Here's a collection of IT outsourcing statistics.
Since its emergence, IT outsourcing has revolutionized how companies approach technology solutions.
In 2024, the IT outsourcing market revenue hits US$512.50bn.
Let's uncover the numbers.
Summary Findings
- IT outsourcing sees 38% growth, 2019-2024.
- IT outsourcing revenue to grow at 10.99% CAGR, reaching US$777.70bn by 2028
- 81% outsource cybersecurity functions to external service providers.
- 57% outsource for cost reduction, talent gaps in focus.
- 27% outsource to enhance efficiency, with IT services leading.
- Cultural fit concerns 22% of executives in outsourcing provider selection
- Emerging trends in AI, RPA, and cloud lead companies to adopt and outsource these technologies.
- 30.29% of finance industry's spend on IT outsourcing, driven by digital needs.
- 54% prioritize transparency in IT outsourcing, underscoring its importance in partnerships.
- Offshore outsourcing leads with 45.13%, as companies balance cost with service delivery models.
- For hybrid work, 96% of organizations outsource to public cloud, with Azure and AWS prominent.
IT outsourcing grows 38% in five years (2019-2024)
Businesses increasingly find IT outsourcing vital for efficiency.
From 2019 to 2024, IT outsourcing experienced a 38% growth.
The trend in IT outsourcing is clearly rising, highlighting its growing importance and integration into business strategies.
In 2024, according to Semrush, the global monthly search volume for IT outsourcing reached 12.4k, with the highest interest coming from the US (4.4k), followed by Brazil and the UK (720 each), and Hong Kong (480).
The high cost per click (CPC) of $15.13 indicates that IT outsourcing companies are willing to invest significantly in advertising, suggesting a competitive and lucrative market.
The sector is expected to continue growing, driven by ongoing technological advancements and the increasing need for businesses to enhance efficiency and reduce costs.
Key Takeaway
The marked growth of IT outsourcing highlights its essential role in business efficiency and competitive advantage.
IT outsourcing revenue to reach $777.7bn by 2028
IT outsourcing market revenue to hit US$512.50bn in 2024.
According to Statista, the IT outsourcing market's worldwide revenue is expected to grow at a CAGR of 10.99% from 2024 to 2028, reaching a market volume of US$777.70bn by 2028.
The average spend per employee in the IT outsourcing market is projected to be US$146.10 in 2024. This spending reflects a direct cost without the long-term commitments and overhead associated with full-time hires.
Before the pandemic, global outsourcing industry revenue neared $135.5 billion in 2019. (source)
And the IT outsourcing market's average total contract value between 2000 and 2019 around $66.5 billion.
In 2024, the most revenue in the IT outsourcing market is expected to be generated in the United States, amounting to US$185.50bn.
By 2025, the expected market size will be India at $210 billion, China at $52 billion, and Southeast Asia at $47 billion. (source)
Key Players:
Key Takeaway
Significant growth in IT outsourcing, led by the US, with notable future expansion in India, China, and Southeast Asia.
81% outsource cybersecurity
Balancing outsourcing vs. insourcing in tech remains a complex decision for businesses.
In 2022, a study found that 81% of businesses outsource cybersecurity functions to external providers, with app/software development (79%), next-gen technology (78%), and IT infrastructure services (77%) closely following.
Here’s the breakdown:
Yet, fewer than half of these organizations are prepared to handle this challenge.
The majority outsource key IT functions, with an average of 24.1% preferring to insource.
76% of executives report outsourcing their IT functions, highlighting a strong trend towards external service providers.
Web hosting emerges as the primary driver of forecasted revenue in IT outsourcing.
Although more businesses outsource cybersecurity for its specialized needs, web hosting services generate the most revenue.
This is due to their universal demand across businesses with online presence, ensuring a steady, widespread revenue flow.
Key Takeaway
Majority of businesses, 81%, prefer outsourcing cybersecurity, underlining the strong reliance on external IT service providers.
