10 outsourcing statistics every organization should know

by Andy Nguyen
outsourcing statistics

The business world is continually growing, competition is thriving, and it takes hard work and strategy to come out on top.

One popular way organizations stay competitive in the business world is to outsource.

Outsourcing is an exceptional way to find top talent at affordable rates. And, when you’re able to effectively tighten your purse strings, without suffering quality of work, why wouldn’t you outsource?

However, there’s more to outsourcing than meets the eye. If you’re looking into outsourcing, you’ll want to take the time to do your research.

The following statistics will help you understand how big the outsourcing industry is, whether or not it’s truly worth your time, and how much you can potentially save your organization by hiring remote workers.

Statistic 1: More than one-third of small businesses currently outsource a business process, and 52% plan to do so in 2019.

If you are a small business owner, this statistic might surprise you.

You may worry you don’t have the resources or know-how to hire outside your inner circle, but statistics show many small business owners take this route.

Small business owners typically outsource to increase efficiency. After all, if you’re a small business with large demand, it’s nearly impossible to keep up with all tasks either yourself or with a small team.

Small business owners also outsource to find expertise. Running a successful business means finding top talent in different areas of business.

If you need help with accounting, digital marketing, IT services, or advertising, you may want to join that one-third of businesses outsourcing a business processes.

Statistic 2: The global outsourcing market totaled $85.6 billion in 2018.

This statistic shows a drop from previously recorded numbers. For example, in 2016, the global outsourcing market totaled $104.6 billion.

Even though the market has experienced a slight dip, outsourcing still remains a dominant industry.

The money being poured into outsourcing means a couple important things.

First, it means that more and more businesses are outsourcing work to either agencies, remote work teams, or freelancers.

Additionally, it means the market is alive and thriving. If you’re looking to hire a remote worker, you’ll have plenty of options at your fingertips.

It doesn’t matter if you’re a large firm or a small firm, if you’re looking to outsource work, you’ll be able to find qualified individuals to help.

Statistic 3: Businesses with 50 or fewer employees (29%) are less likely to outsource compared to businesses with more than 50 employees (66%).

Some studies report that the size of the business matters when it comes to whether or not a small business will choose to outsource.

Businesses that have less than 50 employees are less likely to outsource, while a business with more than 50 employees are significantly more likely to seek help elsewhere.

If you don’t have the financial means to outsource to a remote agency, you can start out by hiring a freelancer. This may be a more financially sound choice when you’re just getting started.

If you’re a larger company, and can afford to outsource to an agency, you may have access to higher levels of expertise.

Statistic 4: Around 84.2% of outsourcing deals originated from the United States, followed by the United Kingdom at 5.2%. Spain and Australia were two other key outsourcing markets.

Statistics show that where your business is located plays a large role in whether or not you choose to outsource.

If your business is located in the United States, you are more likely than any other country to outsource your work. Part of the reason for this may be that it’s much less expensive to hire help outside of the United States than to pay U.S. rates for work.

Interestingly enough, while outsourcing is popular in the United States, it’s also frowned upon by many Americans. 71% of Americans say that outsourcing harms the U.S. economy.

Not to mention 62% of Americans want the U.S. government to stop corporations from taking jobs overseas, according to Bloomberg Businessweek.

If you are a U.S. company looking to outsource, you may be interested in lower wages, avoiding strict U.S. regulations, and finding access to top talent at low rates.

However, you’ll also have to balance that decision with how you feel it may or may not affect the economy.

The second country most likely to outsource is the United Kingdom. However, their outsourcing rates are much lower, coming in at 5.2%.

Other countries likely to outsource include Australia and Spain.

outsourcing reduces cost

Statistic 5: There are several reasons to outsource including everything from 59% of people saying to reducing cost to 17% of respondents saying accelerating organizational transformation.

There are several reasons why companies choose to outsource. Deloitte conducted a thorough study in 2016, and found the following were top reasons for outsourcing:

  • 59% – Reduce or control costs
  • 57% – Focus on core functions
  • 47% – Solve capacity issues
  • 31% – Improve service
  • 28% – Gain access to expert talent and knowledge
  • 17% – Manage business environment
  • 17% – Accelerate organisational transformation

If one or more of these reasons ring true to you, your motivations are in line with the rest of the companies that choose to outsource.

At the core, most companies choose to outsource to reduce costs, improve business, and scale quickly.

Statistic 6: More than 60% of the total outsourcing market is composed of IT workers, and there are some job functions that companies don’t like to outsource.

There are several different types of jobs you can outsource. These jobs include: digital marketing, staff augmentation, and more.

But, it’s interesting to note that more than 60% of all outsourcing is related to IT. Top IT functions that are outsourced include:

  • Customer Support
  • Datacenter operations
  • Database administration
  • Disaster recovery
  • Mobile application development
  • Mobile application maintenance
  • Network operations
  • System support
  • Web hosting
  • Web operations

If you’re wondering about whether or not to outsource an IT function keep in mind that in 2018 the global ITO industry represented $62 billion in terms of revenue.

