A survey conducted by Computer Economics on IT Outsourcing found that outsourcing is becoming an attractive option for smaller organizations and application development is the most outsourced function. It also found that outsourcing of IT security is increasing rapidly - compared to other outsourced functions. These trends can be primarily attributed to the growing availability of cost effective and scalable solutions in the cloud computing, robotic automation, and managed services solutions space.

In terms of preferred geographical location for outsourcing, The Economic Times recently reported that 75% of Multi-National companies (MNCs) in a survey chose India due to its buoyant economy, progress in enacting regulatory reforms and growing talent pool. While outsourcing was used as a cost cutting tool, the rationale is undergoing a perceptible change. Businesses are increasingly considering outsourcing as a cost-effective solution to draw top talent.

Here is a list of what is on the radar for IT outsourcing to help you chart your outsourcing strategy for 2017.

  • 1.Data security: Data leakage and privacy issues plague the digital world, and in response, companies are looking to improve their data security with their existing IT vendors or seeking specialized security vendors to outsource this function.
  • 2.Value generation: As strategic focus of outsourcing shifts from costs and relationship management continues to improve, companies are pursuing partnerships with vendors that add business value by spurring innovation.
  • 3.Quality enhancement: Cost reduction is still important to companies that outsource but surveys indicate that innovation is being used to generate more quality - rather than exploring ways to lower cost of delivery.
  • 4.Automation: With advancing robotics technology that can easily replicate human effort to execute tasks or analyse millions of data points, businesses are looking for vendors who can provide the sought-after automation to reduce human resource costs. As a result, the number of virtual employees is expected to go up
  • 5.Single vendor model: Outsourcing to multiple vendors still happens. However, this model does not optimize quality of service, efficiency and costs as much as a single managed services provider who can cater to all IT functions. The result? The multiple vendor set up could be on its way out.
  • 6.Agility: IT requirements are never set in stone and need to evolve as new market demands emerge. Companies outsourcing IT expect their vendors to follow agile methodologies to remain responsive and deliver scalable solutions that will allow for seamless integration of new features.
  • 7.Mergers and Acquisitions: As competition increases among service providers, companies with smaller offerings are merging with the bigger players in the market. Outsourcing is also driving M&A among companies that recognize the tangible benefits of having outsourced IT functions.
  • 8.Responsible outsourcing: Sustainability and green initiatives are resonating with consumers and business across the world. In keeping with this, companies are collaborating with IT vendors who have an established reputation of being responsive and responsible towards the natural and social environment in which they operate.

Currently, the biggest uncertainty that is weighing on the outsourcing market is the US administration’s immigration policies. Its impact on the US market and the rest of the world remains to be seen as the policies take effect. The other unsettling event in the equation is Brexit, which too leaves UK’s economy and that of Europe’s in question. The fall out of these important events could alter the course of the trends shaping the outsourcing industry in 2017. Only time will tell