Mission 2020: Ready for It?

Since the nineties, IT outsourcing has significantly increased and continues as a long-term global trend. It is now getting an additional boost – mainly from the cloud. In this newsletter, we are giving you an overview of what companies can expect in the next few years.

The forecast for the IT outsourcing industry is very positive. Experts expect the value of global IT services to grow by around 6 percent per year until 2022*. Several developments are fueling this trend: for one, shorter lifecycles for software applications, faster means to transfer data as well as digitalization, which continuously affects more and more areas of the economy. Thus, companies around the globe will increase their investment in IT services. As growth increases, there are several changes to be expected within the industry. Some of the key trends corporations should be aware of are listed below.

End to end service provision

Company X delivers the application for the new web shop, company Y offers the closely linked logistics system and company Z provides the needed cloud capacity. These constellations with several providers and different service solutions will be less common in the future. The demand for IT service that covers all business processes and is provided by one party will continue to rise. Therefore, it is likely service providers will widen their portfolio and enter into long-term strategic partnerships. 

The all-rounder cloud

Cisco found that already by 2013 more than half of the global workload had moved from data centers into cloud services – next year’s forecast predicts 76 percent will be in the cloud. The more experience companies have with cloud services, the higher their expectations will be for service delivery. At the forefront of this movement are software providers who are also offering virtual products like workplace programs that don’t run locally but only in the cloud. The market for these ‘Software as a Service’ (SaaS) services will, according to Gartner, grow by 37 percent until 2020 compared to 2016. In addition, the trend to outsource complete business processes on the IT side will continue to affect the industry: ‘Business Process as a Service’ (BPaaS) will grow 43 percent during the same period.

Automatically cheaper

In the beginning, IT outsourcing was characterized by low-priced outsourcing of easy tasks. In the future, companies can become more efficient by automating standard tasks. Examples are cellphone providers and online customer centers, where simple questions are automatically dealt with. Such machine dialogues, also called chatbots, will partially replace today’s customer hotlines. The preferred providers will be those with automation know-how and who offer innovative solutions. 

It will stay complicated

Should you make or buy IT solutions? Should you stay loyal to your current provider or switch to another? Companies will still need to be careful when choosing IT solutions. Cloud services and automated processes often seem cheaper but also create work. When managing this process, it is vitally important that service providers deliver on their promises and the client is in a position to check the deliverables, due to clear goals and KPIs. 

The more the market changes and the more services are merged into one another, the more demanding it will be for IT buyers to compare the offers available. Companies should give their decision-makers enough freedom to broaden their know-how. The internal service team has to define sensible procedures for the cooperation with the service provider, as well as defining escalation paths to ensure the quality of the bought solution. In short, by outsourcing IT, many things in the future will become quicker, cheaper and more flexible but nevertheless, there will be no reduction in complexity.

* IT Outsourcing – Global Market Outlook (2015-2022); Stratistics Market Research Consulting, 2016