As a business practice, outsourcing has been taking the world’s industries by storm in recent years due to its resiliency during the recent fluctuations in the labor market.
For that reason, we look at the latest outsourcing statistics to understand why companies are hiring outside talent for their day-to-day business operations.
Editor’s Pick: Top Outsourcing Statistics
- IT outsourcing expenditure is estimated to exceed $1.3 trillion by the end of 2023.
- The cloud computing market is expected to reach $1,241 billion by 2027.
- Start-up software development outsourcing will rise by 70% in 2023.
- The BPO market value is predicted to rise to almost $530 billion by 2030.
- 27% of small businesses outsourced their IT services in 2022.
- With 28.7% of the total output, China is still the world’s manufacturing powerhouse.
- Nike outsources its production to 500,000 workers in Southeast Asia.
Within the last decade, IT outsourcing has become the most in-demand outsourcing sector on the planet, and it’s not stopping anytime soon. Let’s see what makes it so valuable.
1. IT outsourcing expenditure is estimated to exceed $1.3 trillion by the end of 2023.
(Source: Imaginovation)
In search of a competitive edge and increased productivity, companies worldwide are expected to push the IT outsourcing market over $1.3 trillion by 2024. Moreover, the current predictions see the market growing at a CAGR of 7.7% by 2027.
2. 92% of the Forbes Global 2000 companies used IT outsourcing in 2019.
(Source: Exploding Topics)
Recent ISG research reveals that over 9 in 10 of the top 2000 companies worldwide had IT outsourcing contracts in 2019—a number that certainly increased after COVID.
3. The cloud computing market is expected to reach $1,241 billion by 2027.
(Source: MarketsandMarkets)
According to MarketsandMarkets, the cloud computing sector was worth $545.8 billion in 2022, but it’s growing at a steady CAGR of 17.9% to reach over $1,240 billion by 2027.
4. 37% of small businesses outsourced their IT services in 2019.
(Source: Clutch)
Clutch—a market research company—revealed that even small businesses relied on IT outsourcing in 2019 (almost 40% of them) since they often lack the in-house expertise to complete serious projects on time and under budget.
5. Start-up software development outsourcing will rise by 70% in 2023.
(Source: Business Wire)
Commit’s 2022 State of Tech Staffing Report finds that start-ups will outsource 70% more software development tasks in 2023 than their 2022 volume. Ultimately, that number will account for over a third of a company’s software personnel on average.
Operational Outsourcing Statistics
Also known as Business Process Outsourcing (BPO), this sector deals with outsourcing everyday operations outside of the core strategy of any business.
For instance, enterprises often outsource their front-office and back-office tasks to focus all their efforts on developing new products and services.
While the former refers to tech support, marketing, and sales, back-office outsourcing concerns accounting, HR, QA, legal, IT support, and payment processing.
6. The BPO market value is predicted to rise to almost $526 billion by 2030.
(Source: Grand View Research)
Per the latest Grand View Research report, the global BPO market size was $262 billion in 2022 and is expected to grow at a CAGR of 9.4% to over $525 billion by 2030.
7. 27% of companies utilizing RPA reported a 10–20% savings in operational costs.
(Source: Deloitte)
Deloitte’s 2020 Global Outsourcing Survey revealed nearly 30% of companies using Robotic Process Automation (RPA)—a subset of the BPO market—cut up to 20% of their operational expenses. That said, a small number (2%) also achieved 60% savings.
8. 27% of small businesses outsourced their IT services in 2022.
(Source: Clutch)
With its 2021–2022 survey, Clutch also discovered that 24% of small businesses outsourced their digital marketing department, while Legal and Finance duties were both outsourced by 23% of all respondents. Development (21%) and Customer Support (19%) were other business areas handled by outsourced teams.
9. The global call center market will reach $741.7 billion by 2030.
(Source: Research and Markets)
According to a Research and Markets report, COVID prompted the rise of call centers worldwide. While estimated at over $461 billion in 2022, this segment is expected to reach $742 billion by 2030—which represents growth at a CAGR of 6.1%.
