IT Outsourcing Trends 2023: The Impact on Business Processes

IT Outsourcing Services are being used by an increasing number of businesses, especially in the digital transformation era. The global IT outsourcing market’s revenue skyrocketed in 2022 and is expected to reach US$430.50 billion in 2023 (Statista).

The fast pace of technology and the rapid expansion of the market results in constant change for companies in the IT Outsourcing Industry to be aware of. In this blog, Savvycom will provide you with the most recent IT Outsourcing Trends in 2023 and how they may affect your business processes.

1. What Is IT Outsourcing? 

Outsourcing occurs when a firm hires another company to fulfill its functions. Businesses can outsource a variety of IT tasks, including software development, application maintenance, web hosting, and IT support services. Companies can benefit from cost savings, access to specialized skills, and increased efficiency by outsourcing these activities.

IT outsourcing can be done either domestically or internationally. There are three significant types of outsourcing based on the service provider’s location:

• Onshore: A procedure for hiring professionals in your city or nearby. It’s a good way to keep things under control at a reasonable cost.
• Nearshore: Outsourcing in neighboring countries that share the same time zone. It is easier to communicate with developers if you choose this option, but it is not always profitable.
• Offshore: Outsourcing to a different country. This type allows you to save the most money.

2. IT Outsourcing Trends 2023

2022 was a leap for the IT outsourcing industry, with over $4.4 trillion spent on this industry, according to Gartner. Cloud computing, blockchain technology, artificial intelligence, and other similar technologies were some of the IT Outsourcing Trends in 2022.

Let’s take a look at IT Outsourcing Trends 2023 to see which ones will stick around and what will be new in the IT Outsourcing Industry next year.

2.1. Cloud Computing

Cloud is the first one on the IT Outsourcing Trends 2023. Cloud outsourcing is required to gain access to other modern technologies such as AI, RPA, and machine learning. Additionally, it gives a business the ability to gather, store, and use cloud-based resources and services. Therefore, more companies started using Cloud. In 2022, over 60% of all enterprise data was held in the Cloud (Statista), and this trend is expected to continue to increase in 2023.

As a result, businesses in many sectors are expected to look for IT service providers with experienced cloud engineers and developers familiar with cloud infrastructure and management. These professionals will assist companies in preventing cloud bill shock and ensuring the safety of their data.

2.2. Big Data Analysis

Big corporations usually store a huge amount of customers’ data, allowing them to create a customized experience for each individual. Big data analysis also allows organizations to make more informed decisions regarding their operations with insights derived from a variety of sources. With these benefits, the Big Data Analytics market is anticipated to reach $103 billion in 2023 (Techjury).

Therefore, this capability is being leveraged more and more by businesses in order to improve their understanding of customer behavior and optimize business processes such as pricing, marketing, and customer service. 

2.3. Automation

The third technology on the IT Outsourcing Trends 2023 list is Automation. The term “automation technology” refers to the collection of procedures and pieces of machinery that together make it possible for systems to function without human intervention. Machines, apparatus, equipment, and other devices are included in this category. 

Businesses increasingly rely on automated tools to handle routine IT tasks like software updates, system maintenance, and security patching. This implies that companies now require more IT Outsourcing Providers to automate processes.

2.4. Cybersecurity

According to Purplesec, the number of cybercrime cases increased by more than 600% during COVID-19. Organizations are focusing more on cybersecurity as cyber threats continue to grow. Indeed, 64% of Deloitte respondents cited security capabilities as the primary concern driving the deployment of emerging technologies over the next three years.

As a result, firms are increasingly turning to third-party providers for advanced cybersecurity solutions. This includes everything from managed security services to cloud-based security platforms, which can provide an additional layer of protection against malicious attacks.

2.5. Artificial Intelligence (AI)

The AI Industry has grown significantly over the past few years, making it one of the top IT Outsourcing Trends 2023. AI-powered tools can assist organizations in improving customer experiences, optimizing operations, and lowering costs. AI also gives businesses more control over their data and processes, allowing them to integrate all aspects of their operations seamlessly.

Companies are beginning to invest heavily in this technology to handle and mine massive amounts of data in order to improve user experience. Rather than developing their own AI tools and strategies, which might require a significant amount of time, many businesses outsource this function to outside vendors specializing in this area.

