Rising inflation and dwindling profits often lead companies to cut costs in various ways.
One of those ways is to outsource work to other companies, part-timers, or freelancers, often in developing countries.
It’s a two-way street – saving costs for companies while stimulating the economies of developing countries through labor exports.
I collected some interesting outsourcing statistics to show where the U.S. and the world currently stand on outsourcing work.
Top Outsourcing Stats
Here are the five most interesting outsourcing statistics I found; read on to find more details on these.
- 83% of organizations managed to reduce costs using outsourcing.
- 59% of businesses use outsourcing services to cut costs.
- 83% of SMBs use business outsourcing services.
- The global IT industry spends $1.305 trillion per year outsourcing.
- 74% of businesses use IT outsourcing services.
The Current State of Outsourcing
The somewhat recent introduction of AI has, I would say, adjusted the outsourcing industry. However, using AI to automate tasks or using AI-based tools is a form of outsourcing too.
This AI influence has led to many companies introducing AI-powered outsourcing tools.
42% of organizations older than 10 years use outsourcing services.
Meanwhile, only 30% of organizations that have been around for 4-10 years use outsourcing services.
37% of organizations with a maturity between 1-3 years opt for outsourcing.
If you think that this number seems a bit low, it’s because it separates exclusive outsourcing from shared service.
83% of organizations managed to reduce costs using outsourcing.
Furthermore, 82% of organizations managed to improve the efficiency of their processes. 59% drove business value up and 58% managed to reduce overall risk to the organization.
48% managed to access a wider talent pool and 22% managed to diversify their locations.
70% of organizations improved their developing capabilities and 51% achieved digital agenda acceleration.
The global CRM outsourcing market is worth $14.85 billion.
Moreover, the market is growing at a CAGR of 5.74% and will reach $19.63 billion by 2029.
After IT and HR, CRM roles are among the most outsourced jobs. Companies have to set up and maintain their CRM processes regularly which takes a considerable amount of time and effort; something that is easily managed by outsourcing.
Outsourcing Market Statistics
The outsourcing services market has witnessed tremendous growth in the last decade.
Faster internet, wider connectivity, and the introduction of accessible communication and project management tools have made it more convenient to outsource various internal tasks.
The following statistics show the market impact of this shift.
The human resource outsourcing market is worth $39.3 billion.
The human resource outsourcing market is growing at a CAGR of 4.3% and will reach $53 billion in market value by 2031.
Furthermore, banking, financial services, and insurance companies account for the highest market share in HR outsourcing, followed by the healthcare, hospitality, IT, and retail industries, respectively.
The global Business Process Outsourcing (BPO) market is worth $370 billion in 2024.
The BPO market currently shows an annual growth rate of 4.43% between 2024 and 2028. Based on that growth rate, the market will reach a valuation of $440 billion by 2028.
What I find interesting is that the average spend per employee is currently $105.2.
Considering average US wages, that number is comically low and shows you why outsourcing over local talent is preferable for a lot of companies.
The robotic process automation (RPA) software market is worth $5.4 billion.
RPA is a form of outsourcing where companies use software to automate certain tasks in their business processes.
The RPA market is currently growing at a CAGR of 36.6%; Statista estimates that the RPA market will be worth $81.8 billion by 2032.
How SMBs Are Using Outsourcing
Small and medium businesses can take the most advantage of outsourcing.
It not only saves costs, but also helps save on overheads; they can keep a smaller office, and save on benefits, certifications, and time because there isn’t much need for training sessions.
59% of businesses use outsourcing services to cut costs.
On average, small and medium business owners are more familiar with outsourcing services. For example, 18.3% of SMB owners are familiar with WebHR, a cloud-based social HR software.
The same isn’t true for larger companies as they prefer to hire in-house. So, it’s safe to say that small and medium businesses utilize outsourcing services the most.
83% of SMBs use business outsourcing services.
The Clutch survey found that SMBs are actively looking for new outsourcing partners. 27% of surveyees are looking for marketing outsourcing, 22% for IT, and 21% for design services.
