According to GrandViewResearch, the global IT services market (inhouse and provided by third parties) was worth around $715.93 billion in 2020. The size of the global IT Outsourcing (ITO) market was valued at $556.67 billion in 2020 accounting for 77.75% of the overall market.
The IT services market has an estimated CARG of 8.4% and the ITO market 7.7%. On that basis, the IT services sector is expected to be worth around $1,070.28 billion by 2025 and the ITO market would be valued at around $ 806.63 billion. That would still be more than 75% (75.37%) of the whole IT services market.
Depending on the type of methodology used to analyse and collect data, the value of the IT outsourcing market varies widely. GlobalNewswire and Statista also provide regularly cited data on the IT outsourcing market with Statista citing figures of around $400 billion, while GlobeNewswise speaks of just under $320 billion in 2020. Reliable data for 2021 had yet to be published at the time of writing.
According to a McKinsey study – 87% of respondents said they either are experiencing gaps in their IT teams now due to recruitment bottlenecks or expect them within a few years.
Many other sources support this statement, and the extent of the global IT talent shortage has increased significantly. 54% of companies currently report IT talent shortages.
Source: Manpower Group
Beyond 2021, tech skills such as quantum computing, networked technologies, as well as fintech and AI are expected to be the fastest growing areas of demand for tech skills.
The most sought-after programming languages in 2021 were:
Technology leaders China and the US could soon face an incredible IT skills shortage, according to management consulting firm Korn Ferry. This would give India the opportunity to take the lead as the world’s most technologically capable nation, with an expected 1 million IT professionals by 2030. If the US and China do not find an internal solution to their IT talent shortages, which currently seems unlikely, IT outsourcing will become even more strategically crucial to their continued development.
The chart below shows the European countries with the most programmers. As expected, the countries with the largest economies and populations, Germany and the UK, have many developers. Countries from Central/Eastern Europe with many developers and which are often described as interesting IT outsourcing locations are for example Poland and Ukraine.
The data shown here is from 2018 and 2019, as this data has not been covered since then. As the number of developers in every European country (except Luxembourg) has increased in recent years, the current figures for 2022 are expected to be higher. The distribution of programmers across countries will remain largely the same.
Source: The State of European Tech
The largest export countries of information & communications technologies (ICT) are large or well-developed economies like India, USA, China, UK, Ireland and Germany. However, the graphic below shows how important IT exports are for Eastern European countries, for whom IT services account for a disproportionate share of overall service exports.
Examples of high-income countries from Europe that generate a particularly high proportion of their service exports with IT services are Finland and Ireland and Ukraine and Belarus examples of low/middle-income countries. IT services account for more than 30 % of export services provided in these countries.
Other countries outside Europe that export a particularly high percentage of IT services are for example India, Israel, Pakistan and Armenia.
The figures presented here are for G2000 companies, over 90% of which have held ongoing ITO contracts in the last 5 years.
Other market research analyses come up with similar figures and KGMB offers more details on the extent to which IT outsourcing is taking place.
Among organisations that outsource app development, 34% are increasing the percentage of work outsourced over the previous year, while 9% are decreasing it, for an overall growth trend of 25 points.
Only 43% of organisations plan on changing the extent of their IT outsourcing activities, indicating relatively low volatility in the outsourcing of app development functions.
Source: Computer Economics (US & CA)
For organisations that outsource app development functions, 40% of outsourcing clients experience higher costs and 31% lower costs compared to executing in-house. About 29% said they experience no notable monetary difference between outsourcing app development and in-house development.
Source: Computer Economics (US & CA)
The sector a company is in has an influence on the tendency to outsource IT functions. The following figure shows the sectors that outsource app development with average frequency. Across sectors, an average of almost 60% of organisations outsource app development. In the financial services sector, that rises to 72%, followed by retail/wholesale companies at 60%. Further down the list are companies in the healthcare sector at a relatively modest 31%.
Source: Computer Economics
Source: PA Consulting (UK)
Globally, cost reduction is the primary reason for Outsourcing. Only a minority of organisations that use outsourcing say that cost is not important to their strategy.
For small companies, IT outsourcing can be a useful means of countering the above-mentioned challenges, which are particularly difficult for small companies, because they are largely taken care of by the IT outsourcing service provider.
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