What is the current state of the outsourcing industry? In this statistic based post on understanding outsourcing, you’ll find everything you need to know. It is key to understand this trend if you are serious about starting or scaling an ecommerce company.
Improving the efficiency of a business and cutting costs are two of the most important things a business needs to get right. In fact, it could be argued that a business can’t be successful without getting both of these factors right.
For a large proportion of companies, outsourcing helps tick a lot of boxes. Outsourcing specific operations to outside organizations can help a business save money on payroll and employee training. It can also give employees more time to focus on important tasks.
The need to reduce costs and make businesses more efficient has seen extreme growth in the outsourcing industry. Today, we’re going to look at the growth of the outsourcing industry amongst other things, so that you better understand how it operates and how many businesses are using it to find success.
Let’s get started!
Based Posts On Understanding Outsourcing Statistic
Here are 20 outsourcing statistics that will give you a better understanding of how the industry works and where it is heading.
Let’s start by looking at some very large numbers. The outsourcing industry is big business. So big in fact that by the end of 2023, Deloitte reports that global spending on outsourcing could surpass $731 billion dollars.
This is an astonishing number that could be easily hit as, by the end of 2022, global spend is expected to hit $700 billion.
To put this into more context, the IT outsourcing industry is projected to reach a global spend of $519 billion by the end of 2023. This is an increase of 22% from 2019. Business process spending is projected to reach $212 billion. This would be an increase of 19%.
In 2014, the outsourcing market peaked globally at a value of $104.6 billion. It then went on to hit a ten-year low in 2016 when it was only valued at $76.9 billion. Since 2016, the global outsourcing industry has recovered, with its value now continuing to rise year after year.
Between 2016 and 2019, the total contract value of the outsourcing industry globally rose by 20%. Today, the total contract value of the industry is approximately $92.5 billion.
Above, we mentioned how IT services account for most of the global outsourcing industry. Looking at this as a percentage reveals just how important IT services are to outsourcing. On a global scale, IT services account for 72% of all outsourcing contract values.
In terms of money, that accounts for $66.5 billion of the $92.5 billion total contract values. The other $26 billion was made up of business process outsourcing.
A Deloitte survey recently revealed that 90% of companies believe the Cloud was the primary enabler for outsourcing. This is a similar finding to a previous study carried out in 2019.
A lot of respondents also noted that a “lack of maturity” when it came to operating models in the cloud has been a barrier to many companies accessing the full benefits of outsourcing. In the survey, Deloitte explains how they believe the Covid-19 pandemic might play a part in further Cloud adoption.
If this does occur, we could soon see more opportunities for businesses to outsource tasks.
This next statistic could be an important one for anyone that works in outsourcing to know. BCG reports that 62% of businesses that use outsourcing look to renegotiate their contract. As the market continues to adapt, evolve, and grow, so do business needs and budgets.
As a result, more than half of businesses that use some form of outsourcing hope to change their contract. The report also reveals what companies hope to change.
One important section of the report explains how 59% of businesses want to renegotiate the terms and conditions of their outsourcing contracts. 56% of businesses also want to renegotiate the pricing structure.
48% of businesses also stated that they simply want to redefine their delivery model.
Another important statistic that could be of importance to those working in outsourcing is that 60% of accounting and finance outsourcing contracts are not expected to be renewed by 2025.
The main reason for this is outdated models, in particular pricing models. These outdated models are leading a large number of companies to reevaluate their contracts. As more and more systems become automated, the need for more traditional services is becoming redundant.
Outsourcing companies that don’t move with the times and adopt newer models could lose their contracts.
A statistic that really drives home how popular outsourcing is in the United States is that almost 300,000 jobs across the US are outsourced every year. This large number of jobs are being outsourced overseas.
The result of this is lower costs for business owners and less work for employees. Whilst this decrease in work is great for current employees, it might not be so great for unemployed workers. After all, every job that is sent overseas takes away the need for a job to be done in the US.
Have you ever wondered what the largest outsourcing company in the world is? If not, you will now. The largest outsourcing company in the world is IBM. IBM has a revenue of $76.5 billion. The company also has a market cap of $105.66 billion.
Moving away from the financial side of the business, IBM also has an incredibly large employee base. At the last count, IBM had more than 380,000 employees. The company has offices all over the world but the headquarters are found in New York.
The second largest outsourcing company in the world is Deloitte. Deloitte has a revenue of $47.6 billion. In third place, we find Accenture, an Irish company with a revenue of $44.7 billion.
(Source: Insider Monkey)
Unsurprisingly, the main reason businesses around the world use outsourcing is for cost reduction. In fact, 70% of companies that outsource jobs do so for this very reason. What’s probably more interesting is the other top reasons why businesses choose to outsource.
30% behind cost reduction is flexibility with a percentage of 40%. 40% of companies believe that outsourcing gives their businesses more flexibility and time to do other things. Other key reasons include speed to market (20%), access to tools and processes (15%), and agility (15%).
With the explosion of video platforms like Zoom, it made outsourcing that much easier. In addition online payment platforms are getting better and cheaper.
Job outsourcing in the United States typically occurs when US businesses hire foreign workers across the world instead of American citizens. In 2019, companies from the United States hired approximately 14.6 million workers.
These workers operated in a range of different sectors but the most popular were technology, manufacturing, and human resources.
This is a big advantage for E-Commerce companies that are looking to move faster than their larger counterparts. With tech improvements in the areas of tracking time and also payments, it is easier than ever to compete against the big boys.
