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IT Outsourcing Trends for 2023

IT outsourcing services are contracted IT services that include the planning, installation, maintenance, and equipment replacement within a company’s IT infrastructure. Contracted IT service providers may also offer on-site and help desk support. The combination of these services can be used on an as-needed basis, to support a company’s existing IT team, or as the [...]

BairesDev Editorial Team

By BairesDev Editorial Team

BairesDev is the leading nearshore technology solutions company with 4,000+ professionals in 50+ countries representing the top 1% of tech talent.

10 min read

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IT outsourcing services are contracted IT services that include the planning, installation, maintenance, and equipment replacement within a company’s IT infrastructure. Contracted IT service providers may also offer on-site and help desk support. The combination of these services can be used on an as-needed basis, to support a company’s existing IT team, or as the entirety of the IT department. 

These services offer numerous benefits to companies, including cost control, expertise, speed, focus, and security. They also come with some potential drawbacks. Each company must determine whether the advantages outweigh the disadvantages. But, whatever the decision, every business should at least consider how this valuable service can help them meet their goals. 

In the following sections, we further explain the advantages and disadvantages of IT outsourcing, explore current and expected IT outsourcing trends, and provide tips for finding the right IT outsourcing provider to support your company’s goals. 

Benefits of IT Outsourcing Services for Your Company

The following advantages support IT teams and entire companies in pursuing their missions and goals. 

Cost control. Some outsourced IT services allow companies to pay a set amount each month. This strategy results in more predictable costs. Additionally, labor costs specifically may be reduced as companies can eliminate or greatly reduce the hiring process. Outsourced IT providers typically have their own procedures for hiring IT professionals and managing their careers, salaries, vacations, education, and other HR matters. 

Expertise. Outsourced IT companies deploy their professionals across various companies in different industries. As a result, those professionals quickly become experienced in challenges and issues that commonly arise. They share best practices with each other and keep up on all the latest technology developments and tools. With this level of expertise, your IT problems are likely to be solved quickly and efficiently.

Speed. If you rely on only your own ability to bring in and train IT professionals, you might need to put off urgent projects, as those processes take time. Handing those tasks off to an outsourced IT team enables you to get started right away. Additionally, as mentioned above, these teams are highly experienced in a variety of deployments, meaning they will waste no time in ensuring your project gets underway.

Focus. Even if your regular IT team can handle most of your IT needs, it can help to bring in other professionals when you want your team to focus on high-level matters, perhaps working out solutions to challenging and specific business problems. Or, looked at from the other side, your IT team may not have the competencies to implement some projects. Outsourced IT is a great way to supplement your staff.

Security. It’s entirely possible that not all IT team members within your company are trained in security standards. By hiring an outsourced IT team, you can find engineers who are familiar with compliance standards. Given that every company needs to be up to speed on security, this is an area you don’t want to try and figure out on your own.

Challenges of IT Outsourcing Services for Your Company

While the benefits listed above are good reasons to consider IT outsourcing services, the process does entail certain disadvantages as well. Company leaders must weigh the pros and cons and decide whether IT outsourcing services make sense for their mission, processes, and budget. Some of the disadvantages are as follows.  

Less control. When you use outsourced IT services, you must trust the outsourcing provider to perform tasks, often with less direction than you may be used to. Given the critical nature of these tasks, handing over control to a third party may cause some discomfort. But, in order to work effectively with these teams, companies IT leaders must get used to the idea that they will have less control over how tasks are accomplished.

Potential for decreased quality. While you have every expectation of a positive outcome when you hire an outsourced IT provider, there is always the possibility that the team won’t live up to your expectations. Such a situation can be very challenging, as it takes a great deal of time and effort to both correct any work that has been done incorrectly and seek out a replacement provider.

Communication challenges. Offshore IT outsourcing can be a highly effective means for getting the services you need less expensively than the same services from local providers. However, time zone, language, and culture differences may impede communication. This situation can particularly be an issue when you need to work together as a team. Hiring companies in nearby time zones and looking for providers who emphasize language abilities can help offset this issue.

