Survey Says: Global Outsourcing Market Is Growing

I’ve written about regions and countries around the world that are driving efforts to build their IT outsourcing markets – countries like Egypt and Vietnam and China and regions like Latin America. It appears that drive is working.

A new study by Duke University’s Offshoring Research Network and  PricewaterhouseCoopers reveals that outsourcing companies in North America and India – regions which for a long time have led the outsourcing market – are being challenged by competition from Latin America, Eastern Europe, and Asia, in service areas such as contact centers, business process outsourcing, and information technology outsourcing. Among those efforts, the Chinese government has designated 20 cities as outsourcing hubs in an effort to attract more international investment, while the Philippine government has declared outsourcing a priority industry, according to Duke and PricewaterhouseCoopers.

“Growing competition has transformed the outsourcing industry into a global race for market share,” s PricewaterhouseCoopers managing director Charles Aird said in a prepared statement.

The survey queried 514 outsourcing service providers in 50 countries; it is the Offshoring Research Network Service Provider Survey that was first conducted in 2007.

I think this finding is particularly interesting for two reasons. First, it signals growth in the outsourcing market, and with the battering we’ve been taking across all sectors of the economy, including IT, any news of growth is a very good thing. Secondly, it illustrates that the outsourcing market continues to become a global market, not just an Indian and North American market. Typically, larger markets drive competition which spurs innovation and better, more cost-effective service. Who doesn’t want that?

Of course, the survey’s finding also indicates, at least to me, that there are plenty of companies that want to and will offshore IT work. Disagree or not –and there are valid points on both sides – offshoring will continue to be a big part of the outsourcing market.

Here’s some other interesting tidbits from the study. A large number of service providers expect to begin new software development and IT-service contracts over the next several years. Overall, 62 percent of service providers said they plan to expand the scale of their existing offerings, according to the survey. The survey also found that the economic crisis of 2009 reemphasized the importance of cost savings and efficiency improvement as the top strategic reasons for outsourcing, followed by access to qualified personnel.