62% of SMB owners are concerned about a looming recession. Despite that, they are looking to build their teams and outsourcing is proving to be the appropriate solution.
40% of SMBs believe that outsourcing is the answer to building a robust IT infrastructure.
Cybersecurity is a common concern when using IT outsourcing services. Another Kaspersky study found that 40% of SMBs also plan to outsource cybersecurity.
Currently, only 25% of SMBs have the necessary cybersecurity automation. Meanwhile, 45% plan on doing it in the next 12 months.
That still leaves 30% of SMBs who are either still considering getting cybersecurity automation or believe that they don’t need it.
IT Outsourcing Statistics
IT services make up a large part of the outsourcing industry. An ISG report found that almost 72% of all global outsourcing contracts are of an IT nature.
Here’s how it affects the industry.
The global IT industry spends $1.305 trillion per year outsourcing.
At the same time, the managed services market size is currently $278.9 billion and the managed security services market size is $31 billion.
Plus, total IT outsourcing market revenue reached a whopping $512.5 billion. It’s currently growing at an annual growth rate of 10.99%.
This means that the market revenue will be around $777.7 billion by 2028.
74% of businesses use IT outsourcing services.
Companies like Accenture, Cognizant, IBM, and Infosys are among the largest providers of IT outsourcing services.
More often than not, hiring such a company is less expensive than hiring full-time IT employees.
For example, according to Glassdoor, the average salary of a full-time DevOps Engineer in the US is $124,000. Meanwhile, the average salary of a full-time DevOps Engineer in, let’s say India, is around $10,900.
That’s more than 90% savings in costs.
Companies are now spending 8.3% of their IT operational budget on outsourcing IT tasks.
This is the highest it has been in the last five years, with the lowest being 5.6% in 2022. Research indicates that the outsourcing share of IT budgets will continue to grow substantially.
While some companies are banking on AI, most are looking to try out outsourcing services.
Outsourcing Recent Trends
As the statistics above show us, outsourcing work is only becoming more commonplace.
The following trends give an idea of why that is and what the future of outsourcing entails.
75% of employers have difficulty finding talent.
The global talent shortage has been on an upward trend since the last decade. In 2014, 36% of employers reported having trouble finding talent; today, that number has more than doubled.
What I find interesting is that this is true for companies of all sizes. However, enterprises with 1,000-4,999 employees suffer the most as 77% of them report having trouble finding talent.
At any rate, this means that 75% of companies today are or may be willing to outsource work to find diverse talent.
17% of global business outsourcing companies are continuing to invest in remote and hybrid work.
In 2021, 14% of GBS organizations were looking to enable virtual work environments; considering that was right after the pandemic, we know that remote work has become more common now.
Remote work in GBS organizations means greater flexibility and the ability to provide outsourcing services more efficiently.
Currently, India, Poland, Mexico, Malaysia, and China are the top locations providing shared service centers to the US.
Compared to 2021, Bulgaria, Mexico, Ireland, Malaysia, and Poland have had the highest percentage increase in shared services.
So, we can expect East Asian and Eastern European countries to provide a good bulk of outsourcing services this year too.
59% of employees are quietly quitting their jobs.
Quiet quitting refers to a lack of engagement at the job. Gallup also found that 18% of employees are loudly quitting; they’re actively disengaged.
Overall, 77% of employees are not engaged in their roles. Low engagement costs the global economy around $8.8 trillion each year.
It’s also one of the reasons we’ve seen an uptick in outsourcing in the last two years. Many companies go down the outsourcing route once an employee quits or is let go.
And low engagement in the workplace is a huge driver of employee turnover.
Wrap Up
In the last decade, outsourcing has become a lot more common, especially with SMBs because it allows companies to cut costs, save time, and get efficient results more quickly.
Primarily, the US, Europe, and Australia outsource work to Eastern European, Asian, and African countries.
While most companies claim to do it for diversity, the truth is that it’s much cheaper to hire in those locations.
However, current market trends show a significant talent shortage in several industries. With remote work becoming increasingly relevant, there has never been a better time for outsourcing.