IT Outsourcing in Covid Environment: Is It Really Relevant?


ITOutsourcing in Covid Environment:IsIt
Really Relevant?
The IT outsourcing industry was a game-changer in 2020. COVID 19 has accelerated innovation
across all the facets of technology—in some cases, there is an advancement in some
unexpected areas too. It has accelerated the momentum of services in industries like grocery
and healthcare where social distancing was prohibited.
by Varun Bhagat / October 19, 2021

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This report explores how technology outsourcing companies have become the ultimate solution
to all the problems.
Index
1. Introduction: COVID-19 and its overall impact on businesses.
2. IT Outsourcing Stats
3. Is IT Outsourcing Now Worth the Company’s Investment? Pros & Cons
4. IT Outsourcing Objectives
5. What is the future of outsourcing?
6. Key Learning-Preparing For The Post Covid World
7. Let’s Discuss
1.NavigatingtheBusinessImpactofCovid-19
On March 11, 2020, the World Health Organization officially declared the novel Covid 19 outbreak
a pandemic. Today, this virus has stolen the show and became the main reason for the current
financial crisis.
The pandemic is exacting a terrifying human toll and menacing the global economy. The various
industries and businesses have faced a massive downfall. Some of them have even faced an
immediate shutdown.
According to a survey, over 82% of businesses had a negative impact of covid-19 and 70% are
expecting a recovery within a year. Many countries are still in recession due to a sudden drop in
their GDP and sudden business closures.
IMF reports the global economy shrunk by 4.4% in 2020. The organization named this decline as
the worst since the Great Depression of the 1930s. The only country whose economy will remain
on track in 2020 is none other than China. It recorded a growth of 2.3%.

However, the IMF predicts global growth of 5.2% in 2021, where India and China were the prime
drivers with 8.8% and 8.2% growth.
In the midst of the recession and economic downfall, the IT sector has managed to survive in this
panic period and even boomed significantly in such a disruptive year. According to Technavio, the
Global IT Outsourcing Market will increase by USD 98 billion during 2020-2024 with a CAGR of 5
%.
The revenue in the application outsourcing segment is projected to reach $108,748.6m in 2021,
as per the latest Statista results.
Major BusinessChallenges

During the Covid 19, many business supply chains were under severe stress. The issues like
goods/raw material’s procurement, its production to transportation had become challenging,
and there was no short-term plan ahead.
Notwithstanding all that, companies had to manage their most important business asset, i.e.,
cash flow – payments to suppliers and employees, timely recovery of debtors, servicing banks’
loans, and more during this pandemic.
Take a closer look into these major business challenges:
Difficulties in gathering information from management and non-management resources
Problems in accessing workplace, offices, factories, or warehouses
Access to key management resources deployed other areas of the business for short term
Issues in assessing the cash flow impact
Tacking the employee’s productivity
Communication gaps among team members despite using the company’s messaging portal
So, you can see how businesses are grappling with the business challenges that occurred due to
Covid 19.
2.ITOutsourcingStats
The latest outsourcing statistics reveal that an increasing number of companies worldwide are
planning to outsource some of their essential and non-essential business functions to third-
party businesses to save cost plus streamlining the operations.
Some recent online surveys are the cornerstone of my research into the IT firms and their
contribution to the global market to thrive amid pandemics.
a)Theglobalbusiness process outsourcingmarketsizeamountedto USD232.32billionin
2020.

This whopping growth is expected to reach a compound annual growth rate (CAGR) of 8.5% from
2021 to 2028.
b)IT outsourcingshares thehighestBPOshareintheAsiaPacificmarket.
c)ThetopreasonforIT outsourcingis 70% costreduction.

Secondly, it provides 40% of business flexibility and reduces 20% of speed to market.
d)64% oftopcompanies havechosenroboticprocess automation(RPA)as adigital
enabler.
The world-renowned Cloud has some 4% ahead in 2020, with 68% of the leading industries using
Cloud to enable digital transformation.
e)Owingto theCovid19,48% ofcompanies worldwidecanincreaseRPAadoptionby 5% or
more.
Dealing with automation will become a prime challenge after the pandemic. Around 57% of
companies claim today that their employees are pretty concerned about these changes.
Around 75% of the companies today are using RPA to support their remote workforce.
f)93% ofcompanies havealready adoptedcloudservices today