Security risk. We list security as both an advantage and a disadvantage, because it can potentially be both. While IT professionals from outsourced companies are typically well versed in security measures, the companies they work for can be a security risk. An outsourcing company’s cybersecurity may not be as robust as yours, leaving the door open for attacks.

Employee satisfaction. Some outsourcing companies are more concerned than others about the well-being of the team members they hire out. Those that don’t provide a high level of care may, just like any other company, find it has disgruntled employees on its hands. Outsourced IT employees are not your direct responsibility, but their job satisfaction may have an impact on the work they do for you. 

Recent IT Outsourcing Trends

As a result of the COVID-19 pandemic, two key drivers have increased the need for IT services and, therefore, IT outsourcing. The first is that during the pandemic companies significantly changed the way they work, focusing more on digital solutions for accessing information and applications, and communicating. Included in this transition is increasing reliance on the cloud. The second is that cybercrime has grown substantially in both number and severity.

Recent studies support these points. LogicMonitor found that “87% of global IT decision makers agree that the COVID-19 pandemic will cause organizations to accelerate their migration to the cloud.” A vast majority agree that by 2025, “95% of all workloads will be in the cloud.” Separately, a recent CNET article stated that the number of reported breaches reached its highest level ever in 2021. 

The services provided by IT outsourcing services follow these trends. Outsourcing firms are helping companies develop, install, and maintain digital systems that support operations and help employees stay productive and communicative. 

Additionally, these service providers are focusing on greater cybersecurity. Experts predict that worldwide expenditure on information security will soon reach into the hundreds of billions of dollars annually. As discussed above, outsourcing companies have a firm handle on what is needed to ensure business cybersecurity, such as virtual private network (VPN), secure sockets layer (SSL), and multifactor authentication.

Another trend in corporate IT departments and, therefore, in IT outsourcing, is application development. Proprietary software applications can support unique business processes and enable companies to increase efficiency. However, the resources needed to develop these applications can cost companies in both time and money. That’s why more organizations are bringing in outsourced software developers to create these applications, allowing their in-house IT teams to focus on regular IT maintenance and high-level planning.

The 2022 Global IT Outsourcing Market

The global IT outsourcing market is growing. According to market research firm Mordor Intelligence LLP, “The global IT outsourcing market … was valued at $526.6 billion in 2021 and is expected to reach $682.3 billion by 2027.”

Some trends that have appeared in recent years are starting to fade in 2022. They include pricing flexibility, which was popular during the pandemic period. IT service providers were willing to lower their prices to ensure their clients got what they needed, and the volume of work that came in during that time in part made up for the lower fees. However, as things shift back to a somewhat normal state, those same providers are unable to maintain the lower pricing. 

Another trend that is slowing is massive cloud migrations. While, as described above, companies are still moving to the cloud, many that have planned to make the move have already done so, and the next phase of their IT operations is more about increasing efficiency in specific cloud-based functions. Therefore, cloud migration engagements are likely to become briefer and less involved.

Comprehensive IT services from one provider may also be on the decline. IT companies are moving toward specialization, so it is becoming rarer for one company to provide the full range of services. Therefore, businesses that want to engage IT support might find themselves looking for several companies to fulfill all their needs. The good news is that these companies are forming partnerships, meaning that IT customers can benefit from trusted referrals.

The year 2022 saw the tail end of the rush to send employees home to maintain health standards, which began in 2020 along with the COVID-19 pandemic. As many companies bring team members back into the office, they are finding less need to provide IT services to remote workers. 

IT teams are starting to move away from the service level agreement (SLA) model and looking to outsourcing service providers to bring more value than just meeting key performance indicators (KPIs). The experience level agreement (XLA) is a concept that is emerging from that shift. It includes not just how systems are working on the back end, but how team members are experiencing the technology that they’re using and how effective it makes them.

What to Look for in 2023

Changes in the way companies do business as well as political and economic forces will shift the role of IT outsourcing in 2023.

