Outsourcing as a Global Trend. Excerpts from "IT Outsourcing Statistics 2017/2018" Report

By 2018, outsourcing has become a global trend, and IT sector is no exception. This article explains the term "outsourcing" and its main functions and presents the highlights and key statistics from the IT Outsourcing Statistics 2017/2018 report.

Per IT Outsourcing Statistics 2017/2018 published by Computer Economics, outsourcing as a trend is gaining larger and larger popularity: the percentage of the total IT budget being spent on outsourcing rose from 10.6% in 2016 to 11.9% in 2017.

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The study was conducted in January - April 2017 and was based on a survey of 131 IT organizations of different sizes in the US and Canada. It profiled the outsourcing of 10 most popular IT functions, including application development and maintenance, to inform outsourcing decisions by executives of IT companies and provide market trends for both service providers and IT companies. Many IT functions have a long history of outsourcing, so nowadays companies more often engage in partial outsourcing, preferring to retain in-house at least part of the workload.

Following Computer Economics definition,

outsourcing is contracting an onshore, nearshore, or offshore service provider to perform an IT function that is commonly performed in-house.

The major outsourcing trends outlined in the report are as follows:

  • Application development and maintenance are the most frequently outsourced functions.
  • Functions with the greatest potential for improving service through outsourcing are IT security, disaster recovery, application maintenance, and database administration.

Though outsourcing is becoming more attractive to all organizations, large organizations are growing IT outsourcing budgets the fastest. Large organizations have increased the percentage of their IT budgets spent on outsourcing from 6.3% to 8.7%. Small organizations spent 7.8% of their IT budget on outsourcing in 2017, compared with 6.7% in 2016. Midsize companies have increased their spending on the average from 4.7% to 6.5%.

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There are many reasons why an organization should outsource. In the first line, outsourcing allows a company to improve its operational flexibility by engaging more professionals in different spheres of knowledge. It is also a great way to augment an in-house personnel without long-term commitments. A strategic decision to outsource would help a company to save capital investments and reduce management overhead. Companies should also consider outsource as an option to get a reliable technical partner, especially if they expect company growth or need to rapidly deploy new capabilities. If there is a need for professional services that are not the company’s primary focus, then hiring an outsourcing team is also a nice option.

Top-10 Outsourced IT Functions

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Global popularity of outsourcing could be explained by a combination of factors. Firstly, the amount of work companies are handling day-to-day increases, so they often come up short with in-house staff and resort to team augmentations. Secondly, the widespread of cloud technology is believed to make organizations more willing to give up control of handling their data to third-party companies. Thirdly, it is now easier to invest in public cloud infrastructure as a service (IaaS) and software as a service (SaaS) than to maintain the same in-house infrastructure, and this is what most of the companies do.

Outsourcing is becoming more and more widespread, and the number of companies that resort to the help of either on- or off-shore outsourcers grows. Ukraine has the largest and fastest-growing number of IT professionals in Central and Eastern Europe; its IT engineering work force is expected to double to over 200,000 by 2020. Considering the rising popularity of the trend and its global spread, IT executives need to continually evaluate the potential of outsourcing to help meet the tactical and strategic objectives of their companies.

Interested in outsourcing IT talent in Ukraine? Here is a comprehensive overview of the Ukrainian IT outsourcing and software R&D capacities.

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