f)93% ofcompanies havealready adoptedcloudservices today.
This move towards cloud technology will help all types of industries in becoming more capable
and responsive. It will enable them to expand their services rapidly in the existing and new
markets.
g)58.8% ofUS marketers experiencedno covid-relatedchanges intheoutsourcing
marketingprocess.
In 2020, there were hardly around 19.4% of US marketers who have seen a change in the
outsourcing marketing activities.
h)66% oflargercompanies aremorelikely to outsourcethansmallbusinesses (merely
29%).
The smaller companies having less than 50 employees don’t have enough budget to invest in
outsourcing services, unlike bigger companies which have more financial resources.
i)Thetopthreeways outsourcingbenefits thebusinesses are:
Profit
Revenue
Improved Cash Flow
In essence, there are five major challenges that every business face:
1. Hiring new employees (50%)
2. Increasing profit (46%)
3. Employee healthcare (44%)
4. Growing revenue (39%)
5. Managing cash flow (34%)
Generally, by outsourcing, you can hit two birds with one stone. How? Outsourcing reduces the
need for hiring employees and getting employee healthcare while still gives a solid boost to the
above-mentioned areas.

3.IsITOutsourcingNow WorththeCompany’s
Investment?
The technological advancements have helped SMEs, startups, and enterprises, including the
Fortune-500, leverage IT outsourcing services and cut down their costs. Partnering with them
was only seen as a single means of business survival amid covid.
According to the latest survey, the global outsourcing market will grow almost at a CAGR of 23%.
Due to which the market is fragmented into various players.
Companies worldwide are looking to outsource their projects and organizations’ operational
activities.
Let me explain the benefits that the companies can avail of by hiring IT outsourcing services.
a)Cost-Effective
A thorough study conducted by Deloitte highlighted that 59% of people outsource tasks and
functions to reduce costs. Therefore, outsourcing your company’s IT needs and infrastructure is
considered the most viable and cost-effective solution.
Know-how:
Outsourcing eliminates the need for expensive staff training.

Outsourcing eliminates the need for expensive staff training.
It helps in saving on capital outlays for IT Resources.
It gives you the liberty to hire people on a project basis.
b)Scalability
While discussing the IT infrastructure, companies generally factor in the current IT
requirements while considering the small differences in growth factors.
Though, predicting and accounting for things in advance keeps on changing exponentially with
the company’s growth.
Luckily, if they outsource to reliable technology partners, these problems get resolved
automatically. They are already equipped with the resources to manage rapid and exponential
growth, thus, promoting scalability.
c)ImprovedCore-Competency
Outsourcing IT services allows your business to utilize the free time and resources to
concentrate on the core services, products, and growth objectives.
Suppose you will assign this job to the in-house team. In that case, the same resources and time
are distributed between prospective customers and core operations, leaving no time to achieve
core objectives.
d)BetterDisasterPlanning
“Anything that can go wrong will go wrong”-Murphy’s law.
The line suits here aptly to the companies especially dealing with the digital solutions.
During a digital disaster, you can get up and run in no time by outsourcing your company’s IT
infrastructure to a reliable and experienced managed IT services provider.
All these data centers are equipped with the required hardware architecture, planning, and
expertise. They will aid you in recovering your data and avoid future problems as well.
e)BetterBudgetControl
Businesses always have to keep them financially prepared for unforeseen computing problems.

In such a problem, you will need more money than the expected scenarios.
Technology outsourcing provides the benefit of better budget predictability. Companies can
achieve this by paying a fixed monthly compensation covering maximum IT functionality and
security for your business.
f)Zero InfrastructureCost
IT outsourcing companies take the business processes responsibility and develop its
infrastructure. This directly eliminates the need for a company to invest in infrastructure.
g)ReducedLaborCosts
By hiring IT outsourcing services, you will no longer be required to invest in recruiting and
training expensive resources for your business. Instead, outsourcing lets you focus your human
resources where you need them most.
h)Access to SkilledResources
If you are a non-technical person, you can hire a qualified IT employee for your organization.
Certifications like Microsoft Certified Systems Engineer are essential as well as experience.
With IT outsourcing services, you can choose from a wide range of skilled resources for your
project or service. Then, all you are required to do is some research.
ITOutsourcing Challengesfor Companies
Along with some great benefits, there are few areas where IT outsourcing services lack. Take a
look into these reasons.
#1.Outsourcingis expensive
Although outsourcing services are considered cheaper, you should also beware of getting ripped

