The third quarter review of outstaffing/outsourcing trends

It outsourcing and outstaffing market sizes and trends of its development

According to Statista, the market value of the IT outsourcing sector is expected to reach $430.53 trillion in 2023 and go up to $587.3 trillion by 2027.

This would result in a compound annual growth rate (CAGR) of 8.07% from 2023 to 2027, with the majority of revenue expected to be generated in the US ($156.20 billion in 2023).

The three most important areas of IT outsourcing are:

• administration/support;
• application outsourcing (development and maintenance);
• web hosting;

these 3 areas together account for more than half of the market value.

The number of vacancies that require candidates to be located in a certain location increased in consequence of the relocation of many IT specialists.

Also, customer behavior has changed – they have become more careful and picky. Due to the relocation of strong developers, the expertise of some partners has dropped significantly. Some of the customers have placed project financing on hold. At the same time, rates have fallen and demands on specialists have increased. Time that companies spend during interviews and onboardings have also increased.

At the end of 2022, many ratings (Runet Rating, Ruward, Tagline) included outstaffing as a separate labor hiring model, along with outsourcing.

One of the main reasons for the outstaffing market growth is the companies’ desire for flexibility and scalability. Outstaffing allows companies to hire specialists on a temporary or project basis, allowing them to adapt to changing needs and avoid long-term commitments.

The growth and development of IT outsourcing/outstaffing is highly connected to the growth of the market of cloud technologies, mobile application development and other related markets.

What are the most common reasons why companies choose these types of collaboration models?

According to Deloitte’s 2022 Global Outsourcing/Outstaffing Research, half of managers believe that finding the right specialist is the biggest inner issue and it takes a lot of time. This problem is related to the data analysis tools and methods’ narrowness of most companies.

In response to rapid technological growth, many companies are choosing outstaffing and outsourcing as strategies to maintain their competitiveness.

1. Expansion of geographical diversity. Companies are paying more and more attention to new regions and countries for outsourcing and outstaffing. We will see growth in global outsourcing markets such as India, Philippines, Ukraine, Poland and others in 2023. These countries offer highly skilled specialists at competitive prices, making them attractive to companies aimed to reduce costs.
2. Hybrid models’ usage increase. Companies are now using hybrid models frequently, combining internal resources with outsourcing and outstaffing services. This allows them to flexibly respond to changes in business needs and use available resources in the most efficient way possible.
3. Evolution of AI and robotization. In 2023, the use of artificial intelligence will transform from an innovation to the norm. For example, large retail is increasing interest in cloud-based AI solutions for automating operational processes, predictive analytics, detecting fraudulent activities, working with Big Data and hyper-personalization of sales offers.
4. Increased focus on quality and safety. Due to the increasing cybersecurity threats and regulatory requirements, companies are placing greater emphasis on providing high quality services and protecting data. This includes strict quality control, certification and compliance with relevant safety standards.

1. Development of new models of cooperation. In 2023, new cooperation models emerge, such as partnership as equals or long-term strategic partnerships. This allows companies to work more closely with service providers and create mutually beneficial relationships.
2. Increase of Cloud specialization. Cloud technology continues to evolve, with many companies migrating their applications and infrastructure to the cloud. Due to this, the demand for DevOps engineers specializing in cloud platforms such as AWS, Azure or Google Cloud is also growing. Outsourcing/outstaffing allows companies to gain access to experienced specialists in this field.
3. Increased use of data analytics. In 2023, companies realized the value of data and used data analytics to make business decisions. Outsourcing/outstaffing data analytics specialists will allow companies to receive expert assistance in data processing and analysis.
4. Growing demand for remote work. Due to the COVID-19 pandemic and the implementation of social distancing measures, companies have turned to outstaffing and outsourcing to support business processes. Remote work has become an integral part of work, and this has increased the demand for remote teams and external service providers.
5. Expanding DevOps into other industries. If DevOps was previously widely used in the IT sector, now it is beginning to expand into other industries, such as finance, healthcare, manufacturing, etc. Companies are realizing the benefits of DevOps – accelerating product development and delivery, as a result they are turning to outsourcing DevOps engineers to implement these practices. The DevOps market size was valued at US$7.01 billion in 2021 and is projected to reach US$51.18 billion by 2030, growing at a CAGR of 24.7% from 2023 to 2030.
6. Growth of augmented/virtual reality projects. The global AR market has experienced significant growth in recent years and was valued at approximately $38.5 billion in 2022, according to Grand View Research. Between 2023 and 2030, the compound annual growth rate (CAGR) is expected to be 39.8%. Recently, AR/VR technologies have become one of the most popular future outsourcing trends, especially for the mobile market. The market is full of uncertainty right now, but the long-term growth potential is huge.

In conclusion, outsourcing and outstaffing will continue to shape the future of business. Despite concerns about job losses and rising costs, these collaboration models will remain as a popular choice for companies looking to be competitive. Following the annual increase in demand for IT services, the demand for IT specialists outsourcing/outstaffing is also growing.

By accurately analyzing your company and choosing the right outstaffing/outsourcing services provider, you can cover all your hiring needs and reduce costs for: paying taxes, contributions, deductions, vacation pay and sick leave as well as the costs associated with the adaptation and training of a staffer.