In October 2022, research giant Deloitte published its most recent shared services and outsourcing status report, which collected information from 600 global participants. The primary outsourcing categories, as reported, were payroll, finance, and IT — all being significantly facilitated by prolific cloud adoption. Several years ago, the same company estimated that outsourcing would be worth $971 billion dollars, headed toward $1 trillion by the end f the decade. In this most recent report, they raised that number tenfold to $10 trillion.
The reason people are using shared and outsourced services haven’t changed since the idea was introduced – it represents an opportunity to streamline and reduce the budget while optimizing services. But it’s not just a financial decision – outsourcing gives organizations the opportunity to concentrate on their core business and minimize time-consuming or tedious tasks. Google, Microsoft, Apple, Slack, and Skype all outsource on a significant scale.
Fast Facts:
- 44 percent of CIOs are more open to outsourcing in 2023 than they were just five years ago.
- Information technology leads the way in the outsourcing sector — 64 percent relates to software development, 51 percent to application and software maintenance and 40 percent to data centers.
- Hiring top IT talent directly is increasingly challenging. Outsourcing extends the pool of resources significantly.
During the pandemic lockdowns, a Forbes Business Council essay urged businesses to become more efficient by taking advantage of “this vital opportunity to outsource ‘non-core’ tasks so you can utilize the best talent out there. A misperception exists that outsourcing is a cost center and a misuse of resources, but in reality, you have about four or five months to focus your operations before another potential wave of tough economic effects hits this fall. The businesses that leverage this now will be in the best position to sprint forward, while the others that wait may struggle to survive another round.” Now that the United States is open but entering a recession, company leadership is seeking opportunities to eliminate unnecessary costs, boost operational efficiencies, compete more effectively, and concentrate on core competencies. Outsourcing and managed services achieve these KPIs while facing talent shortages and employee retention head-on.
One objection to the concept of outsourcing is that management is afraid that it will result in job loss. While there may be some attrition, the issue is typically one of supplementation rather than firing and replacing. Outsourcing allows your current team to do their jobs, expand and grow opportunities in their division, and more aggressively drive revenue – which will ultimately increase employee satisfaction and retention. Employees don’t want to be continually distracted with repetitive tasks (such as software licensing or patching and upgrading systems). These actions are essential but can take away from the important functions that need to be accomplished day to day.
Another potential reason for the surge in outsourcing and managed services is tied to the Great Resignation and “quiet quitting” phenomenon. As companies learn to adapt to employee loss, outsourcing can fill in critical skills gaps while not requiring a rigorous recruitment and hiring campaign. While this is sometimes a stop-gap solution, companies are likely to learn that managed services provide the talents and skills they require, eliminating the need to compete for these highly desirable professionals themselves.
If your company is considering outsourcing or IT managed service providers to fill critical holes in your organization – or simply to get a handle on your budget – there are ample providers ready to help. Alliance IT is a Sarasota-based managed services provider specializing in SMB services, from the cloud to network cabling. How can we help you?
