Key Trends in IT Outsourcing after 2020

Current State of IT Outsourcing Industry

The list of IT functions that are most frequently transferred to third-party companies will help understand the current state of the IT outsourcing industry. It was made by the Statista portal in 2017 and reflects the current trends in this area.

The functions are listed in the descending order of their popularity:

• Development of web and mobile applications
• Software maintenance
• Data centres
• IT infrastructure
• Customer support services
• Network maintenance
• Integration services
• HR functions

This list will change in the near future. As part of its research campaign, the National Outsourcing Association has identified the outsourcing development trends after 2020.

According to the research, the main trends in this area will be the following:

• Putting value before price. Outsourcing relationships will no longer focus on the price decrease. More attention will be paid to an added value that they bring.
• Several providers. Customers will select several companies for one project to assemble the most suitable team.
• New areas of outsourcing. The customers will more often choose IT developers from Central and Eastern Europe such as Brainhub.
• Emergence of new business models. Outsourcing partners will share responsibility with their customers, so contracts will probably be based on performance.
• Automation. IT tasks will be performed by bots, AI systems and robots.
• Cloud platforms. A spate of data storage and security projects is expected in the outsourcing sector.

Key Trends in IT Outsourcing after 2020

New motivation

Within the survey, outsourcing companies and their customers were interviewed about the reasons for the transfer of IT functions to third-party organisations. 35% of respondents said the cost saving was the most important aspect, while 23% of them mentioned the improved customer experience.

Moreover, it is arguable that the IT outsourcing industry will grow along with the number of people seeking to transfer more tasks to third-party companies. Despite having different reasons for using outsourcing, most organisations agree that the improved customer experience and the potential for identifying new opportunities attract them more than the cost-saving issues.

Contracts

According to GSA UK, almost 90% of respondents strongly believe that both outsourcing companies and their customers will switch to performance and value-based contracts after 2020.

In addition, 69% of respondents predict that outsourcing companies will work as system integrators. In doing so, they will share more risks with their customers. Only 31% of respondents expect outsourcing companies to take all the risks.

Focus on service delivery

More and more business representatives believe that the service delivery issues should become one of the most important contract parts. Notice and contract periods will be reduced.

Model contracts currently being developed and modified by the customers will be based on performance. Such models will appraise the value and assess opportunities for the development of relations in the future for both parties to the contract, taking into account the results obtained. Thus, cooperation in the IT outsourcing sector will reach an unprecedented level as partners and customers will realise that risk sharing eventually gives them more benefits.

Development of cooperation and competition

Since contracts will be based on performance in 2020, and market players will be more open to sharing risks with each other, outsourcing companies will turn into major service integrators.

Considering the described trends in the outsourcing, you may have some questions. To what extent will I share the risks? Where is the appropriate limit? How to share them? How will it influence the reputation of our company and our partner?

The best approach for both parties in this case is to cooperate and assess different opinions. No one wants to risk. Therefore, you should be more cooperative and try to assess the risk independently at the same time—perhaps there is nothing to worry about.

Such situations in the outsourcing market may force competing companies to fight for the largest deals and begin to offer competitive solutions. In turn, this may lead to the disappearance of the best possible projects of providers. On the other hand, some customers will take advantage of this situation.

Key transformation factors

Modern customers looking for companies to outsource IT functions are in constant motion and are undergoing substantial changes. They expect high-quality solutions (while the timely performance of operations may still matter to them). Providers must take into account the needs of their potential partners and avoid disappointing results that have become commonplace these days.

Customer dissatisfaction with outsourcing deals is growing. They think that many providers lack flexibility, fear innovation and do not keep on top of cutting-edge technology. Outsourcing companies should recognise this attitude and focus on driving their customer centricity. This will help them remain competitive, get major contracts and develop relationships with strong partners.

Conclusions

Modern IT function outsourcing providers must recognise the above-mentioned trends in the changing market to understand the needs of modern customers. Leading partners will appreciate the customer-oriented approach, transparency and trust.

Furthermore, the implementation of the latest technology and data protection on behalf of the customer will soon be of great importance. Courage to share the risks can be the key to success and fruitful cooperation.

Implementing the new strategies and following the main trends in IT function outsourcing can be an excellent starting point for many market leaders in the coming decade.