For instance, PayPal opened up lots of opportunities to pay outsourced workers abroad. Much better and cheaper than a bank wire. However, years later there are exceptional options like Payoneer that are solid, but also half the cost of PayPal.
(Source: The Balance Money)
Artificial Intelligence, commonly referred to as AI is an industry continuously growing in popularity. As a result of its meteoric growth, more and more businesses are starting to accept it.
In a recent survey conducted by Deloitte, it was found that 58% of companies have started using some form of artificial intelligence. This is something that is also growing in the outsourcing industry with more work being outsourced to artificial intelligence.
This growth in popularity has also revealed that 29.4% of workers are now required to take part in training as a consequence of AI implementation.
A study from Statista that included results from over 1,800 respondents found that almost 12% of businesses fully outsourced their payroll in 2019. A study from four years ago found that 8% of companies fully outsourced their payroll in 2015.
Therefore, there has been a 4% increase in four years. Whilst this may not seem like a significant increase, it shows that outsourcing is continually growing in popularity.
Another Statista survey found that 58.5% of US marketers saw no covid-related changes to outsourcing marketing. The survey, which was carried out in 2020 revealed that just under 20% of business marketers experienced some changes to the outsourcing market as a result of the pandemic.
This is arguably enough data for us to confidently say that the covid pandemic hasn’t had much of an impact on the outsourcing industry.
For those that don’t know, the gig economy is a group of people made up of freelancers and individuals that take up short-term work in exchange for payment. This group is also made up of individuals that work in the outsourcing sector.
Freelance statistics from Gallup show that this group of people is very happy with their income. The highest-paid gig economy job in 2020 was massage therapy. The average hourly rate for this job was $27.84.
In the same study, Gallup also revealed that 36% of all American workers make up the gig economy.
Clutch reports found that almost one-third of all small businesses use outsourcing for at least one business procedure or process. That accounts for almost 37% of small businesses. The study also found that most of these businesses outsourced IT services, digital marketing, and accounting.
When it came to the reasons why small businesses outsourced their business processes, 24% of respondents responded by saying that they outsourced their work to improve efficiency within their business.
52% of companies also said that they plan on outsourcing more of their business processes in the future.
With the IT industry expecting to turn to outsourcing more and more, it isn’t a surprise to see more businesses using outsourcing to help their business. One line of work that a lot of businesses are considering using outsourcing for is cybersecurity.
In fact, 83% of IT leaders are thought to be thinking about outsourcing all of their business’s security efforts. This is quite remarkable when you consider that 91% of IT professionals already have an in-house security team.
The downside to this is the potential loss of jobs in America.
Despite all the growth the outsourcing industry has seen in recent years, there are still areas of the industry that have experienced a decrease in popularity.
A Statista study found that between 2019 and 2020, the number of professionals using outsourcing for content marketing dropped. In total, the number of people using outsourcing for content marketing dropped by 25%
An interesting tool called Global Service London Index or GSLI for short can be used to measure a specific country’s attractiveness for outsourcing business services. It takes factors such as financial attractiveness, availability, people skills, and business environment into account.
The tool found that India is actually the most attractive country in the world for outsourcing business services. It’s worth noting that 7 out of the top 10 were actually all countries from the Asia-Pacific region.
The other countries from this region that made the top 10 were China, Malaysia, Vietnam, Thailand, Indonesia, and the Philippines.
When we look at how much money can be saved by outsourcing work to Asia, we really start to understand why so many businesses are doing it. For example, if a business outsourced its work to the Philippines, it could save up to 70% on labor costs.
The main reason for this is the huge difference in wages. The average wage in the Philippines for a software developer is $7,174. In America, the average yearly salary for someone doing the same role is $69,589. That means a worker in the Philippines only earns approximately 10% of an American’s yearly salary.
(Source: Outsource Accelerator)
To finish off, we want to share a statistic with you that shows how valuable the outsourcing industry is. This statistic is a great way to do just that.
In China alone, the outsourcing industry is worth well over $175 billion dollars. That’s a whopping increase of 65% in just 6 years. In 2016, the outsourcing industry in China was worth just $106.46 billion.
This goes to show how important outsourcing can be to the economy. If outsourcing wasn’t accessible, China wouldn’t have anywhere near that amount of money coming in.
There you have it, 20 interesting statistics about outsourcing. Now that you’ve made your way through this post, you should have a much better understanding of what outsourcing is, how it works, why so many businesses use it, and why the industry continues to grow.
On the whole, outsourcing is a fantastic way for businesses to save money and become more efficient. However, whilst it mostly comes with benefits, there are also negatives associated with the loss of work at home and the potential for errors.
Having said that, the industry continues to grow and change so those issues may one day be solved. Until then, we look forward to seeing where the outsourcing industry goes next.
Frequently Asked Questions
What Are Outsourcing Statistics, and Why Are They Important for Businesses?
Outsourcing statistics refer to data and metrics related to the practice of outsourcing certain business functions to external service providers. These statistics provide valuable insights into the trends, benefits, challenges, and overall impact of outsourcing on businesses globally.
What Percentage of Businesses Outsource Their Operations?
The percentage of businesses that outsource their operations varies across industries and regions. According to some reports, around 70% to 80% of companies outsource at least one business function, with IT, customer support, and manufacturing being among the most commonly outsourced areas.
What Are the Main Reasons Businesses Choose to Outsource?
Businesses choose to outsource for various reasons. Some of the primary reasons include cost savings, access to specialized expertise, increased efficiency, scalability, and the ability to focus on core competencies.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.