IT Outsourcing Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The IT Outsourcing Market is segmented by Organization Size (Small and Medium Enterprises, Large Enterprises), End-user Vertical (BFSI, Healthcare, Media and Telecom, Retail and E-commerce, Manufacturing), and Geography.

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Market Snapshot

IT Outsourcing Market Summary
Study Period: 2020-2027
Base Year: 2021
Fastest Growing Market: Asia-Pacific
Largest Market: Asia-Pacific
CAGR: 4.13 %

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Market Overview

The IT outsourcing market (hereafter referred to as the market studied) was valued at USD 526.6 billion in 2021, and it is expected to reach USD 682.3 billion by 2027, registering a CAGR of 4.13% during 2022-2027 (hereafter referred to as the forecast period).

  • With digital transformation, organizations have become dependent on the success of creative applications and extensions that IT could provide. More certainly, IT has become a critical competitive edge for most organizations. Moreover, IT outsourcing has become more than a simple cost-reduction technique with the migrations and options of cloud services. Therefore, this new form is driven by organizational motivations regarding business growth, customer experience, and competitive disruption.
  • Multiple studies have suggested that Application Development and Maintenance have become the most frequently outsourced functions amidst the partial IT outsourcing trends. For instance, in 2021, Accenture PLC reported an increase in the revenue in its outsourcing business by 15% compared to fiscal 2020. The company also said that growth in outsourcing revenue was led by strong growth in North America and other markets, with solid growth in Europe.
  • Leading IT companies are experiencing growing demand to assist clients with application modernization and maintenance, cloud enablement, and managed security services. In addition, clients continue to be focused on transforming their operations through automation and AI, data, and analytics to drive operational cost savings and productivity.
  • Looking at application development, companies such as Slack, GitHub, Alibaba, and WhatsApp have successfully leveraged the benefits of outsourcing development. In its initial days, WhatsApp resorted to Eastern Europe for tech talent to keep operation costs low. It hired offshore developers from Russia for the software build and kept its in-house employees focused on customer support and operations.
  • Many established and technologically driven players are present across regions. The development of specializations has led to market fragmentation with the vendors studied. With many options to choose from, the rivalry is also expected to be on the higher side as multiple strategies have been adopted to enter new emerging markets and acquire/partner with allied technology-driven companies.
  • The growing adoption of cloud services since the outbreak of COVID-19 is expected to create a favorable market scenario for the growth of the IT outsourcing market as enterprises using such services often outsource the maintenance and portion of development work to third parties.

Scope of the Report

IT outsourcing involves a contractual arrangement where IT service providers take complete ownership and control over the client’s infrastructure. The growing emphasis on operational efficiency and cost-effectiveness led to increased demand for outsourcing to offshore companies.

The study tracks the regional and country-level market demand for IT outsourcing and provides detailed coverage of the major end-user trends affecting adoption.

By Organization Size
Small and Medium Enterprises
Large Enterprises
By End-user Vertical
BFSI
Healthcare
Media and Telecommunications
Retail and E-commerce
Manufacturing
Other End-user verticals
By Geography
North America
United States
Canada
Europe
United Kingdom
Germany
France
Italy
Spain
The Nordics
Benelux
Poland
Rest of Europe
Asia-Pacific
China
India
Japan
Indonesia
Vietnam
Malaysia
South Korea
Rest of Asia Pacific
Latin America
Brazil
Mexico
Colombia
Rest of Latin America
Middle East & Africa
Gulf Cooperation Council (GCC)
South Africa
Turkey
Rest of Middle East & Africa

