- February 9, 2020
- Posted by: Faisal Khan
- Category: June 2019
A new decade is here, yet you are still uncertain about outsourcing part of your services. To help you finally decide, here are some forecasted outsourcing trends in 2020.
The outsourcing industry has significantly grown this year, as more companies look for strategic ways to grow and protect the future of their business, while remaining focused on expanding their capabilities. Advancements in technologies were also a factor in opening more opportunities for cost-effective and faster processes. Businesses are not only able to save money, but also have more time to focus on core practices and innovate processes.
In addition, the cloud, robotic process automation (RPA), and single-instance enterprise, have helped increase the demand for outsourcing. As such, the outsourcing market is expected to see an annual growth rate of 7.4% in the next 6 years. Moreover, because these digital capabilities are becoming easier to adopt, businesses are now shifting to more global and multifunctional models.
However, experts believe we will be seeing significant transformations in the outsourcing industry in the next decade. Since businesses are looking at becoming more global, complex, and digital, changes in outsourcing goals and expectations are also emerging. We’ve collated some of the forecasted outsourcing trends in 2020 from industry experts to help you finally decide if outsourcing is the right solution for your business.
Cost Reduction to Value Creation
Companies choose to outsource, so they can save on operational costs. In fact, businesses can save up to 15% of their annual costs by outsourcing their services. Most companies pass the savings to the business, while some invest in technology, process improvement, talent development, and improving their facilities.
Clearly, outsourcing not only provides professional services at a lower cost, but also opportunities to make the business more agile. However, experts believe that one of the outsourcing trends in 2020 is that businesses will want more value and improvements to the services they outsource.
Businesses are starting to look for more ways to become competitive in the market. Thus, creating more value and driving innovation will become an emerging trend in the next year. Businesses will be looking at more opportunities to improve processes, enhance agility and transform the organisation.
Moreover, we will also see more advancements in technologies as the cloud, RPA, and artificial intelligence (AI) continue to evolve and transform the business industry. As such, businesses will also be looking into more specialist services to cope with emerging automation processes.
Although businesses wanting to start outsourcing will still be looking at how this business practice can help them reduce cost, those who have been practicing outsourcing for quite some time will be looking at more ways to access specialist, more capabilities, and better resources to help them become market leaders.
Non-core to Core tasks
Another reason why businesses outsource is to have more time to focus on core functions. By outsourcing their back office and non-core functions, businesses can focus on more client-facing tasks. Their in-house staff can also have more time performing core duties and improve efficiency and productivity.
However, businesses in 2020 are expected to focus on more advanced business areas and core functions, and access to a high degree of specialisation. Thus, we will see businesses move towards outsourcing not only their back-office, but also their core business areas.
Also, with the adoption of cloud services and new technologies, businesses will be investing more in innovation. However, not all businesses have the capacity to adopt innovative technologies and processes. Thus, we can also see businesses looking at engaging disruptive outsourcing solutions.
Disruptive outsourcing can help businesses innovate and transform their organisation faster. Through disruptive outsourcing, automation, and increased product and service innovation can be achieved faster. Moreover, disruptive outsourcing will help reduce capacity and capability gaps, increase agility, and provide access to intellectual capital.
Indeed, the strategic and competitive advantages disruptive outsourcing can provide will help businesses keep up with new technologies and stay relevant. Most importantly, disruptive solutions may be the key for businesses to have access to more specialists to delegate part of their core services to.
Transactional to Strategic Partnerships and Collaboration
Transactional outsourcing is when clients outsource a specific operation with well-defined and repeatable processes. This type was regarded as the most satisfactory outsourcing relationship with up to 90% success rate for both client and outsourcing firm. However, there is little need for automation and customisation of the services being provided.
On the other hand, in strategic partnerships, outsourcing firms provide bundled operational services based on the clients’ needs. It allows for more collaboration between the client and outsourcing firm, to develop a more effective process and meet mutually desired outcomes. In addition, it supports the implementation of innovation and the creation of new value.
Experts also believe that one of the outsourcing trends in 2020 is that businesses will be looking at increased goal and risk sharing with their outsourcing partners. Thus, we will see outsourcing arrangements change from transactional to strategic partnerships, with focus on outcome-based contracts.
We will see less business looking at the number of employees and volume of outputs. Outsourcing will soon become a more collaborative practice, with business outcomes as measurement for outsourcing success.
Businesses will want to have equal responsibility, higher degree of openness and information sharing, a more strategic alliance, and better collaboration to create solutions. Thus, outsourcing arrangements will be driven by how much value was delivered, reduced risk from clients, and increase in market reputation.