Outsourcing Trends to Watch in the Coming Years

12.04.23 08:29 AM By Yan

Outsourcing Trends to Watch in the Coming Years

Outsourcing has been a popular business strategy for several decades now, with companies leveraging the expertise of third-party service providers to gain cost savings and access to specialised skills. However, as the business landscape continues to evolve, outsourcing trends are also changing rapidly. In this article, we will explore some of the key outsourcing trends to watch in the coming years.

The rise of near-shoring and reshoring in outsourcing operations

Traditionally, companies have outsourced their operations to distant countries like India, China, and the Philippines, where labour costs are relatively low. However, in recent years, we have seen a growing trend towards near shoring and reshoring. Near-shoring involves outsourcing operations to countries that are geographically closer to the client's location, while reshoring refers to bringing outsourced operations back to the client's home country.

According to a report by Deloitte, 53% of companies plan to reshore operations in the next three years. The report also states that 65% of companies plan to increase their use of near-shoring, citing the benefits of improved quality, reduced time-to-market, and greater control over operations. However, it is not all that easy because of many constraints involved in terms of technologies, contracts, people and regulations.

The emergence of smart outsourcing, leveraging AI and machine learning technologies

Artificial intelligence (AI) and machine learning (ML) technologies are rapidly transforming the outsourcing landscape. By leveraging these technologies, companies can automate repetitive tasks, improve data processing, and enhance decision-making capabilities.

According to a report by Gartner, the global AI and ML outsourcing market is expected to grow at a compound annual growth rate (CAGR) of 25.1% in next five years.

Outsourcing in the post-pandemic era: implications and opportunities

The COVID-19 pandemic has had a significant impact on outsourcing operations, with many companies shifting towards remote work and virtual collaboration. According to a survey by PwC, 77% of companies are planning to increase their use of virtual collaboration tools in the post-pandemic era.

Moreover, the pandemic has also highlighted the importance of business continuity planning and disaster recovery capabilities. As a result, we are likely to see an increase in outsourcing of disaster recovery services and business continuity planning in the coming years.

Growing focus on security and privacy in outsourcing partnerships

With the increasing prevalence of cyberattacks and data breaches, companies are becoming increasingly concerned about security and privacy risks in outsourcing partnerships. In response, we are likely to see a growing emphasis on security and privacy in outsourcing contracts. Better monitoring and systems are put in place to reduce or rather handle such occurrences early.

Expansion of outsourcing services beyond traditional IT and BPO functions

Traditionally, outsourcing has been associated with IT and business process outsourcing (BPO) functions. However, in recent years, we have seen a growing trend towards outsourcing of other functions, such as finance and accounting, human resources, and legal services.

Adoption of agile methodologies in outsourcing projects for faster delivery and flexibility

Agile methodologies are becoming increasingly popular in outsourcing projects, as they offer a more flexible and iterative approach to project management. By breaking down projects into smaller, more manageable chunks, agile methodologies can help companies respond more quickly to changing market conditions and customer needs.

According to a survey by Scrum.org, 70% of organisations are using agile methodologies in their outsourcing projects. Moreover, the survey also found that companies using agile methodologies reported 60% higher project success rates than those using traditional project management approaches.

Increased use of virtual collaboration tools and remote work in outsourcing operations

As mentioned earlier, the COVID-19 pandemic has accelerated the adoption of virtual collaboration tools and remote work in outsourcing operations. With the increasing availability of high-speed internet and cloud-based technologies, remote work has become more feasible and cost-effective than ever before.

According to a report by Global Workplace Analytics, 25-30% of the workforce is expected to work from home multiple days a week by the end of 2021. Moreover, the report also states that remote work can save companies up to $11,000USD per employee per year.

Evolution of outsourcing contracts, with a focus on more flexible and outcome-based models

As outsourcing operations become more complex and dynamic, companies are looking for more flexible and outcome-based contracting models. Outcome-based contracts focus on delivering specific results rather than just providing services, which can help companies achieve better alignment with their business goals.

According to a report by Information Services Group, the global outsourcing market is expected to shift towards outcome-based models, with the market for outcome-based contracts expected to grow at a CAGR of 12.5% from 2020 to 2025.

Growing importance of social and environmental responsibility in outsourcing practices

As consumers become more socially and environmentally conscious, companies are also looking for ways to align their outsourcing practices with their corporate social responsibility (CSR) goals. This includes promoting ethical labour practices, reducing carbon emissions, and supporting local communities.

According to a report by Nielsen, 81% of consumers feel strongly that companies should help improve the environment. Moreover, the report also states that 66% of consumers are willing to pay more for products and services from companies that are committed to sustainability.

Advancements in outsourcing analytics, predictive modelling, and data-driven decision-making

Finally, we are likely to see continued advancements in outsourcing analytics, predictive modelling, and data-driven decision-making. By leveraging big data and analytics, companies can gain insights into market trends, customer behaviour, and operational performance, which can help them make more informed outsourcing decisions.

Conclusion

In conclusion, outsourcing trends are constantly evolving, driven by changing market conditions, technological advancements, and shifting consumer preferences. As a business owner, it is essential to stay up to date with these trends and adapt your outsourcing strategies accordingly to maximize the benefits and stay ahead of the competition.

 

 

Yan