off. These companies generally ask small business owners to sign lengthy contractual
agreements that include many extra charges. You may not find these charges while signing a
contract.
So, while hiring the company, read all the terms and conditions carefully to avoid unexpected
service charges in the future. The best you can do here is do deep research, compare prices, and
list out your business requirements that need outsourcing firms’ interference.
#2.Outsourcingserviceis notdedicated
Because the nature of an outsourced service provides that service to multiple companies, some
business owners feel that their company will not receive good loyalty and dedication.
But it’s not a major concern; delivering the quality and desired work is their duty. So, it’s
essential to do a bit of research, read reviews and ask them questions related to your business
requirements.
#3.Languageissues
The other difficulty that you can face while working with the offshore team is communication
problems. There are various countries where people are not proficient except the USA and India.
If language is fine, you will find a difference in pronunciation. Though, all such problems are less
likely to occur in today’s world.
4.OutsourcingObjectives&Strategies
a)CostReduction– APrimary Objective
Cost reduction is an important objective of every business. Hardly, there will be anyone who
considers it not essential. In 2018, the key objectives of outsourcing were enabling speed to
market, scaling faster, improving user experience, and gaining a competitive edge.
Now in 2021, cost reduction has become the most crucial motive of every business. By
conducting a survey, we have concluded that the prime reason behind the companies switching
to outsourcing is cost reduction.

“What drives the clients’ decisions is cost
reduction. If there is no positive cost case,
it will not happen. It is always about cost.”
‒EMEA
Coronavirus plays a key role here as the uncertain economic environment started concentrating
again on the cost. While interviewing the service providers and lawyers, we learned that cost
reduction is the main reason for outsourcing.
We have found that clients talk about agility, technology enablement, and innovation, but
ultimately their sole focus gets stuck to cost. Many have also indicated that measuring the cost
impact is way easier than articulating the benefits of scalability and tech advancement like a
forensic analysis withstands.
Therefore, it’s not surprising that parameters like cost achievement, rate card, and IT
investments are still heavily weighted in the downselection and final contract award decision.
Though a price may not drive the deal to the table, dinner is not over until you make its bill.
b)Outsourcing– Business TransformationEnabler
Experts consider outsourcing as a business transformation enabler. Now the digital solutions
have taken the mainstream. Clients seek providers who can elevate their business operations
and growth by making them more flexible, helping in leveraging the latest technologies, and
increasing their overall speed to market. Understanding the service provider’s strength is
essential for deploying the right mix of niche providers to get the desired results.
c)ServiceOrchestrationRestricts Strategy Implementation
The flexible sourcing model with interchangeable service providers has become a mainstay for
almost every client sourcing strategy. In short, it’s a popular trend now and consistent from the
past two years, with clients representing their strategies as “multi-vendor” and “multi-
sourced.”
As a result organizations today don’t deter from taking on the challenges of integrating these

As a result, organizations today don t deter from taking on the challenges of integrating these
service providers. But also not that with outsourcing too, there is room for improvement,
recognizing what they can do more to manage the service provider adequately.
While communicating with a few clients, we got to know about their experiences. They have
shared their disappointment with the services as they were not getting the service quality they
expected. Even some of them responded by bringing back their in-house team. Though this
decision can work in some cases, now the step is too far.
However, while some interviewees agreed with us, many were disappointed about securing
investment, knowing well that outsourcing deals need years of management to ensure the
service that clients expect and signed at the contract.
5.WhatistheFutureofOutsourcing?
The future of outsourcing is digital. Outsourcing companies will increasingly use digital systems
to offer smarter, faster, better, and cost-effective services.
They will increasingly automate the functions which people currently perform. The outsourcing
contracts built on the traditional assumption today will fundamentally change to reflect that
digital tools backed by people offer the services.
According to my experience in the IT industry, I have tried to list out the major outsourcing
trends that prevail in the coming years. Take a look.
a)HybridWorkandSafety FirstwillbecomeaNew Norm
The number of remote workers increased by 400% in 2020. According to the survey, 72% of
employees today prefer the hybrid model over full-time office work. The remote working model
has a significant hike in IT project implementation in the two areas.
1. Firstly, the dispersed IT development teams will work on the projects. In 2020, this strategy proved helpful
in remaining operational and adapting to new digital plus technologies in pandemic circumstances.
2. Secondly, IT and members of other departments working online will stay at home due to safety reasons.
The technological solutions based on the Distance Economic assumptions will gain speed. Thus, we can
expect that companies hire IT, partners, for digital assistance.
b)Technology OutsourcingOverAdHocOutsourcing