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Key Market Trends

Ongoing Migration Toward the Cloud and Adoption of Virtualized Infrastructure

  • Cloud migration and adoption software has led outsourcing customers to divert resources from low-value assets to specialized employees while focusing on more flexible, tailorable, and evolution-friendly solution.
  • Traditionally, IT outsourcing has been tangible, with servers, data centers, networks, specifications, person-hours, and lines of code deployed. With the rise of cloud-based services, more flexible, asset-free IT services are available on demand. On the other hand, cloud computing has also led to a fundamental shift in how companies pay for and access IT services.
  • Companies looking forward to outsourcing cloud services have regarded cost optimization as a significant aspect. Multi-cloud strategies, therefore, have been gaining momentum and allowing multiple providers to reduce concentration risk.
  • Similarly, according to Hashi Corp’s State of the Cloud Strategy Survey, organizations invest significant resources in multi-cloud deployments. As per the survey, 76% of the respondents already use multi-cloud, 34% reported digital transformation as a top multi-cloud driver, and 47% mentioned that security is a top cloud inhibitor.
  • Furthermore, according to Flexera’s State of the Cloud Report for 2021, 36% of enterprises responding to its survey said that their annual spending exceeded USD 12 million, and 83% reported that cloud spending exceeded USD 1.2 million. This was a significant increase over last year, wherein 20% of enterprises said an annual expenditure of more than USD 12 million, and 74% reported yearly spending of more than USD 1.2 million.
IT Outsourcing Market: Expected IT Budget Allocation, In (%), North America AND Europe, 2022

Asia-Pacific Accounts for the Largest Market Share

  • China has been one of the significant outsourcing destinations. The outsourcing industry weighs benefits that the majority of US companies find attractive. Reduced development costs play a crucial role in retaining the original uses of outsourcing. King White, CEO of Site Selection Group, a global location advisor, believes that China has the potential to become one of the lucrative outsourcing markets that are even more cost-competitive than India.
  • Over the past two decades, the IT industry in the country has witnessed impressive growth and has become a key industry in the country's overall economy. In the current 5-year plan, the government has significantly focused on making IT one of the seven strategic industries that will help the country move from a cheap-labor manufacturing outsourcing to a world-class, innovation-driven IT outsourcing.
  • India is one of the most mature global IT outsourcing destinations, with many options. The country has worked in this direction for over 25 years and has maintained its dominance among the top IT outsourcing destinations.
  • With the demand for skilled software developers rising, IT outsourcing companies out of the country rapidly expand their operations worldwide. The cost factor and talented skill pool have played a key role in assuring the country's dominance in the market. This has also led to India's average developer hourly rate hovering around USD 30.
  • Indonesia is yet another country in the Asia-Pacific region that is gaining ground and offering similar IT outsourcing services, especially software development services. Home-grown software development providers have been growing. This has assisted the country in achieving a preference for being a nearshore/offshore software developer by opening up R&D centers.
  • Japan, as a country, has been facing severe talent shortage issues. The unemployment rate is steadily approaching 2%, highlighting the talent shortage. Thus, the government has been dependent on IT outsourcing and encouraging enterprises in the country to embrace diversity.
  • Over the past few years, Vietnam has emerged as a lucrative market for IT outsourcing in the global tech community. The country has slowly gained momentum as it moves from low-tech manufacturing to a service-oriented economy. Despite Vietnam's relatively short history of IT outsourcing (roughly 20 years), the country has risen to prominence in the sector, becoming the natural extension of global clients due to many inherent capabilities and transformations.
  • The IT outsourcing market has witnessed intense competition in the Asia-Pacific region, with India and China dominating the need for a long time. However, Malaysia has been steadily emerging as a lucrative market destination and is considered an emerging challenger across Southeast Asia.
  • Over the past few years, IT service companies in the country have witnessed substantial growth in the domestic market. However, the transition was limited due to the maturity of the domestic market. This has paved the way for IT outsourcing as South Korea's government considers this industry one of the growth engines in the country and other foreign markets.
IT Outsourcing Market - Growth Rate by Region (2022-2027)

Competitive Landscape

The IT outsourcing market is highly competitive owing to multiple vendors providing IT services to the domestic and international markets. To sustain in the market and retain their clients, companies are developing advanced technologies to play on the competitive edge, thereby intensifying the competitive rivalry in the market.

