Interesting IT Outsourcing Trends to Watch In 2023

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Nikhil-KhandelwalNikhil Khandelwal VP Engineering
LinkedIn|6 Apr 2023

IT outsourcing trends reflect the broader technological developments that compel companies to overhaul their operations and offerings. They are indicators of the changing needs for IT talent and technologies among businesses, and the responses of IT outsourcing companies to shifting market dynamics. 

In this post, we take you through the trends likely to affect the IT outsourcing industry in 2023. 

What is IT Outsourcing and Why is it Popular? 

IT outsourcing is the practice of utilizing a third party, usually based in a different country, for various IT tasks and initiatives, from developing custom software and automating business operations, to data visualization and mobile and web analytics. And that's just scratching the surface of what an IT outsourcing company can do. 

Delegating processes to a third-party provider is popular because it gets the job done on time, at a low cost. Here's more on the benefits of IT outsourcing. 

Why Use IT Outsourcing Services? 

IT outsourcing began in the 1980s. While it was initially driven by lower operational and labor costs, over the years, three business imperatives have emerged to fuel a rise in outsourcing:  

  • Better efficiency, made possible by hiring a dedicated offshore IT team and unburdening in-house staff for more crucial functions. 
  • A great customer experience, activated by developing winning products, providing round-the-clock customer support, and leveraging technology platforms with no overhead. 
  • Increased innovation, enabled by using specialized IT talent and reliable infrastructure required to innovative rapidly, at scale. 

An IT outsourcing company is a hub of expert IT knowledge and resources. It works out to be more affordable than hiring full-time equivalents and purchasing or subscribing to the tools, hardware and software required to carry out IT tasks and projects effectively. 

Top IT Outsourcing Trends to Watch in 2023 

These seven trends are likely to shape IT outsourcing in 2023 and beyond. 

1. Accelerated migration to the cloud

The migration of assets to the cloud surged during the pandemic, and will continue unabated at least in the near future. Cloud infrastructure management, a revenue driver for IT outsourcing services, can be expected to remain in demand. 

As an innovation enabler, the cloud is attractive to businesses of all sizes. However, while the trend towards cloud services is unlikely to slow down any time soon, other computing options like blockchain, IoT, edge and quantum computing will also come under consideration at some point.   

2. Automation will be the impetus for cost savings and efficiency boost

Global competition and automation are transforming the nature of work. Trends point to a mix of automation and IT sourcing for software development. Companies will actively define automation opportunities for development processes while ensuring that the human-centric vision remains intact.  

Software development companies are also adopting automation to enhance and speed up processes while optimizing labor costs. Automated testing and DevOps automation to enable faster app deployment in production can be expected to gain more steam.   

3. Heightened focus on cybersecurity

As cyber-attacks become more sophisticated and security providers themselves fall prey to genius hackers, data privacy and security will gain sharper focus. The cyber complexity of businesses will also increase in the light of new threats and geo-political tensions. 

IT sourcing companies' value proposition will need to emphasize strong security measures, such as encryption algorithms and blockchain technology. Investments in cybersecurity will increase to give clients the assurances they want. 

4. Remote teams

The trend of doing less with more will have implications for companies' workforce. The pandemic increased comfort around letting employees work from home. But back then, it was a compulsion. Now, business leaders are open to continuing remote work arrangements, which bodes well for offshore IT staffing companies. 

At the same time, service providers must take into account potential clients who may be contemplating a remote-in-person work mix and regional/local delivery for quality or security reasons. These companies may be less amenable to outsourcing their IT needs, and require more persuasion.  

5. A move towards nearshoring

Disruptions from the COVID-19 pandemic and geopolitical tensions have made companies wary about relying too much on their offshoring partners. With businesses becoming more risk-averse, nearshoring is gaining precedence over offshoring

It's one thing to use an IT outsourcing company and another to engage freelance developers in another continent. The former has fixed and transparent policies, while the latter is less reliable, with some being full-time employees and moonlighting for extra income. Issues of legal compliance and any potential disruption from company firing can have a knock-on effect on freelancers' clients. These reasons are also influential in favoring nearshoring over offshoring

6. Interest in new tech

Companies' appetite for experimenting with new technologies has increased. Significant investment is being made to digitize in the short term, states an Ernst & Young report based on responses of over 100 Chief Procurement Officers across multiple industries worldwide. 

The survey mentions AI and machine learning among the new technologies being actively considered or piloted by companies, while noting that visualization has been adopted at scale. Companies' fast-paced digitalization will benefit IT staffing companies that provide AI/ML engineers and data scientists. This brings us to the next trend. 

7. Preference for specialist talent

Digitalization initiatives will increase the demand for specialized talent. Companies recognize the importance of assembling the right team to achieve digital transformation. They also understand that they're constrained by IT talent shortage. They'd have to pay an AI or ML engineer a huge salary comparable to tech giants' pay checks. 

By utilizing IT outsourcing services, companies can keep costs down while accessing the skills necessary to digitize successfully. The awareness that they can access the best of both worlds will encourage businesses to consider niche talent. 

Why You Should Stay Ahead of IT Outsourcing Trends 

IT outsourcing trends point to the behaviors exhibited by companies that have a need for IT talent at a low cost. They tell you if or how attitudes towards outsourcing are changing and how service providers are responding. Any shift in the outsourcing industry is bound to affect you in some way. 

For example, if a skill was 'hot' a few years ago and has cooled since, you may be left with fewer options as service providers will have prioritized talent that's in demand or expected to become more popular in the future. 

Trends offer insights into the technology solutions that are being increasingly adopted in your industry and the technological progress being made. They serve to validate your own observations on where IT outsourcing in your industry, and in general, is headed. 

IT Staff Augmentation, Digital Transformation Services, and Dedicated Remote Workers in One Place  

Not a trend, but a reality, VLink provides a range of outsourcing services to help you capture value from software product development and digital activities. Our expert resources based in the US, Canada, India and Indonesia handle IT projects of varying complexity and scale. For a number of our clients, we're their one-stop provider for sophisticated talent in areas such as machine learning and AI, IoT and analytics. 

Implement IT projects quickly and respond proactively to trends that materially benefit your business. Take a look our process to understand us better and feel free to contact our team with your questions. 

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