b)Technology OutsourcingOverAdHocOutsourcing
Nowadays, companies struggle to access in-demand technical skills, and hiring the right talent
has become a severe challenge. The outsourcing companies’ role has changed significantly in
these years; today, companies consider it as technology outsourcing rather than last-minute
party leasing.
The last year has brought a shift towards digital transformation-oriented outsourcing, especially
in areas facilitating digital change, allowing companies to gain a digital advantage in the market,
such as
Cloud services
Machine Learning and Deep Learning
Artificial Intelligence
Cybersecurity services
RPA and automation services
DevOps and DevSecOps
Data Analytics
6.KeyLearnings:Preparingfor thePost-PandemicWorld
“Ignoring the pandemic impacts will be fools’ talk. The disruption that occurred with it has
drawn out some specific observations on which we have to work. The final section shed
highlights this area specifically”.
Businesses have already grappled with a “new normal” concept— an overused term but the apt
one, meaning the new operational ways that the company and their employees will adopt. The
agility companies have responded and adapted to a new normal will determine their future in the
post-pandemic world.
Outsourcing decisions will play a significant and strategic role in short-term flexibility and long-
term growth. Though no impact has come on the outsourcing industry, providers also have to
adapt quickly to new ways of working.

Moreover, the impact is greater on business process outsourcing (BPO) than information
technology outsourcing (ITO). It is mainly due to the regulatory limitations on the size of virtual
workforces, making the BPO firms underprepared.
Indeed, the clients and service providers have many success stories about how they have
supported each other to address the immediate lockdown issues, such as mobilizing their
supply chains to obtain laptops for teams.
We anticipate that the three significant changes will take form across the outsourcing industry
from the interviews we have gathered and gathered insights.
a)BuildingResilience
Business Continuity has become an important issue, and some contracts will contain adequate
provisions for another global lockdown (if it occurs again). While today’s business continuity
plans in contracts provide relief for regional disaster scenarios, few (if any) of these have also
included a situation where the whole world comes to a standstill like a lockdown.
The most black event in our generation that we had is COVID 19. It took everyone by surprise;
none of us were ready for it. The pandemic highlighted gaps in the preparedness level and tested
everyone’s imagination limit.
b)AcceleratingCloudAdoption
The Cloud model has never looked attractive like it did in 2020. Experts have tailored it well to
the circumstances that companies find themselves in today. The industries like travel and
hospitality demand remain active every time, and this technology has given these sectors a
significant hit.

Cloud computing in hospitality can provide enhanced guest experiences, reduce cost, faster
services, seamless access, software, and service security, plus more flexibility. In contrast, this
model in travel industries can give travel agents access to better and flexible technologies,
which increase the effectiveness of assets and uptime and employee productivity. All this
automatically leads to decreased costs, higher efficiency, and better agility.
“Cost savings, transparency, faster
provisioning, and deployments—overall it
has been a positive cloud journey for us.”
‒EMEA
The organizations that migrated their operations and projects can scale their technical
resources with the changing demand better and meet the ongoing demand by being
technologically prepared. They will also find themselves better positioned to return to their
regular operations and adjust their technology footprint once the pandemic is over.
Increasingly companies are experiencing first hand the flexibility that the cloud offers As a

Increasingly, companies are experiencing, first-hand, the flexibility that the cloud offers. As a
result, it will likely accelerate their journey to enable cloud more in the other areas.
c) Rise in Outsourcing
Coronavirus is the most disruptive event, but at the same time, it has brought many
transformations in the industries. It broke the norm of going to the office to complete the
project, and physical co-location of resources is essential to build a trust relationship in the
workplace. Earlier it was misguided and became a major inhibitor in many outsourcing
transactions.
Offshore and nearshore service providers were always considered outsiders. But with the rise of
the remote working model in these organizations, the nature of office relationships has changed
drastically.
Now, we have adopted a remote working model and are growing successfully in terms of
productivity and revenues. Companies have become comfortable hiring through virtual interview
meetings, signing new contracts with no formal handshake, replacing onsite classes with online
sessions, and conducting online project success parties with a sparkling glass of their favorite
drinks.

Remote working culture has ingrained gradually within the companies and it will help them
access the global talent from offshore and nearshore locations both. It will also allow
companies. Also, with the downfall of the global economy, companies are now planning their
ways to preserve their finances. All these are clearly indicating that the needle will tilt more
towards outsourcing in the coming days.
As always, benefit relies on the client’s willingness to invest in a particular service which would
further compel them to enjoy service providers’ service.
Let’sDiscuss
The disruptive outsourcing environment has opened the door to opportunities to enhance
innovation plus market competitiveness for forward-thinking companies. If you want to explore
how outsourcing solutions can help your business or gain deeper insights into the outsourcing
world, get in touch today.
We would love to provide you with a full briefing.

Study References
https://www2.deloitte.com/us/en.html
https://www.bbc.com/
https://www.n-ix.com/
https://www.technavio.com/
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