  • February 2022 - DXC Technology, an Oracle PartnerNetwork, signed a multi-year Managed Services agreement with the University of Newcastle to manage Oracle’s PeopleSoft Campus Solutions application and infrastructure.
  • February 2022 - Infosys, a global leader in next-generation digital services and consulting, collaborated with Qualtrics, the leader and creator of the Experience Management (XM) category. Infosys has established a Qualtrics center of excellence to bring solutions on Qualtrics to the market. These solutions are a part of Infosys Cobalt cloud offerings and help clients improve their customer, employee, and supplier experiences.
  • January 2022 - Airbus, Nippon Telegraph and Telephone Corporation (NTT), NTT DOCOMO INC. (DOCOMO), and SKY Perfect JSAT Corporation (SKY Perfect JSAT) jointly began studying the feasibility of collaborating on future high-altitude platform stations (HAPS)-based connectivity services as part of a future space-based wireless connectivity ecosystem.

Major Players

  1. IBM Corporation

  2. DXC Technologies

  3. Accenture PLC

  4. NTT Corporation

  5. Infosys Limited

IT Outsourcing Market Concentration

Recent Developments

  • March 2022 - Infosys, a global leader in next-generation digital services and consulting, collaborated with Telenor Norway, Telenor's wholly-owned Norwegian telecommunications operator, to transform its finance and supply chain operations.
  • March 2022 - Cognizant collaborated with Microsoft to deliver a new digital health solution to enhance remote patient monitoring for improved medical care. Cognizant's new solution, leveraging the Microsoft Cloud for Healthcare components, is the first of several planned offerings that combine remote patient monitoring and virtual health, utilizing products like smartwatches, blood pressure monitors, and glucose meters to collect and communicate patient health data to providers. Built-in analytics allow providers to cross-reference historical health information to gain patient insights and potentially identify early warning signs of chronic conditions to take preventative measures.
  • February 2022 - WNS Holdings Limited, a leading provider of global Business Process Management (BPM) solutions, unveiled WNS Triangle– the new data, analytics, and Artificial Intelligence (AI) unit of WNS. Driven by a specialized team of over 4,000 data scientists, data engineers, and domain experts, WNS Triangle powers transformation by enabling businesses to define the correct data, analytics, and AI strategy and execute that strategy with cloud-based platforms and solutions, resulting in improved outcomes.

Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Assumptions and Market Definition

    2. 1.2 Scope of the Study

  2. 2. RESEARCH METHODOLOGY

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET DYNAMICS

    1. 4.1 Market Overview

    2. 4.2 Market Drivers

      1. 4.2.1 Growing Demand for Efficiency and Scalable IT Infrastructure

      2. 4.2.2 Organization are Increasingly Focusing on IT as a means to Gain Differentiation by Relying on Outsourced Vendors

      3. 4.2.3 Ongoing Migration Toward the Cloud and Adoption of Virtualized Infrastructure

    3. 4.3 Market Challenges

      1. 4.3.1 Fragmented Nature of the Market And Growing Incidence of Data Breaches

      2. 4.3.2 Dynamic Needs of IT Structure Impacts the Cost of Customization for End Users

    4. 4.4 Impact of COVID-19 on the IT Outsourcing industry

    5. 4.5 Industry Attractiveness - Porter's Five Forces Analysis

      1. 4.5.1 Threat of New Entrants

      2. 4.5.2 Bargaining Power of Buyers

      3. 4.5.3 Bargaining Power of Suppliers

      4. 4.5.4 Threat of Substitute Products

      5. 4.5.5 Intensity of Competitive Rivalry

  5. 5. MARKET ANALYSIS

    1. 5.1 Trends Related to Onshoring and Offshoring

    2. 5.2 Breakdown of Outsourcing Industry - BPO vs IT-based outsourcing

    3. 5.3 Impact of the Ongoing Commodification of IT Solutions

    4. 5.4 Analysis of IT Outsourcing and Managed Service Industry

    5. 5.5 Breakdown of the Major IT outsourcing Segments - Application and Infrastructure

