The future of IT outsourcing: Top trends in 2020

The rapid development of technology brings businesses as many benefits as challenges. Nowadays, it is crucial to constantly implement changes and innovations to remain competitive. That’s why more companies choose to outsource tech parts to specialists providers. According to recent data by the Global Sourcing Association, about 70% of surveyed companies plan to outsource more in the upcoming years. So what does the future hold for IT outsourcing?  We’ve prepared an overview of major IT outsourcing trends to watch in 2020.

In general, the top IT outsourcing tendencies are:  

  1. Higher demand for skilled developers – the global lack of engineering talents will continue to grow. 
  2. Alternative outsourcing destinations – the rising popularity of Eastern European countries with its large talent pools.
  3. Value over price – сlients are tent to choose more value-driven vendors, who can provide deep expertise in specific areas. 
  4. The rise of automation – the automation of processes through AI-powered services. 

Higher demand for skilled developers

It’s not easy to implement digital transformation without new talents. The lack of skilled software engineers is an issue, companies facing for a decade. And today hiring developers for either a startup or big company has never been more difficult.  One of the reasons is a huge deficiency in STEM graduates. The universities can’t produce grads as quickly as needed.

For example, according to U.S. BLS, by 2020 there will be almost one and a half million computer science job openings and less than half a million university grads with necessary skills.

Moreover, it is hard for traditional institutions to keep up with the fast pace of the tech industry. So having a degree doesn’t mean a candidate has skills required to do the job. Therefore companies should spend a significant amount of time training new staff and constantly encourage current employees to upgrade their skills.

That’s why outsourcing is a solution more companies include in their business strategies.

In order to fill the gap employers expand their search radius overseas, establishing cooperation with providers from countries where tech talent pools are booming. 

Alternative outsourcing destinations 

Today Asian countries such as India dominate the outsourcing market, remaining unrivaled as top offshoring destinations. 

However, despite the low cost of development services and availability of resources, it still has some issues with digital technologies adoption, compared to the US and Europe. 

So it’s facing competition from smaller countries that can offer niche expertise or higher service quality that exceeds cost benefits.

Eastern Europe is one of the most vibrant software development destinations now. Software outsourcing here is definitely gaining momentum. In recent years, the main Eastern European countries have been steadily increasing their IT sectors with an average of 10% growth rate annually. 

As the “middle ground” in terms of software development prices between Asia and Latin America(with some exceptions), this region is known for its big talent pool (over 1 million specialists) and excellent quality. Also, the advantage is that countries like Ukraine, Poland, Romania are only 1- 4 hours of flight from the UK, France or Germany. 

Our company is located in Ukraine – one of Europe’s leading hubs for global software development services.

There are over 1,000 Ukrainian companies, and more than 230 000 specialists, with a vast range of expertise from fintech to gaming.

Value over price 

Of course, cost-reduction is still a major argument when hiring an outsourcing provider. Though, the IT outsourcing ecosystem is going through a core transformation. It is crucial for modern companies to keep businesses streamlined and competitive. So they are looking for more value-driven vendors, who can provide deep expertise in specific areas. Companies prefer partners who can offer cost-efficient solutions rather than just a low price. 

Relations between the two parties are becoming more outcome-based.

IT providers will be not only suppliers but strategic partners for their clients. According to the GSA report they will be contracted as service integrators sharing risk and responsibility. 

On the other hand, such сhanges in the nature of IT outsourcing partnerships won’t be any easy for suppliers. It will bring along more competition among IT companies to win big deals and acquire strong partners. To be successful they have to improve expertise, progress with new technologies and become more customer-centric.  

The rise of automation

The AI (artificial intelligence), NLP (natural language processing) RPA (robotics process automation,) etc. enable new ways of working. Combined such technologies go beyond automation of routine tasks to predicting, analyzing and making contextual decisions. 

According to Deloitte study, the number of companies applying intelligent automation has doubled during 2019. It is also stated that automation will help to increase working capacity by 30%. Moreover, the 2020 year is expected to be a breakout year for intelligent automation. Organizations that will combine human and machine workforces, and have the skills and knowledge to use intelligent automation are going to benefit from opportunities the technologies promise. Therefore the rise of automation will shape the IT outsourcing industry by increasing demand for AI and big data experts. 

To sum up 

Considering the above trends, the future of IT outsourcing looks very promising. The industry will grow and transform to keep up with the ever-changing global market. The coming years will bring more collaboration in client-vendor relationships. Companies will look for IT outsourcing partners that are innovation-friendly and able to provide better expertise.       

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