October 27, 2022
In Deloitte’s most recent global shared services and outsourcing report, which compiled data from 600 participants, the top three outsourcing categories were (from least to most) payroll, finance and, no surprise, information technology — all of which are being greatly facilitated by increasingly widespread cloud adoption. By 2023, Deloitte predicted a few years back, overall global outsourcing will hit $971 billion on its way to exceeding $1 trillion by the decade’s end. More recently, it pegged that number at $10 trillion.
Once considered an option, outsourcing is now considered a necessity by more companies than ever before. The reason for its growing popularity hasn’t changed since it began in earnest several decades ago: saving money on business costs. According to Fortunly, the global IT outsourcing market in particular is expected to grow by $98 billion through 2024. Among U.S.-based companies that provide outsourcing services, IBM leads the way by a large margin. As one write-up summarized, “Key figures from IBM include supply chain savings anywhere from $3 to 5 billion each year and over $500 million in productivity improvement.”
But it’s not just a dollars-and-cents thing. Because outsourcing allows companies to focus on their core business and provide better customer service by reducing time-consuming tasks, it can also accelerate the expansion of goods and services at home and abroad. That’s a huge part of why tech behemoths like Google, Microsoft, Apple, Slack and Skype all do it on a massive scale.
“Freeing up resources to focus on core business is the most widely cited reason for outsourcing IT functions, at 49 percent,” the Fortunly report notes. “Saving money is secondary, but still a top priority. About 45 percent of companies outsourcing IT functions say that their information technology outsource projects are meant to save money. About 46 percent say outsourcing lets them access skillsets that aren’t available in-house.”
Fortunly also points out that more than 44 percent of CIOs are more likely to outsource now than they were five years ago. In fact, among all sectors, IT leads the way in outsourcing — 64 percent of which is related to software development, 51 percent to application and software maintenance and 40 percent to data centers.
The ability to hire top IT talent, especially amid an ongoing talent shortage, is another big bonus of outsourcing. Instead of just looking in their own backyard or even in their own country, it lets companies cast a global net.
“The world’s largest companies can offer pay and benefits far beyond what you can likely offer, so the top talent goes to the largest firms,” this Forbes article rightly notes. “This can limit your company’s ability to achieve the best results. It could even put you at risk of having your best employees poached by larger companies offering better incentives. Outsourcing agencies are capable of attracting top talent to ensure customer satisfaction and competitive results.”
Another Forbes Business Council essay, from mid-2020, was even more emphatic. The author, a startup founder, implored companies to become leaner and meaner in part by leveraging “this vital opportunity to outsource ‘non-core’ tasks so you can utilize the best talent out there. A misperception exists that outsourcing is a cost center and a misuse of resources, but in reality, you have about four or five months to focus your operations before another potential wave of tough economic effects hit this fall. The businesses that leverage this now will be in the best position to sprint forward, while the others that wait may struggle to survive another round.” That was written in 2020 at the height of the pandemic. Now we are entering a recession. Leaders are looking for opportunities to cut costs, improve operational efficiencies, posture for gaining market share, and focus on core competencies. Outsourcing infrastructure management provides a means to achieve that while eliminating the headaches associated with talent shortages and retention.
And while it’s true that the term “outsourcing” remains to some degree synonymous with job loss, in reality that’s less the case these days (though the perception persists). It’s more about supplementing rather than replacing — it’s about letting your existing teams do what they do best, providing them with growth opportunities, challenging them to drive revenue – which in turn, improves employee satisfaction and retention. Teams don’t want to be bogged down with mundane, repetitive tasks like patching and upgrading systems, because although important (very important if you want systems to run optimally and securely) these tasks are not challenging for them professionally. The applications side is often far more enticing for employees. That’s why organizations are increasingly transitioning day-to-day management to IT outsourcers so they can position their own teams for initiatives that drive competitive advantage and growth. And when leadership provides professional development opportunities, employees are less likely to bolt. And bolting clearly has been the reality for many IT departments – with a mass exodus that began 1-2 years ago and has not slowed down.
If you’re thinking about hopping aboard the outsourcing bandwagon or switching IT managed service providers, there are plenty of firms out there (like Mindsight) that stand ready to assist. Or you can just keep doing everything in-house with increasingly poor results. We don’t recommend that, but it’s entirely your call.
Mindsight, a Chicago IT services provider, is an extension of your team. Our culture is built on transparency and trust, and our team is made up of extraordinary people – the kinds of people you would hire. We have one of the largest expert-level engineering teams delivering the full spectrum of IT services and solutions, from cloud to infrastructure, collaboration to contact center. Our highly certified engineers and process-oriented excellence have certainly been key to our success. But what really sets us apart is our straightforward and honest approach to every conversation, whether it is for an emerging business or global enterprise. Our customers rely on our thought leadership, responsiveness, and dedication to solving their toughest technology challenges.