While IT functions are popular to outsource, there are some operations that companies typically do like to outsource.

For example, 89% of companies will not outsource strategic planning and 80% of companies will not outsource sales or marketing job.

This means more companies like to keep strategy and marketing in-house, but once strategy has been set, they will outsource things like customer support, development, and system support, to name a few.

Statistic 7: India comes in as the top country for outsourcing based on cost, availability, business environment scores, and people skills.

There are some countries that are known for specific types of outsourcing. For example, Ukraine is popular for IT outsourcing and has the most number of IT professionals in Central and Eastern Europe with a workforce that is projected to increase to over 200K by 2020.

However, in terms of outsourcing in general, agencies and professionals in some countries have higher ratings than others.

Based on a study that evaluated cost, availability, people skills, and business environment scores, here are the top countries for outsourcing:

  • 7.07: India
  • 6.31: China
  • 6.11: Malaysia
  • 5.99: Indonesia
  • 5.93: Brazil
  • 5.92: Vietnam
  • 5.87: Philippines
  • 5.86: Thailand
  • 5.76: Chile
  • 5.73: Colombia

If you’re new to outsourcing, then India is a great place to start researching outsourcing agencies.

If you are looking for development help specifically, take the time to check out agencies in Ukraine.

If you’re worried about validity, you’ll be interested to know all of the following companies outsourced development to Ukraine: Smartling, Shape, Jelastic, CurrencyCould, Elementum, RateSetter, DisclosureNet, CloudMade, AdsWizz, and more.

Statistic 8: The outsourcing industry in the Philippines contributes to 10% of the country’s economy.

The economy of some countries relies heavily on outsourcing. For example, the outsourcing industry in the Philippines contributes to 10% of the economy.

Additionally, the BPO sector in the Philippines had a 17% growth rate and created 1.3 million jobs in 2016.

For a country that isn’t known for a particularly strong economy, outsourcing plays a huge role in job creation.

Another study shows that 34% of the outsourcing industry in the Philippines is comprised of knowledge process outsourcing.

This means if you’re looking for high-value services, you may want to start by checking out agencies in the Philippines. Top services include things like animation, legal services, financial services, and content production.

Not only will you get high-level services when you opt to outsource to agencies in the Philippines, but you are also supporting a smaller economy.

Statistic 9: The defense sector accounts for the most revenue in outsourced deals, coming in at $100 billion.

When considering whether or not you want to outsource your business operations or IT functions, sometimes it’s helpful to know which industries and sectors are outsourcing and what the value is. Here are some top industries and sectors that outsource often to consider:

  • The defense sector comes in first with total deal value of $100 billion.
  • The government sector has a total deal value of $75 billion.
  • The insurance sector has a $52 billion deal value.
  • The healthcare sector saw the most outsourcing growth in 2017, an increase of 36%, the human resource center came in at 32%, and the finance sector at 30%.
  • The healthcare sector saw the most significant outsourcing growth in 2017 by up to 36%, followed by the human resource sector at 32%, and the finance sector at 30%.
  • Surprisingly, in 2018, only 9.4% of the average IT budget was allocated to outsourcing.

If you work in one of these industries or sectors, you’ll see it’s not uncommon to outsource. However, it doesn’t mean that you have to work in one of these sectors or industries to outsource work to another country.

business automation

Statistic 10: More than 1 million outsourced jobs in the US, India, Poland, and the Philippines are at risk due to advances in technology and automation.

Technological innovations are considered good news for many businesses. With the help of AI, automation, machine learning, and business intelligence, it’s now possible for some of the mundane tasks to be automated.

This can help decrease operational costs, improve efficiencies, and help free up time for you to focus on more pressing tasks.

The advancement of technology also can replace some of the jobs that companies used to outsource to other countries. For example, more than 1 million outsourced jobs in top countries are already at risk of disappearing.

As technology continues to advance, it’s projected that for every one new automation management position that is created there will be 4 jobs lost.

Again, this is good news for manby companies, but it might not be the best news for people working as remote workers in other countries.

However, having a job cut out due to improved technology isn’t the end all be all for professionals. It may just mean it’s important to skill-up and look for a different type of outsourced job.

For example, high-level jobs that involve creativity and the human touch have not yet been automated. These jobs are on the rise and remote workers can transition into these types of roles and offer their services successfully.

As a business owner, the more that technology improves, the easier it will be for you to run your business more efficiently.

And, it’s important to stay current. Sometimes investing in a software program and digital transformation will be much more cost effective than hiring a remote worker in another country.

On the other hand, some tasks require the human touch and a remote worker may be a better option.

Wrap up

Outsourcing is an excellent way to save time and money. Outsourcing can also help you find top talent in places you would never have access to if you only hired within your local area.

While outsourcing is a positive experience for most organizations, it’s also critical to make sure you have a way to monitor employee activity. This is especially true when you hire remote workers across the globe.

For more information about how to track time, monitor work, and pay remote employees efficiently, check out Time Doctor today.

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