2.6. Internet of Things (IoT)

There are already examples of this trend, such as smart homes, wearable tech, and connected cars, but in the next five years, we can expect to see the IoT grow exponentially.

As more and more devices become connected and integrated, the Internet of Things (IoT) will become a significant force in 2023. From now on, virtually every new device in our homes and workplaces, from refrigerators to thermostats to security systems and beyond, will be able to connect to the internet. Businesses may outsource a complex product to an IoT-focused company to save time and money.

3. The Impact Of IT Outsourcing Trends 2023 On Business Processes

As more and more technologies and trends are constantly appearing, it is hard for businesses to follow and adapt to these changes. It will take a long time to study, invest, and hire people to catch up with those trends. Fortunately, third-party providers can assist them in improving their business processes.

Outsourcing can provide numerous advantages, including lower costs, increased efficiency and scalability, and access to expert knowledge. This can lead to significant improvements in areas such as customer service, marketing, sales operations, and others.

Additionally, businesses can direct their internal resources away from mundane jobs and toward more important projects. This is especially helpful for smaller companies that don’t have the required expertise or personnel to carry out specific initiatives successfully. They are able to maintain their competitive advantage without having to make significant investments in recruiting full-time employees by outsourcing. 

IT outsourcing is expected to become an even more critical component of business operations by 2023. Businesses that recognize this trend and take action to capitalize on it now will be in a solid position to achieve success in the years to come. They can maintain a competitive edge in the market and keep improving their processes by relying on the knowledge of third-party providers rather than spending too much time learning about and implementing new technologies.

4. IT Outsourcing In Vietnam, Why Not?

On the list of the “Best countries to outsource to in the World in 2019,” Vietnam came 5th, according to MarketInsider. The hourly rates for developers in Vietnam range anywhere from $20 to $40, depending on the developer’s specific set of skills. This results in significant cost savings for companies in the United States and Western Europe when compared to the hourly rate of $100 which is common in developed countries.

TopDev estimates that each year Vietnam produces 400,000 IT Engineers and 50,000 IT graduates from the country’s 153 IT institutions.

• According to 2018 data from the Developer Skills Chart of Skill Value Report, Vietnam is the 29th best place in the world in terms of skills.
• Topcoder’s 2016 Developer Skills Report featured the top 6 developer skill sets in the world.
• Positioned #23 on Hackerrank’s 2016 Global Developer Skills Charts.

In addition, many Vietnamese solution providers are now open to the possibilities presented by emerging technologies like artificial intelligence (AI), machine learning, blockchain, etc. As a result, Vietnam is the perfect location for businesses that are looking for solutions that are not only technologically advanced but also economical.

5. Conclusion

In 2023, the IT outsourcing market is expected to expand significantly as more businesses turn to external vendors to meet their computing, storage, analytics, automation, and cybersecurity requirements.

Organizations can take their business processes to the next level by taking advantage of the many advantages offered by outsourcing, such as increased efficiency, scalability, and access to expert knowledge. Any business with aspirations of continued success should be aware of these IT Outsourcing Trends 2023 and implement them as soon as possible in order to keep up with the fast pace of technology.

What is IT Outsourcing?

Outsourcing information technology (IT) refers to the practice of utilizing third-party service providers in order to more efficiently deliver IT-enabled business process, application service, and infrastructure solutions for the purpose of achieving business outcomes.

Why do businesses IT Outsource?

More and more businesses nowadays are IT Outsourcing for these several reasons:

• Cut down on and keep costs in check (this usually the main reason).
• Improve the organization's focus.
• Make inner resources available for new uses.
• Increase the speed of some tasks that take a lot of time and where the company may need more resources.

What are the IT Outsourcing Trends in 2023?

As technology evolves continuously, it is expected that some new trends are going to emerge this year, these are:

1. Cloud Computing
2. Big Data Analysis
3. Automation
4. Cybersecurity
5. Artificial Intelligence (AI)
6. Internet of Things

When should businesses IT Outsource?

Businesses rely on technology to keep things running smoothly, and in the ever-changing IT world of today, it's important to stay ahead of the game. IT Outsourcing can help you achieve that. So here are some signs showing that your company should IT Outsource:

• If you are Spending too much on the in-house IT team.
• If your system cannot work properly anymore, or is outdated.

• If your system is vulnerable to cyber threats.

• If you are taking so much time operating and maintaining your IT system.