Running a business can be expensive. Is there a more efficient way to reduce that cost than moving some of the work to people from other, cheaper parts of the world? Probably not. The outsourcing statistics listed below will point out the good and the bad sides of this business, as we answer some of the key questions on the topic. By the way, outsourcing doesn’t always need to be financially motivated. The lack of expertise is just one of the other factors prompting companies to seek external professionals locally, nationally, or internationally. Read on to find out more.
Cost-cutting is the most common reason that makes organizations turn to outsourcing. More than half of businesses take this step in a bid to reduce the weight on their budgets. Other reasons include:
Outsourcing statistics by year show that in 2019, the value of global outsourcing services reached $92.5 billion. Compared to 2018, the market grew by just over 8%. Still, the value of outsourcing services provided around the world remains far from the 2014 record of $104.6 billion.
Outsourcing statistics by country put India on top of the list of global outsourcing providers, with much of the industry being concentrated in the cities of Bangalore, Mumbai, and Delhi. The global top 5 of BPO destinations is rounded up by China, Malaysia, Indonesia, and Brazil.
Offshoring customer service is a standard practice for thousands of businesses around the world. Stats on outsourcing show India has always been the leading market for call centers. For the past five years, however, the Philippines has been strengthening its foothold in the game, as outsourcing has become one of the major contributors to this country’s economy. According to estimates, the country’s BPO industry employs over 1.2 million people.
Over a third of small businesses use outsourcing, according to a 2019 study by Clutch. 52% of participants in the outsourcing survey plan on contracting out a business process in the near future. The small business outsourcing statistics are based on the answers of 529 market players.
Accounting is the most commonly outsourced business aspect, at least among small businesses. The top 5 list also includes IT services (37%), digital marketing (34%), development (28%), and HR (24%).
Outsourcing statistics by industry show that the majority of organizations—especially those in the manufacturing and IT business—plan on increasing their outsourcing efforts. Once they experience the financial benefits of this practice, just 35% of companies don’t plan to expand on it.
Ukraine boasts the fastest-growing number of IT professionals in Central and Eastern Europe. IT outsourcing statistics put the number of those workers in the country at over 200,000, potentially turning Ukraine into the next big market for the IT outsourcing industry.
(Ukraine Digital News)
There are some positions that organizations tend to avoid outsourcing. Sales and marketing are two of them. Strategic planning is also among the activities that 89% of businesses would not consider entrusting to external vendors.
(Booth & Partners)
All previous job outsourcing statistics could be overshadowed by a new development in the industry: repetitive and/or low-skilled jobs that have been outsourced are now at risk due to automation. Estimates show that, in the next five years, automation could ax some 1 million jobs in the US, Poland, India, and the Philippines.
Despite the previous stat, HR outsourcing statistics are showing no signs of slowing down. Since 2018, the industry has been expanding steadily at a compound annual growth rate of 8.69%. The trend is expected to continue at least until 2022.
In order to streamline their outsourcing efforts, 93% of organizations have either adopted or are considering adopting cloud-based solutions. These solutions might help with control and coordination, but they come with some risks, particularly when it comes to protecting sensitive data. This is why 68% of these organizations cite security as their primary concern.
The US is responsible for the lion share of outsourcing deals. The country alone accounts for 84.2% of the $92.5 billion spent on BPO services globally. On a regional level, North and South America attract 42% of overseas outsourcing buyers. Europe, Middle East, and Africa together account for 35% of deals in the industry, while Asia and Oceania hold a 23% share.
These offshore outsourcing statistics give a clear indication of the scale of BPO. In 2015 alone, US foreign affiliates hired 14.3 million workers overseas. If those outsourced jobs stayed in the US, they would be enough to hire the 5.9 unemployed Americans, plus 4.3 million of those who are working part-time and want to switch to a full-time position.
(Entrepreneur, The Balance)
Outsourcing in the USA is much less common among businesses that have 50 or fewer employees. Just 29% of them outsource. Companies that employ more than 50 workers, on the other hand, are much keener to take some of their work outside: outsourcing statistics show that 66% of them do so.
While organizations across the world enjoy the benefits of outsourcing, most members of the US population agree that it is harming the economy. 71% of Americans think that outsourcing has a negative impact, and 62% want the government to ban it altogether.
Jobs lost to outsourcing statistics show that, between 2001 and 2018, California lost 654,000 jobs to China. Texas is next on the list with 335,000 displaced jobs, followed by New York with 185,100 lost workplaces. Directly or indirectly, China is responsible for the loss of 3.7 million jobs in the US.
Global outsourcing is a business practice where a company decides to task a third party with dealing with some of its services or job functions. Companies can decide to outsource a small part of their operations (for example, QA testing), or their entire divisions (for example, IT).
Depending on where it takes place, outsourcing can be onshore (within the country), nearshore (to a nearby country), or offshore (to a remote country).
The outsourcing market saw $92.5 billion worth of services during 2019, growing at a significant annual rate of 8%. However, the outsourcing industry reached its peak in 2014, when the world spent a total of $104.6 billion on BPO services.
Companies that outsource do so mainly as a cost-cutting effort. Around 59% of businesses that outsource say saving money is one of the reasons behind their decision. Reducing spendings on labor, operation, and overhead is, arguably, the biggest benefit of BPO. Other advantages include improved efficiency, freeing up internal resources, and mitigating risks by sharing difficult tasks.
International outsourcing doesn’t come without risks and negative sides. The danger of losing sensitive data is always there when you work with third parties. Lack of quality control is also a common fear shared by businesses that outsource.
Accounting-related and IT jobs are the most outsourced ones, with 37% of businesses that outsource listing them as one of the operations that they contract out. Digital marketing jobs are outsourced by 34% of these businesses, followed by development-related activities (28%), and HR (24%). The list of jobs that can be outsourced is virtually endless.
Outsourcing research shows that India, China, and Malaysia are the biggest outsourcing destinations in the world. The country that outsources the most is the US, where more than 84% of all BPO deals are made. The UK is at the other end, accounting for around 5% of the deals.
In order to find the appropriate workforce or cut costs, US businesses have outsourced 14.3 million jobs. If these jobs had stayed within the country, they would have been more than enough to cover local unemployment: there are currently 5.9 million jobless people in America, as well as 4.3 million part-time workers who want to transition into full-time work.
As mentioned above, India is the largest market for businesses looking to outsource. Even though the exact number of BPO jobs in India is not available, we can expect it to keep growing, as the cost of local labor remains far lower than the average global standards.
Outsourcing is an excellent way to reduce the costs of running a business. It is also a smart lever to improve efficiency by freeing up internal resources and mitigating risk. However, it does come with some negative sides. Should you outsource or you should rather count on your own staff to deal with all or some of your non-core operations? The decision is up to you. Take your time to carefully tick all the pros and cons. Consult the experts, do your numbers and feel free to use our list of outsourcing statistics as a guide.