10. The BPO financial services segment is valued at over $130 billion.
(Source: Fortunly)
Current Fortunly research indicates that the BPO financial services segment is worth $130 worldwide. Moreover, the latest U.S. statistics show a near-future 7.5% annual rise.
11. The banking industry outsources more than 40% of its help desk positions.
(Source: Orient Software)
Orient Software’s research reveals that two in five help desk positions in the banking industry are outsourced. The likely reasons for that business decision are the shortened response times, round-the-clock support, and using experts with better call management skills.
12. With 45%, HR consulting is the most common service HRO entities offer.
(Source: ExtensisHR)
ExtensisHR—a top-tier HR supplier—has revealed that the top five in-demand services offered by the HRO industry include: HR consulting (45%), Benefits administration (36%), Time tracking (24%), Insurance services (19%), and Performance management (10%).
Manufacturing Outsourcing Statistics
Manufacturing is the core of any product-focused business. But, outsourcing the production of goods also saves firms 15% in costs, so today’s companies tend to focus on product conception and development only. Below, we see the results of that practice.
13. With 28.7% of the total output, China is still the world’s manufacturing powerhouse.
(Source: Safeguard Global)
Based on a 2019 UN report, the HR experts at Safeguard Global found China still topping the charts with almost 30% of the world’s goods production. The U.S. placed second with over ten percentage points less, despite having the largest manufacturing sector until 2010.
14. Nike outsources its production to 500,000 workers in Southeast Asia.
(Source: Outsource Accelerator)
According to Outsource Accelerator, Nike’s success (47% market share) is the direct result of their outsourcing policy, i.e., closing their manufacturing plants and transferring all production to 500,000 workers in the Philippines, China, Vietnam, Taiwan, and Indonesia.
15. COVID eliminated close to 750,000 manufacturing jobs in the U.S.
(Source: Public Citizen)
Public Citizen’s thorough research revealed the grim reality of the job market during and after the COVID pandemic, which eliminated over 740,000 U.S. manufacturing positions.
16. 85% of Apple’s suppliers operate their manufacturing facilities in Asia.
(Source: Verdict)
Most (98%) of Apple’s materials, manufacturing, and assembly payments were distributed to 200 suppliers in 2020. Moreover, the manufacturing centers of 85% of these suppliers are stationed in Asia, especially China (with 42% of total production).
17. Recent survey shows half of all companies increased their manufacturing outsourcing in 2022.
(Source: Fictiv)
The latest State of Manufacturing Report conducted by Fictiv confirms that almost 50% of all companies outsourced their production efforts in 2022.
Three-quarters of them also view outsourcing as an efficient practice that reduces costs and increases speed without affecting product quality.
Bottom Line
As evident from the eye-opening stats above, the outsourcing market is experiencing a never-before-seen boom in the post-COVID era. This operational shift greatly benefits SMBs, which must cut costs to maintain relevancy and growth.
However, outsourcing is also a volatile and dynamic market that may hide pitfalls, despite its resiliency to labor shortages. The good news is: cutting ties with your outsourcing partners is far easier than restructuring your in-house teams.
FAQs
What are the common types of outsourcing?
Outsourcing has evolved in the last decades to include several segments, ranging from IT outsourcing to project, process, manufacturing, and operational outsourcing.
How does outsourcing work?
Outsourcing is a business practice that involves hiring outside professionals to do specific tasks, ranging from day-to-day operations to manufacturing goods and customer support.
What are the advantages of outsourcing?
Some benefits of outsourcing include lowering operating costs, boosting work efficiency, focusing on core strategies, and accessing additional skills and resources.
Sources
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By Raj Vardhman
Raj Vardhman is a tech expert and the Chief Tech Strategist at TechJury.net, where he leads the research-driven analysis and testing of various technology products and services. Raj has extensive tech industry experience and contributed to various software, cybersecurity, and artificial intelligence publications. With his insights and expertise in emerging technologies, Raj aims to help businesses and individuals make informed decisions regarding utilizing technology. When he's not working, he enjoys reading about the latest tech advancements and spending time with his family.