The value of the outsourcing sector has been growing rapidly, and is projected to continue expanding at a 6.5% CAGR rate in the 2023-2027 period. The biggest share of the outsourcing market is still in business process outsourcing, which will reach a global market value of $350 billion by the end of the year.
About 300,000 jobs get outsourced out of the US each year.
Statistics like this one make it easy to understand why so many people view outsourcing negatively. Negative sentiments are especially strong when there is a big economic crisis, like the Great Recession of 2008, when86% of Americans blamed outsourcing for exacerbating the crisis.
More than 93% of organizations are considering or have already adopted cloud services to improve outsourcing.
The move toward cloud technology will help companies of all kinds become more capable and responsive while allowing them to rapidly expand their offerings in existing and new markets.
By the end of 2022, 85% of organizations have already adopted cloud services, and what's more, the data shows that a third of all organizations are willing to accept an increase in operating costs if they get access to the cloud in return.
This means that for a large number of businesses, the main motivation for this move is not to lower costs by cutting jobs, but to be more competitive and increase innovation.
Some 75% companies use external providers to leverage data and analytics.
In recent years, businesses have increasingly been turning to third-party sources for detailed analytics and insight generation, with more than three quarters of all companies surveyed leveraging this sensitive data through outside partners.
Out of all these organizations, 94% are leveraging service providers to innovate the data by developing AI and machine learning technology, an indicator of the rapidly growing adoption of this cutting-edge tech.
Data security is a top concern for 68% of outsourcing companies that are considering moving to cloud technology.
As cloud technology continues to disrupt the outsourcing industry, some of the main concerns that companies have are related to information security and compliance with the law.
However, IT outsourcing trends point to an additional concern that has everything to do with performance: 45% of outsourcing businesses worry that a cloud-based service may not be stable or reliable enough. Some 35% of respondents identify a fear of losing intellectual property as their biggest concern.
More than 44% of chief intelligence officers say they are now more likely to use outsourcing suppliers than they were just five years ago.
The latest offshoring data shows that the IT sector is moving toward outsourced suppliers most quickly. In fact, about 64% of outsourced offshore technology functions have to do with software application development.
The same research has shown that 51% of technology executives outsource application and software maintenance, and 40% outsource their data centers.
Saving money is a major motivation for outsourcing IT.
Freeing up resources to focus on core business is the most widely cited reason for outsourcing IT functions, at 49%. Saving money is secondary, but still a top priority. About 45% of companies outsourcing IT functions say that their information technology outsource projects are meant to save money.
About 46% say outsourcing lets them access skillsets that aren’t available in-house.
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71% of financial service executives outsource or offshore some of their services.
Financial companies are among those that outsource the most. About 70% of retail and transportation firms do the same, while pharmaceutical companies currently hold the top spot, with roughly 82% of these organizations outsourcing some of their services.
80% of financial companies and institutions are implementing or considering implementing robotic process automation.
The trend toward automation is accelerating, as outsourcing statistics like this one show. Robotic process automation is often the first step a company can make toward digital labor, and most financial companies are already implementing it.
What’s more, 81% of financial companies are satisfied with their robots, meaning that continued growth is all but guaranteed. This trend is currently most visible in HR and invoice processing sectors, where bots are increasingly replacing people.
The global IT outsourcing market revenue is projected to reach $460.10 billion in 2023.
IT outsourcing is projected to continue growing at a 11.07% CAGR until 2028, and is projected to reach $777.7 billion by that time. Currently, the most revenue in the IT outsourcing market is generated in the US, with $167.90 billion projected by the end of 2023.
More than 654,093 Californians have lost their jobs to China since 2001.
Californian economy has suffered the most in the US when it comes to jobs lost to outsourcing, mainly because of Silicon Valley and the shrinking of the state’s apparel industry.
A quick look at jobs lost by industry illustrates why California, as the home of most US tech giants, suffered so much. Of 3.8 million jobs that the United States has lost to China since 2001 when the country joined the WTO, 2.89 million were in manufacturing. Out of all Californian jobs lost to China, 74% were in the manufacturing sector.
Worldwide, the financial and accounting business processing outsourcing market is expected to reach $60.31 billion in 2023.
The same data shows that this market is expected to grow at a 9.1% CAGR from 2023 to 2030, with order-to-cash segment representing over 50% of the market share. The biggest factor driving this market growth is the increased need for cost-effective services with advanced technologies.
The global outsourced customer experience market was estimated to be worth $74.16 billion in 2022.
Outsourcing statistics by year demonstrate that customer service is among the most outsourced processes for large companies and financial organizations. Since most businesses believe that improving customer experience is a top priority, it’s not surprising that growth is projected to continue throughout 2024.
The value of the market is projected to increase to $80.7 billion by 2028, growing at a CAGR of 3.42%.
The most commonly outsourced jobs in small businesses are accounting and IT.
Small businesses usually turn to outsourcing when it comes to accounting and IT because those tasks require proficiency and skills that they might not possess internally. That’s why the data shows that 37% of all accounting and IT tasks get outsourced. Digital marketing tasks follow at 34%, with development and human resources at 28%.
However, a report from Gartner in 2022 showed that some 60% of finance and accounting outsource contracts are not expected to be renewed by 2025.
27% of small businesses outsourced to improve efficiency and save time in 2022.
Small business owners care about efficiency above all. Compared to larger companies, these businesses usually cannot afford or simply do not have access to the necessary resources to build a team from scratch. The same survey found that 35% of small businesses outsource to access flexible resources, whilw 26% of small businesses with 10 or fewer employees outsource with the goal of working with an expert.
29% of businesses with fewer than 50 employees outsource, compared to 66% with 50 or more employees.
Smaller businesses are less inclined to spend money on outsourcing when compared to global outsourcing companies, as they usually feel like it is better to keep the money inside their firm and do things themselves. When they do outsource, smaller companies tend to turn to freelance workers.
83% of small businesses plan to maintain on increase their spending on outsourced services in 2023.
Most small businesses state that the main reason they wish to increase spending on outsourcing has to do with the ability to manage the scaling up or down quickly, as well as supplementing their current teams or filling in the skill gaps, along with the fact that hiring outside usually costs less than hiring in-house.
76% of executives in the business and technology sectors say that their companies outsourced IT services.
Out of this number, the biggest share of outsourced IT work comes in the form of cybersecurity (81%), followed by app and software development (79%) and IT infrastructure services (77%).
Small businesses spent an average of $198,550 on outsourced service providers in 2022.
With the growing demand and shift to outsourced specialist and specialized agencies, this number is expected to grow even more in the coming years.
57% of companies in 2022 used traditional outsourcing because of the overall need to cut operational costs.
The same research found that the second most-quoted reason were shifts in business strategies and operating models, with 51% of responders claiming this is why they increasingly rely on outsourced work, while 49% claimed that the biggest reason was to gain access to new capabilities.
In Conclusion
The US administration is focused on bringing manufacturing and other outsourced industries back to American soil, but overall, global trade policies remain in constant flux. Tariffs, quotas, and geopolitical factors are sure to keep outsourcing on the radar for many years to come.
The outsourcing statistics we’ve gathered also show an obvious split between small businesses and large corporations as emerging technologies like artifical intelligence and robotic automation change the market even further.
While outsourcing is likely to continue growing, the functions that are outsourced and the companies that rely on outsourcing may change. Operations are generally moving in-house, while key sectors like software development and maintenance remain outsourced.