57% outsource for cost reduction
Businesses are outsourcing IT for different reasons.
A 2022 survey revealed cost reduction (57%) as the leading reason for IT outsourcing, followed by business shifts (51%) and accessing new capabilities (49%).
Here’s the breakdown:
Compared to a 2020 Deloitte survey, cost reduction was higher at 70%, with flexibility (40%) and speed to market (20%) also noted.
Cost reduction remains the primary motivation for outsourcing, despite a decline in its percentage. This is expected, as businesses consistently aim to minimize expenses. Cost impacts are more tangible and easier to quantify compared to other factors.
The main areas of cost reduction relate to addressing skills shortages in emerging technologies like AI/machine learning. Half of the surveyed companies cited talent acquisition as a major internal challenge, alongside limited tools (35%) and collaboration issues.
The struggle to find, develop, and retain talent, especially in next-gen tech, is both costly and complex.
Key Takeaway
Cost reduction drives IT outsourcing, amidst talent and technology challenges.
27% of small businesses outsource for efficiency
Efficient time use is important.
In 2022, a survey of 1,003 small business owners revealed that 27% outsource to enhance efficiency, consistent with 2021 data.
Outsourcing allows focus on priorities due to limited resources.
Small businesses primarily outsource IT services (27%), followed by digital marketing (24%), and legal (23%), keeping PR, automation, and admin tasks in-house.
Outsourcing also shortens hiring time. IT partners complete hires in 33 days versus the 50-80 days for an in-house recruiter to hire a developer. (source)
Key Takeaway
Outsourcing, especially in IT, boosts small business efficiency by saving time
70-90% labor cost reduction via outsourcing
Employee wages are escalating in developed countries.
Outsourcing to lower-cost countries can slash labor expenses by 70% to 90%.
As a result, significant savings are realized.
Outsourcing is popular because hiring skilled workers is expensive. Here's what it costs to hire a full time software developer in different countries.
Additional costs are involved. Here's the cost structure for hiring an in-house developer in the U.S. (annual breakdown):
Cost Component | Description |
|---|---|
Net Developer Salary | Base salary without additional benefits |
Supplementary Pay (3.2% of salary) | Includes bonuses, overtime, etc |
Insurance (8%) | Health, dental, etc |
Paid Leave (7.1%) | Vacation, sick leaves, etc |
Retirement & savings (3.8%) | 401(k), pensions, etc |
Benefits (7.6%) | Social security, Medicare, etc |
Overheads (15%) | Workspace, equipment, utilities, etc |
Cost per Hire | $4k on average (recruitment, interviews, training, etc) |
In fact, 70% of businesses report cost savings from not needing to hire in-house. (source)
With inflation on the rise, cost-cutting remains essential
Though IT outsourcing offers cost savings, it also has cost-related side effects:
Currency fluctuation risks can impact projected cost savings.
Hidden costs of managing offshore teams, including travel and training.
Increased costs in quality control to maintain standards.
Potential legal and compliance costs in different countries or regions.
Key Takeaway
Outsourcing offers major labor cost reductions but comes with hidden and fluctuating expenses.
22% worry about cultural fit in outsourcing
Aligning vendors with a unified goal is tough and time-intensive.
In a 2022 global outsourcing study, 22% of executives identified 'cultural fit' as a major concern in selecting providers.
Cultural alignment is crucial for success in collaborative environments.
Though SLAs provide a foundation for outcomes and relationships, it falls short of ensuring optimal results.
Matching vendors with a team's culture boosts the chance of achieving top results from outsourcing.
Key Takeaway
Finding vendors that match a company's culture is a key challenge in outsourcing.
Growth in AI, RPA, cloud shapes IT outsourcing
Generative AI
AI's role in IT outsourcing expanded 99X from 2019 to 2024, with predictions of even greater growth in 2025 and a monthly search volume of 368k.
