Outsourcing Services - Market Share Analysis, Industry Trends & Statistics, Growth Forecasts (2024 - 2029)

Outsourcing Services - Market Share Analysis, Industry Trends & Statistics, Growth Forecasts (2024 - 2029)

The Outsourcing Services Market size is estimated at USD 1.02 trillion in 2024, and is expected to reach USD 1.39 trillion by 2029, growing at a CAGR of 6.40% during the forecast period (2024-2029).

Factors such as the rising emphasis on minimizing operational expenses, the unavailability of a skilled workforce, and the incorporation of advanced technology in outsourcing services are propelling players to develop new services to capture market share. The market is expected to witness significant growth during the forecast period.

Key Highlights

• Organizations are increasingly turning to outsourcing services, driven by various factors. One major factor is the cost-saving potential when outsourcing to countries with lower labor costs, which can lead to substantial reductions in expenses related to salaries, benefits, and overheads. Additionally, companies are focusing their resources and management efforts on core business activities, enhancing their competitive edge and fostering growth.
• The market players are acquiring various outsourcing firms in the European region to expand their customer base. For instance, in February 2024, Konecta, a global player in Customer Experience services, bolstered its presence in English-speaking markets by acquiring Bespoke, a United Kingdom-based business process outsourcing firm. Bespoke's primary production facilities are in Durban, South Africa.
• Additionally, Konecta expanded its English services by launching its inaugural operations center in San Antonio, Texas (USA). These strategic moves align with Konecta's broader geographic expansion strategy, enriching its offerings for English-speaking clients, notably in offshoring services. With these expansions, Konecta is solidifying its standing as a critical player in the industry.
• Moreover, the growing popularity of cloud computing in business process outsourcing is a significant factor affecting the adoption of BPO services. Cloud computing aids BPO operators in improving the time to market, reducing costs, and enhancing the quality control process.
• Furthermore, cloud computing in the market ensures instant computing support and system keys, universal access, and adjustable provisioning whenever needed for required business purposes. These advantages are expected to positively impact the overall adoption of cloud computing in the business process outsourcing sector during the forecast period.
• However, concerns related to data security, customization, and data migration, coupled with the dynamic needs of the IT structure, impacting the cost of customization for end users, are poised to hamper market growth during the forecast period.

Outsourcing Services Market Trends

The Information Technology Outsourcing Segment to Witness Significant Growth

• The market is witnessing a rising emphasis on leveraging the core competencies by outsourcing non-core operations, increasing organizations' focus on IT to gain differentiation by relying on outsourced vendors, continuing the shift to cloud services, and embracing virtualized infrastructure. Moreover, due to the growing emphasis on digital transformation, organizations depend on the performance of creative applications and extensions that IT services can provide.
• Hence, there is a strategic shift among businesses and organizations to prioritize their core strengths and critical functions while outsourcing non-essential IT operations to external service providers. This trend recognizes the importance of focusing internal resources and expertise on activities directly contributing to a company's competitive advantage and overall business growth.
• One of the primary drivers behind this shift is recognizing the critical importance of focusing on core competencies. Businesses are increasingly specific about investments in their resources and expertise, allocating them to activities directly contributing to their competitive advantage. Outsourcing non-core IT operations allows organizations to divert their attention and resources toward innovation, product development, and customer-centric efforts, enhancing their market positioning and agility.
• Further, the market is witnessing an expansion in the SME sector due to the rising investments in SMEs to adopt advanced technologies. These factors are further expected to create substantial growth opportunities for IT outsourcing vendors in the coming years.
• For instance, in May 2023, three UK universities collectively received GBP 4.5 million to establish small and medium-sized enterprise (SME) engagement hubs under the HNCDI (Hartree National Centre for Digital Innovation) program. Newcastle University, Ulster University, and Cardiff University are expected to provide targeted and accessible help for SMEs to boost their competitiveness and growth by adopting advanced digital technologies such as supercomputing, data analytics, visual computing, and artificial intelligence (AI).
• Furthermore, rising cloud deployment is significantly augmenting the growth of the IT outsourcing market by offering scalable, cost-effective, and flexible solutions. According to Flexera Software, as of 2024, 73% of enterprises surveyed implement a hybrid cloud in their organizations. Businesses increasingly leverage cloud services to reduce infrastructure costs and improve agility. This shift enables IT outsourcing providers to offer specialized cloud management, integration, and security services.
• Consequently, organizations can focus on core activities while outsourcing complex IT tasks. The demand for cloud expertise drives IT outsourcing growth as companies seek to harness cloud technology's benefits without the need for extensive in-house resources. This trend accelerates innovation and operational efficiency across industries.

North America to Hold a Significant Market Share

• The United States holds a significant position in the North American outsourcing services market. Due to the growing demand for business process outsourcing services from the region's tech giants, the region is expected to maintain its dominance. The surge in the overall demand for cloud computing and the personalization of service offerings to better meet individual needs are also expected to drive regional expansion.
• Many Canadian companies are transitioning from solely relying on public cloud services. Instead, they are embracing a hybrid IT approach, blending public, private, and traditional infrastructure. This shift is driven by the benefits these organizations see in enhancing their operations and customer service through a hybrid cloud strategy. In line with its "cloud-first" approach, the Canadian government prioritizes cloud services for IT investments, techniques, and projects. By leveraging private-sector innovations, the government aims to enhance the agility of its IT infrastructure. Such government initiatives toward IT development are expected to drive market growth.
• Moreover, businesses operating within North America are increasingly integrating AI (artificial intelligence) and automation technologies into their outsourcing processes. This trend aims to boost efficiency and minimize manual intervention. The adoption of AI and automation in outsourcing is on a steady rise. Companies are turning to AI, RPA (Robotic Process Automation), and machine learning to streamline operations, enhance efficiency, and reduce expenses. In response, outsourcing service providers are pivoting toward AI-centric solutions, enriching their services with smarter, data-driven insights for clients.
• Various players in the region are using AI in BPO services. For instance, Expiviahas reshaped the landscape of BPO services by prioritizing technology and AI. Rather than relying solely on conventional benchmarks, the company prioritizes technology-driven strategies, ensuring its clients derive strategic value.
• Also, large enterprises are increasingly adopting IT outsourcing strategies for better backend IT support and IT infrastructure updates, which would drive market growth in the United States. For instance, in July 2023, Tata Consultancy Services (TCS) expanded its relationship with GE HealthCare Technologies Inc., a medical technology company based in the United States, to help transform its IT operating model for managing its applications and driving innovation. After this collaboration, TCS would provide outsourcing services for IT application development, maintenance, rationalization, and standardization of GE Healthcare, supporting the growth of the market in the country's large enterprise sector.

Outsourcing Services Industry Overview

The outsourcing services market is semi-consolidated with an array of services from various vendors. Major vendors include Accenture, TATA Consultancy Services Limited, Capgemini, Cognizant, and HCL Technologies Limited. Market players are enhancing their portfolios and seeking long-term competitive advantages through strategic partnerships and innovative product offerings.

In March 2024, Celegence Holdings LLC strategically invested in Soterius Inc., a key player in outsourced services, collaboration technologies, and data assets within the drug safety and medical affairs domain. This investment, a part of Soterius' Series A financing, has forged a partnership that capitalizes on the strengths of both Celegence and Soterius. By leveraging the expertise of their teams, this collaboration aims to broaden their reach and fuel mutual growth.

In January 2024, Varanium Cloud Limited, a digital technology company, is establishing its second office and business process outsourcing (BPO) center in Sawantwadi, Maharashtra. The BPO center would specialize in services such as data accounting, background verification, and debt recovery.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support