IT Services Outsourcing Market Size and Trends

Global IT services outsourcing market is estimated to be valued at USD 387.46 Bn in 2024 and is expected to reach USD 702.32 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 8.9% from 2024 to 2031.

IT Services Outsourcing Market Key Factor

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With increasing globalization of businesses, more companies are outsourcing their IT services such as infrastructure management and support to lower costs and focus on their core operations, the market is expected to witness significant growth during the forecast period. The key drivers of this market include focus on core competencies, access to advanced technologies, scalability, and cost optimization. There is rising demand for outsourcing application development and maintenance services, especially among small and medium enterprises. Growing penetration of cloud-based technologies and automation are also expected to boost the IT services outsourcing market.

Technological advancements and digital transformation

With technology advancing at an ever-increasing rate, it has become almost impossible for organizations to keep up with the latest innovations on their own. There is constant change in areas such as cloud computing, mobility, analytics, automation, Blockchain, and artificial intelligence. Moreover, customers are demanding improved digital services and experiences. Organizations are under pressure to quickly adopt new technologies and digital business models in order to remain competitive. This is driving greater reliance on IT services providers that have specialist skills and can help accelerate digital transformation journeys.

Outsourcing non-core technology functions such as infrastructure management, application development and support allows companies to focus internal resources on their core competencies. IT service providers invest heavily in research and building centers of excellence to stay ahead of the technology curve. They have the capabilities and expertise to integrate new technologies seamlessly into clients’ systems and operations. Particularly for newer and emerging technologies, outsourcing reduces the risks associated with in-house development and implementation. Service providers effectively share the costs and responsibilities of continuously evolving technology landscapes with their clients.

For instance, In February 2023, Oracle, a leading cloud technology company, launched Oracle Banking Cloud Services, a new suite of cloud-native, software-as-a-service (SaaS) solutions for the banking industry. This componentized and composable suite of services is designed to help corporate and retail banks modernize their applications and meet customer demands with agility. The services can be selected and combined to create tailored solutions that address each bank's unique requirements, enabling them to innovate with speed, security, and scale without compromising their existing environments.

Growing Demand for Flexible Workforce and Managed Services

Rather than maintaining expensive in-house IT teams to handle various tasks, many companies now prefer outsourcing non-core IT functions. This provides operational flexibility and reduces fixed costs. Global capability centers of IT service providers can scale resources up or down instantly based on changing business demands. Their workforce is trained and certified on a wide range of technologies, with different skill levels available on an as-needed basis.

Outsourcing frees internal teams to focus on strategic priorities instead of routine maintenance and support activities. IT service vendors offer managed services for applications, infrastructure and security through shared services models. They closely monitor clients’ IT environments using advanced tools and take care of ongoing operations, upgrades and issues reported. This streamlines processes, improves service quality through specialized management skills and frees clients’ employees for more critical tasks. It also removes resource and budget planning uncertainties related to in-house maintenance of ageing systems.

Furthermore, managed services pricing is mostly aligned to actual usage rather than large upfront capital investment and operating expenditures. This subscription or pay-per-use pricing makes IT costs highly predictable and visible. IT outsourcing models like cloud and "as-a-service" suit cash-strapped industries in the current uncertain macroeconomic conditions. They allow optimizing existing investments before incurring new expenses for IT modernization programs. Overall, the growing requirement for variable workforce and managed services delivery is a significant factor propelling increased IT outsourcing globally.