinational corporations, earning increased profits by helping other businesses expand to a global market.
Outsourcing is a valuable resource for businesses to cut costs, improve operational efficiencies, and expand to new markets.
So, if you’re a business owner, go through the statistics we covered here to get a better understanding of how it can improve your business’ growth.