    6. 5.6 Impact of Digital Transformation and Emergence of "As-a-Service" Model

  6. 6. MARKET SEGMENTATION

    1. 6.1 By Organization Size

      1. 6.1.1 Small and Medium Enterprises

      2. 6.1.2 Large Enterprises

    2. 6.2 By End-user Vertical

      1. 6.2.1 BFSI

      2. 6.2.2 Healthcare

      3. 6.2.3 Media and Telecommunications

      4. 6.2.4 Retail and E-commerce

      5. 6.2.5 Manufacturing

      6. 6.2.6 Other End-user verticals

    3. 6.3 By Geography

      1. 6.3.1 North America

        1. 6.3.1.1 United States

        2. 6.3.1.2 Canada

      2. 6.3.2 Europe

        1. 6.3.2.1 United Kingdom

        2. 6.3.2.2 Germany

        3. 6.3.2.3 France

        4. 6.3.2.4 Italy

        5. 6.3.2.5 Spain

        6. 6.3.2.6 The Nordics

        7. 6.3.2.7 Benelux

        8. 6.3.2.8 Poland

        9. 6.3.2.9 Rest of Europe

      3. 6.3.3 Asia-Pacific

        1. 6.3.3.1 China

        2. 6.3.3.2 India

        3. 6.3.3.3 Japan

        4. 6.3.3.4 Indonesia

        5. 6.3.3.5 Vietnam

        6. 6.3.3.6 Malaysia

        7. 6.3.3.7 South Korea

        8. 6.3.3.8 Rest of Asia Pacific

      4. 6.3.4 Latin America

        1. 6.3.4.1 Brazil

        2. 6.3.4.2 Mexico

        3. 6.3.4.3 Colombia

        4. 6.3.4.4 Rest of Latin America

      5. 6.3.5 Middle East & Africa

        1. 6.3.5.1 Gulf Cooperation Council (GCC)

        2. 6.3.5.2 South Africa

        3. 6.3.5.3 Turkey

        4. 6.3.5.4 Rest of Middle East & Africa

  7. 7. COMPETITIVE LANDSCAPE

    1. 7.1 Company Profiles

      1. 7.1.1 IBM Corporation

      2. 7.1.2 DXC Technologies

      3. 7.1.3 Accenture PLC

      4. 7.1.4 NTT Corporation

      5. 7.1.5 Infosys Limited

      6. 7.1.6 Tata Consultancy Services

      7. 7.1.7 Cognizant Technology Solutions Corporation

      8. 7.1.8 Capgemini SE

      9. 7.1.9 Wipro Limited

      10. 7.1.10 Andela Inc.

      11. 7.1.11 WNS Global Services

      12. 7.1.12 Pointwest Technologies

      13. 7.1.13 ATOS SE

      14. 7.1.14 Amadeus IT Group

      15. 7.1.15 Specialist Computer Centres (SCC)

      16. 7.1.16 HCL Technologies Ltd

    2. *List Not Exhaustive
  8. 8. RELATIVE RANKING ANALYSIS OF THE MAJOR IT OUTSOURCING COMPANIES OPERATING WORLDWIDE

  9. 9. MARKET OUTLOOK

**Subject to Availability
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Frequently Asked Questions

The IT Outsourcing Market market is studied from 2020 - 2027.

The IT Outsourcing Market is growing at a CAGR of 4.13% over the next 5 years.

Asia-Pacific is growing at the highest CAGR over 2021- 2026.

Asia-Pacific holds highest share in 2021.

IBM Corporation, DXC Technologies, Accenture PLC, NTT Corporation, Infosys Limited are the major companies operating in IT Outsourcing Market.

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