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Next Version of Outsourcing 2016, What to Expect?

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Unless someone is really eco-obsessed, no one grows their own food today, or weave their own clothes, we are outsourcing them to someone who specializes in those fields like farmers and weavers. Majority of the population still consider outsourcing a taboo word as they are not familiar that they are outsourcing on a regular basis.

Outsourcing industry has fought global recession quite successfully and has all plans in place to further grow.

But with government policies trying to curb the outsourcing growth, there’s a question mark hanging over outsourcing, so let’s discuss if there’s really a future for outsourcing?

How Is the Global Outsourcing Market Scaling Up?

Gartner predicts that outsourcing will be approximately $524.4 billion global industry in 2015, with information technology services getting the maximum traction. Deloitte found that 60% of the IT sector had been outsourced in 2014 and the trend will continue to grow in the coming years. Engineering R&D market is expected to reach $1.4 trillion by 2020 predicts Booze and Company, and India will emerge as a dominant player, contributing 10–15% in the global ER&D services market.

Outsourcing is also creating new opportunities for the economies of many countries, generating new demands for goods and services. It’s a win-win situation for all, McKinsey Global Institute highlights that for every dollar US corporations spend on outsourcing to India, the US economy benefits by $1.14. Thirty-five big US-based multinational companies added jobs much faster than other U.S. employers in the past two years, and nearly three-fourths of those jobs were overseas.

The outsourcing industry is undergoing a makeover with new companies providing aggressive outsourcing models and existing providers expanding into new markets. The Indian ecosystem of outsourcing is facing tough competition from other Southeast Asian countries like Indonesia, Malaysia, the Philippines, Singapore, Vietnam, and Thailand.

India and Outsourcing, the Best of Friends

NASSCOM predicts that India will emerge as a global hub for knowledge services. With a large pool of English-speaking workforce and over a million engineers graduates adding every year, India is leading the outsourcing operations for Fortune 500 companies.

While Indian outsourcing is growing at a very fast pace, the infrastructure is not good enough to bear the rising demand for outsourcing. Indian companies are also giving lucrative pay hikes to retain the talented workforce and reduce the level of attrition, however, this is creating new opportunities in smaller tier II cities that offer cheaper labor.

Trends That Will Drive Outsourcing in 2016

  • Dawn of Innovation – Startups bring in speed and innovation, but creativity gets lost somewhere in big organization and innovation takes a back seat. Creativity and innovation are emerging to be next big trends in outsourcing where companies dedicating budget to bring innovation within projects.
  • Access to Special Skills – Sometimes work requires specific technical expertise and building that skill base in your own company requires time and effort. Outsourcing will continue to be a great way to access the technical expertise of talented developers who specialize in particular fields.
  • Big Savings – Getting access to high-quality services at a cost-effective price will continue to be the biggest attraction of offshore outsourcing. The increase in short-term pressures on outsourcing teams will allow companies to negotiate more on flexible pricing contracts.
  • Performance – Operational skills, better quality control, and reduced errors will become major driving factors for existing outsourcing partnerships.
  • Shared Risks and Services – The risk and reward sharing relationships between the company and outsourcing team that has expertise in handling those tasks will gain more strength in future as well.
  • Time Zone Advantage – Timely deliveries impress customers and outsourcing companies will continue to leverage the time zone advantage where critical work can be completed much faster and 24 hours work cycle gives businesses a speedy advantage.
  • Technologies Change Rapidly – New technologies give you a competitive edge, but there are some risks in adopting and making heavy investments such as hiring and training of the workforce. This will also put an additional pressure on companies to outsource work.
  • More Destinations – While India will continue to lead the race, China is catching up soon followed by Brazil and Russia. Latin America and Europe are also emerging as new outsourcing destinations.

Innovation and Creativity are the Deciding Factors

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Most of the companies have people to get the work done, but when it comes to standing out on innovation and creativity, they fail. That’s where many outsourcing companies have started focusing their attention — providing best of resources, creativity, and innovation for a single service instead of multiple.

As a user experience driven firm, big brands approach us to instill creativity in their projects, they have money to spend, however, they lack resources to provide innovative outputs. Our research-driven process helps them in bringing out the uniqueness of their products and delivering amazing customer experiences.

To give best output, you need time, research and talented resources that will cost you big money, so cost saving is definitely not a focus but innovation and creativity is.

Let us know if you are planning to take your next innovative step in outsourcing? Talk to us today.