IT outsourcing in 2021

Surveys show that companies who utilize IT outsourcing are those who work hard to minimize the effects of the pandemic by changing their business strategies and accelerating their efforts on digital adoption. This is confirmed by the NTT 2020 Global Managed Services Report which states that 45% of global corporations declared an intention to increase their use of outsourcing in the next 18 months. Grand View Research also forecasts 7.7% annual growth in IT outsourcing services to reach US$ 940 billion in 2027. The growing popularity of 5G also seems to be a factor in the acceleration of the outsourcing trend.

Without a doubt, the effects of the crisis have also affected the outsourcing industry. However, the IT outsourcing (ITO) sector is in a more favorable position than shared service centers (SSC) or business process outsourcing (BPO) organizations. The latter have faced challenges in terms of retaining clients that have decided to either re-shore work or diversify outsourcing destinations, or simply lack sufficient infrastructure enabling secure work from home.

Recent surveys indicate the key factors that business leaders take into account while deciding to outsource IT services. The cost optimization and the acquisition of rare skills are the most common ones nowadays. However, it wasn’t always like that. According to Deloitte’s 2018 Global Outsourcing Survey, enabling faster time to market, scalability, improving CX and gaining competitive advantage were more important than reducing operating costs.

Last year’s study showed indubitable change – the cost-cutting virtue of outsourcing is once again a priority. Engaging an external team to reduce rental space and expenditures related to hiring, managing and training employees is an opportunity for everyone seeking to optimize cost strategy.

Ten years ago Forbes announced “the end of the age of outsourcing”. In reality, quite the opposite is true. The reason why outsourcing is not dead is that it offers flexibility in scaling business resources, which is so important these days.

The pandemic has speeded up digital adoption and intensified the demand for IT services. Businesses which were totally snowed under with clients’ orders turned to IT outsourcing partners to quickly introduce new digital tools and provide the best customer experiences.

What’s more, external support is an injection of diversified outside expertise. The knowledge of external experts positively influences the course of the projects and activates new ideas. A fresh look from the outside is always useful. That’s why external teams often trigger innovations. According to Deloitte’s 2020 Global Outsourcing Survey, the leading innovations adopted through outsourcing are RPA and cloud solutions.

Outsourcing is still invariably seen as a means to digital transformation. It manifests itself in a company’s search for partners who will support the transformation path and take the business to a new, higher level. External support contributes to improved flexibility, the adoption of new technologies and the speed of entry of new products to the market.

While all businesses globally are struggling, some were hit harder than others. The automotive and aviation industries have had a particularly hard time, while logistics (which paradoxically has experienced a crisis and a boost at the same time), e-commerce, remote collaboration software and e-learning, pharma, and fintech are all looking to expand even in the throes of a general recession. What does all that mean for the IT Outsourcing market in Poland?

First of all, companies continue to expand their IT outsourcing agenda. Talents in Poland are available for those that consider technology their core business and those who just want someone to take care of necessary infrastructure while they focus on what really matters.

The pandemic is increasing the influence of technology on the daily functioning of life. Commerce, education and entertainment are increasingly often taking place online. Changes in consumption habits result in increased demand for technological services. Businesses of all sizes show a significant demand for IT services, which generates new opportunities for the IT outsourcing industry in Poland. Providers of technological solutions are coming to the rescue, transforming the way many businesses operate.

Salaries are also slowly equalizing between cities so that qualified specialists are more consistent in terms of their expectations. We are gradually reaching the point where the most – and maybe the only – relevant variables are experience and skills.

Some fields of economy are responding to this new reality better than others, but the digital aspects of everyday work are more important than ever. Whether you want to innovate or thrive, you will need IT competences. These uncertain times require partners that can share and mitigate the new risks. That way, market demand for IT solutions contributes to maintaining the pace of further development of the Polish IT outsourcing industry.

According to The IT Landscape: The Future of IT in Emerging Europe report published on 25 February, Poland’s IT sector remains the most competitive in Central and Eastern Europe – as evidenced by Poland’s first place in the ranking.

Furthermore, the high scores achieved by Polish IT specialists in global hackathons prove that it is one of the most favored destinations for businesses in the UK, Nordics, DACH and the US to outsource IT and software development services.

Poland has a considerable population of highly qualified experts with a wide area of technological expertise, and is more than competitive in terms of the price – quality ratio, ranked highly in several globally acclaimed programming competitions.

The culture gap is also very narrow, with Poland in 16th place in the World’s English Proficiency Index. Poland already has a lot of the most talented developers from countries like Ukraine or Belarus, offering a much more stable legal environment.

When the pandemic hit, we were affected like everybody else, but with the same tools and processes we managed to overcome the difficulties of this forced transition. Right now most IT suppliers practice remote or hybrid work.

The formal aspects of outsourcing ventures are of great importance now, more than ever before.

Avoid speeding up the selection process

Plan the purchasing process properly. As a rule, suppliers try to address the two most important needs of clients that are in the process of choosing a partner – namely, the adaptation of the most suitable service and the presentation of a dedicated solution in the shortest possible time. It is a good idea to approach the selection process carefully and not to rush the purchasing process, which may be asking for trouble. It can create unnecessary risks and complications during the downstream stages of the collaboration.

Business Continuity Plans

The pandemic showed that most outsourcing contracts did not practically stipulate collaterals and guarantees against global events, only regional scenarios. Currently BC plans are evolving towards minimizing the risk of global events.

When deciding to cooperate with key suppliers, provide appropriate provisions and resources in the outsourcing contract for new pandemic scenarios. Some companies also decide to audit the infrastructure of the future partner, its supplier network and the conditions for full-time remote work.

Switching to shorter contracts mode

Deloitte’s 2020 Global Outsourcing Survey indicates that an important lesson learnt from the pandemic for half of the respondents was the length of contract periods. Our recommendation is to switch to shorter contracts and to enable more flexibility to adjust to the agile way of project delivery.

The IT outsourcing industry has new challenges to face, such as fully digital channels of generating new business opportunities, maintaining a company’s culture or retaining the quality of employees’ daily communication in full remote work mode. However, digital industry has proven its ability to smoothly adapt to the new circumstances and market expectations.

Outsourcing will remain an important instrument by means of which to secure business resilience and support strategic goals. Changing market expectations stimulate the industry to constantly introduce new solutions and innovations. For IT outsourcing to be beneficial, both the client and the partner require a common vision of cooperation and preparedness on each side. Global competition for most organizations is building up. Therefore, businesses will head towards flexible outsourcing partnerships that help improve efficiency, build resilience and reduce costs.

Author: Paweł Krzyczkowski, Business Development Manager