Approximately 70% of generative AI startups leverage Google's cloud and AI services for outsourcing needs.
AI's growth enhances automation, improves decision-making, and fosters innovation, providing businesses with smarter solutions and competitive edge.
RPA
Robotic Process Automation (RPA) has expanded 10% from 2019 to 2024, with its growth expected to skyrocket in 2025, indicated by a monthly search volume of 368k.
63% of participants intend to collaborate with RPA implementation partners, emphasizing the technology's growing importance. (source)
RPA significantly reduces operational costs and increases efficiency by automating routine tasks, allowing businesses to focus on core competencies.
Cloud Computing
Cloud computing has seen a 40% growth from 2019 to 2024, with expectations of significant expansion in 2025, underscored by a monthly search volume of 368k.
90% of companies recognize cloud computing as a crucial factor in enhancing their outsourcing initiatives.
Cloud computing lowers infrastructure costs, scales services flexibly, and accelerates digital transformation, offering businesses agility and innovation.
Key Takeaway
As the growth of AI, RPA, and cloud technologies accelerates, more companies will turn to outsourcing for specialized expertise.
Finance tops IT outsourcing at 30.29%
Technology is crucial across all business sectors.
In 2023, a Statista study using annual reports showed BFSI leads IT outsourcing with 30.29%, followed by Healthcare at 23.43%.
Here’s the breakdown:
The finance sector's high IT outsourcing spend reflects its digital transformation needs.
Both traditional finance and startups rely on IT solutions for competitive edge. 71% of financial service executives outsource at least one service.
The trend of outsourcing in finance is expected to grow as digital services become more integral to customer retention and acquisition.
Key Takeaway
Finance leads in IT outsourcing, reflecting its push for digital innovation.
Transparency valued most at 54% in outsourcing relationship
Collaborating with IT outsourcing partners requires effort and adjustment.
A 2022 Deloitte study shows transparency (54%) as the top valued quality in service providers, followed by trustworthiness (41%), and business understanding (40%).
Here’s the breakdown:
Understanding the business isn't the top priority, which is surprising. This highlights the ongoing importance of human connection in outsourcing.
The demand for transparency, trust, and business acumen in service providers is likely to increase as companies seek more integrated and collaborative outsourcing solutions.
Key Takeaway
Transparency is the top priority for companies in IT outsourcing relationships.
Offshore IT outsourcing dominates at 45.13%
IT outsourcing is divided by location: nearshore, offshore, and onshore. Each type offers unique strategic benefits to businesses.
In 2023, Statista reveals offshore IT outsourcing leads with an average of 45.13%, followed by onshore (33.48%), and nearshore (21.39%) for 2020 to 2028.
Here’s the breakdown:
The trend shows onshore decreasing, nearshore increasing, while offshore remains the majority but fluctuates.
Despite geographical distances, companies utilize three delivery models: traditional, managed, and operate services to navigate the complexities of offshore outsourcing.
Key Takeaway
Offshore remains top IT outsourcing choice, with nearshore gaining as onshore dips.
96% outsource to public cloud, supporting hybrid work models
More companies are bringing employees back to the office, shifting away from permanent remote work to embrace hybrid arrangements.
A 2023 Flexera study of 750 cloud decision-makers and users shows 96% of organizations have outsourced to public cloud services, 76% to private clouds, and 72% use hybrid models.
Here’s the breakdown:
The widespread adoption of cloud services reflects organizations' need for flexibility and scalability in their operations.
Azure is the most utilized public cloud, with AWS leading in significant workload operations.
The shift towards hybrid cloud solutions is expected to continue, accommodating hybrid work arrangements.
Key Takeaway
Nearly all organizations turn to cloud services to facilitate flexible, hybrid work models.
Wrapping Up
IT outsourcing continues its upward climb. Its varied solutions offer expansive potential for businesses.
Foreseeing the need, having IT-savvy full-time staff to manage multiple IT vendors is still essential.
