Global markets and improvements in technology have changed the way businesses work. For many, staying competitive means capitalizing on the world being a smaller, more tech-savvy place, and enjoying the benefits of outsourcing.
- lower overheads;
- increased growth; and
- greater focus and service quality.
Combined, these benefits mean a happier looking bottom line.
On paper, it all sounds great. But for a business sitting on the fence about whether to offshore, promises and benefits that “sound great” aren’t enough.
You need evidence.
Well, the good news is you’ve come to the right place. The ultimate list of outsourcing statistics puts the proof in the pudding. Using current data from trusted sources, here’s why your small business might outsource roles to a managed operations provider or a business process outsourcing (BPO) provider.
Why businesses outsource
Deloitte’s 2020 Global Outsourcing Survey took a more intimate approach to their research as a result of the pandemic. They interviewed 40 executives across their clients, service providers and lawyers globally, both before and after the start of the COVID-19 pandemic, to get an accurate representation of how industries have responded. As one of the most trusted lists for outsourcing statistics and market research, Deloitte’s survey showed that once again, despite the pandemic in 2020, cost reduction remains the primary objective to outsourcing.
With around 70% surveyed saying outsourcing was used as a cost-cutting tool, with “the uncertain economic environment switching the focus back to the numbers”, another 40% said outsourcing provided the organisational flexibility to deal with the changes felt by the pandemic; remote work and fast-paced digitalisation.
According to another survey conducted in 2019, Clutch’s 2019 Small Business BPO Survey, the main reason small businesses choose to outsource was to increase efficiency. 24% of businesses surveyed by Clutch said that through outsourcing, they could manage more projects yet still maintain clarity, quality and a fresh state of mind. Cost reduction actually was only a priority for 12% of small businesses at the time. Going back to Deloitte’s 2020 study, it is evident that the pandemic has forced businesses to do a full-360 and focus on costs once again.
The conclusion is that by outsourcing, businesses are rewarded with extra time and greater staff support. This allows them to scale, remain competitive, and (potentially) improve their services and offerings. That’s good news for consumers.
Offshore popularity is rising
According to Statistica, revenue in the BPO sector is projected to reach around US$276.1 million in 2020 with an expected annual growth rate of 6.7% by the year 2025.
Businesses are feeling positive about their outsourcing relationships, especially those who are pursuing robot process automation (RPA) and cloud integration within their outsourcing solutions. RPA and cloud integration go hand in hand with the cost savings objectives companies had in 2020.
Which sectors and functions are outsourced the most?
Some business functions and industry sectors lend themselves better to outsourcing than others. This boils down to practical issues around setup and management.
According to Clutch’s 2019 Small Business BPO Survey, the most commonly outsourced services are accounting (37%), IT services (37%) and digital marketing (34%).
Although all of these sectors make strong contributions to the financial growth of the outsourcing market, IT remains one of the top contributors.
Infiniti Research Limited released a report, Global IT Outsourcing Market 2020 - 2024, which states that the tech outsourcing market is expected to grow by US$98 billion during 2020 - 2024. A large part of this success will be a result of the IT telecommunications sector.
Advancements in technologies, more companies moving to the cloud, and increased global mobile usage, all boost the telecommunications sector and offshoring countries that can support its rapid development.
As it stands, American businesses most commonly outsource IT functions. But they outsource a lot of other functions too. When asked about current and future outsourcing levels, respondents revealed they planned to increase the amount of tax, HR and procurement tasks handed to offshore teams.
Finance shows the biggest difference. Currently, US businesses outsource around 39% of finance functions, but wish to push this up to 89%.
Clearly, these statistics prove how successful outsourcing continues to be for modern American businesses. And the rest of the world seems keen to capitalize on the benefits of outsourcing, too.