As digital solutions become more intrinsically integrated into business operations and capable IT professionals become harder to find, IT outsourcing is becoming more critical. As such, the relationships organizations have with their IT providers are becoming increasingly important. Additionally, in the coming years, outsourcing providers will no longer just be commoditized services, but will be long-term partners to help companies drive growth, improve the customer experience, and create a competitive advantage.

Because businesses require greater customization of systems and solutions, they are willing to provide value back to IT outsourcing organizations in different ways. One of them is gainsharing, in which IT outsourcers are being compensated in ways that reflect their participation. Such a strategy might involve a higher cost arrangement than companies have been paying. 

The IT professional shortage is very real, and companies must pay top dollar in order to retain the services of the highest quality IT outsourcing providers. This investment on the part of businesses will ensure that they will get the services and solutions they need to grow and advance their business. 

Another trend that will continue in 2023 is fallout from Russia’s brutal invasion of Ukraine, which is one of the world’s top technology hubs and top providers of IT services. The disruption taking place there will likely continue to have a negative impact on those services and, consequently, the ability for companies across the globe to access those services. In a worst-case scenario, other countries that provide these services might become similarly affected.

The metaverse is still a nascent technology. However, as a way for companies to interact with customers and prospects, it is quickly gaining traction. Savvy organizations want to get in on the ground floor of this exciting opportunity for exposure and promotion. Such businesses need IT assistance to bring their ideas to life. As the metaverse expands, the demand for these services will increase as well. The following video demonstrates the technology that currently enables users to interact with the metaverse. 

How to Find the Best IT Outsourcing Service for Your Business

Finding a good outsourcing firm may take a bit of research, so start as soon as you know it’s something you want to pursue. First, think about what you need in an outsourced IT provider. Questions you might ask yourself and other leaders include: What problems do we need to solve? What kinds of provider attributes are important to us, such as location, time zone, and language? And how much are we willing to spend?

Ask colleagues for referrals to outsourcing providers they like and trust. Start a list of potential providers and include their name, contact information, expertise, and anything else you know about them up front. Next, perform an online search for vendors that meet your criteria, including those near your location if that’s important to you, price, and areas of expertise. Add any promising possibilities to your list.

An additional way to find potential vendors is to perform online searches for the areas you need help with. For example, you could do a search for how to build a custom CMS solution. Many IT outsourcing providers and software development firms have blogs and are likely to turn up in such searches. If the blog posts or other resources look promising, it’s likely the company knows its stuff in this area.

Another way to find potential vendors is to search online marketplaces such as Clutch, which enables you to compare providers across a variety of variables, such as location, reviews, and focus. Add any potential providers to your list.

To narrow down your choices, carefully review the websites of each provider on your list. If you see anything that looks particularly promising or is a deal breaker, note it on your list. For example, you may need a particular service, yet you don’t find it listed on a vendor’s website. If the provider looks great otherwise, you may want to contact them just to make sure, but it’s likely that will be a deal breaker.

Be sure to think about things that are outside of the technical realm, such as the level of service you can expect, how they choose their engineers, and what kind of contract you will be expected to sign.

When you have your list narrowed down to between three and five possible vendors, make arrangements to meet representatives from those companies. Take the opportunity to have them describe their services to you and present any demonstrations they have prepared. Also, ask them any questions you may have. From there, you can make your final decision and move forward with the new relationship.

What Is the Future of IT Outsourcing?

The future of IT outsourcing will likely see a greater focus on security, challenges in attracting and retaining top talent, demand for cloud-based technology, the growth of artificial intelligence and automation, and more globalization. Companies that want to take advantage of highly useful and necessary outsourced IT resources should start now to find a partner they can rely on to build the IT infrastructure they need to support current projects and those that will emerge as they grow.

Tags:trends
BairesDev Editorial Team

By BairesDev Editorial Team

Founded in 2009, BairesDev is the leading nearshore technology solutions company, with 4,000+ professionals in more than 50 countries, representing the top 1% of tech talent. The company's goal is to create lasting value throughout the entire digital transformation journey.

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