Adoption and revenue beyond the Americas
Based on an assessment of 38 metrics, A.T. Kearney compiled a report and identified the countries with the strongest underlying fundamentals to potentially deliver IT, BPO, and voice services. The top 10 countries were India, China, Malaysia, Indonesia, Vietnam, the United States, Thailand, the United Kingdom and Brazil and the Philippines..
America is a major outsourcing region. When professional services company KPMG analyzed outsourcing deals closed in Q1 2017, the US contributed 41.5% of the total deal value. But Asia Pacific regions and Europe, the Middle East and Africa (EMA), aren’t far behind.
An increased willingness to adopt outsourcing in the EMA and Asia Pacific has sent figures upwards.
In the first quarter of 2017, the EMA’s contribution to the global outsourcing deal value was a healthy 35% (with 22.07% of deals coming from the United Kingdom). This was up on the last quarter of 2016, when it sat at 27%.
Likewise, Asia Pacific’s contribution to global outsourcing deals rose from a mere 16% in the last quarter of 2016, to 23% in Q1 of 2017.
In the same KPMG report, Australia and India were identified as key contributors to the global outsourcing market.
Effects of disruptive automation and cloud working
When it comes to outsourcing, technology brings pros and cons.
A huge pro is the use of cloud-based working. Although there are concerns around data security and implementation, increased connectivity makes offshoring much easier.
The con is technology’s impact on jobs. As the popularity of RPA matures for logical rule-based processes, the use of advanced technologies like Artificial Intelligence (AI) is also becoming widespread.
According to Deloitte’s, “Automation with Intelligence” survey (2019), 58 percent of respondents had already started implementing AI. There was higher acceptance and increasing adoption of AI in companies that were using RPA. As maturity increases, this trend is unstoppable as more and more organizations experience these benefits.
But it’s not all doom and gloom. While it may appear cheaper, automation still needs setting up and monitoring: cue the human workforce.
Plus, some jobs simply can’t be automated. Healthcare, HR, telecommunications and customer service aren’t as robot-friendly, so offshoring continues to rise, despite increases in automation in other areas.
This means businesses can outsource high-level roles to stay lean in a competitive environment.
The Philippines — a top 10 offshoring destination
When it comes to offshoring, the Philippines is one of the top countries in the world.
How a country is ranked has changed. And the criteria plays to the Philippines’ strengths. For example, A.T. Kearney took digital competence in consideration to identify the top outsourcing destinations in its Global Services Location Index (GSLI), while the Tholons Services Globalization Index added digital innovation.
The rankings confirm the Philippines is an industry leader in outsourcing.
So what do the statistics suggest it has going for it?- English is an official language in the Philippines, with approx 60 million English speakers.
- High standard of education. With a 97.5% literacy rate, and more than 680,000 people graduating from university each year.
- Cultural fit. As a former US colony with a 90% Christian population, the Philippines has a very ‘westernized’ culture.
- Gross Domestic Product (GDP). The Philippines has one of the fastest-growing economies in Asia, going up to 6.2% in 2018.
- In 2015, the BPO sector generated over $22 billion in revenue, accounting for 7.3% of the Philippine economy.
- Contribution of BPO to employment. In the same year, the industry generated 1.2 million full-time employees.
- Government support. As an encouragement to develop the IT industry in the Philippines, PEZA supports foreign investors to set up BPO companies in the country by giving them incentives.
With excellent communication skills in both oral and written English, the Philippines offers a balanced package of excellent customer service with reduced labor costs. More importantly, the government is very supportive of the offshoring industry, with a nationwide focus on infrastructure and telecommunications investments, especially in the main cities.
The future of outsourcing
This ultimate list of outsourcing statistics shows how popular offshoring continues to be. As technologies and infrastructure continue to evolve, particularly in the Philippines, companies needing to grow and remain competitive in the global market, can’t afford to overlook the cost savings and functional benefits of outsourcing.
The Philippines as a top outsourcing destination
There are many reasons why the Philippines is the ideal outsourcing location. To find out more, read this blog.
