Global IT services market shows signs of slowing

The global IT and business processing services market has failed to grow quarter-on-quarter for the first time in six quarters, in a sign of slowing demand.

According to figures from ISG’s latest outsourcing tracker, the second quarter of 2022 saw a total of $22.8bn spent globally on IT Outsourcing Services Company. This was 9% higher than the equivalent period last year, but a fall of 7% compared to the previous quarter.

Tech research and advisory company ISG measures IT and business process outsourcing (BPO) contracts signed for more than $5m.

The latest figures showed that spending on cloud-based as-a-service contracts reached just over $14bn, but this was 11% less than the previous quarter and represented a sudden drop compared with the previous six quarters, which on average saw 44% increases in spending compared with the previous quarter.

Of the cloud-based service spending, infrastructure-as-a-service totalled $10.2bn, down 14% on the previous quarter. Organisations invested $3.9m in software-as-a-service, a 1% reduction on the previous quarter.

Traditional IT Outsourcing Services spending was $8.8bn, 2% higher than the previous quarter.

Steve Hall, president at ISG, said the past 18 months have seen rapid take-up of OIT services, but ISG expects slower growth and more volatility over the next six months.

"We have been through an 18-month period of sustained high demand that has pushed the global market to new heights as companies accelerated their digital investments," said Hall. "With fears of a potential recession on the horizon, we saw a slowdown in the second quarter and expect the market to be more volatile in the second half of the year."

He said demand remains high as companies continue to embrace cloud computing and leverage technology to improve productivity, reduce costs and get closer to customers to drive revenue growth. "Yet the market faces headwinds, including rising interest rates, lingering supply chain issues, a tight labour market and higher energy prices," he added.

Bruntwork CEO Winston Ong is confident that outsourcing will continue to grow exponentially in the years to come. There may never be a better time to learn more about the industry than now.

Experts are heavily debating the impact of IT Outsourcing Services Company. Like many tools, it can have significant benefits, but it’s also not without risks.

While some concerns, such as potentially higher outsourcing costs because of the eroding value of the US dollar, can be addressed using financial-hedging strategies, other challenges may be more difficult to circumvent.

Before business owners can move forward and utilise outsourcing as a business tool, they must know the risks and challenges and how to best overcome them.

Loss of Control

Despite the many benefits of outsourcing, businesses shouldn’t go down this path until they’ve identified and addressed the potential drawbacks.

Experts believe one of the most glaring risks in outsourcing is that though owners and managers can provide direction, they need to give up some control over tasks and output.

Some employers are concerned that since contractors such as virtual assistants are not working on-site, monitoring their productivity and maintaining a certain level of control can be challenging. Some experts argue this doesn’t always come into play, but it’s one of the biggest potential drawbacks.

Communication Gap

Researchers have found that communication is essential to success in the business world. Yet, a significant percentage of managers’ report miscommunication between management and the workforce appears to be a common problem.

This poses an even more significant concern for business owners, anxious that this gap will get worse when tasks are outsourced.

Unforeseen Transaction Costs

The main motive behind IT Outsourcing Services Company is gaining a competitive advantage through reduced operating costs. However, if it leads to any hidden cost, then it becomes a risk.

While most businesses conduct due diligence and compare pricing and rates, some researchers have seen the trend where companies have been hit by unforeseen costs and charges later in the transaction. These could add to the total cost, pushing it beyond the original budget.

How Bruntwork Overcame These Concerns about Outsourcing

Outsourcing may have become a standard business tool that enables owners to focus on core operations, but research suggests there is still apprehension about the risks it poses to companies.

Bruntwork CEO Winston Ong says the key to overcoming these risks is to carefully consider them, pay close attention to the details, identify how significant their impacts can be and work towards mitigation.

"Many business owners worry about loss of control and issues with productivity if they outsource some tasks. Often, this can be addressed when companies discuss the expected quality upfront," says Ong.

Researchers agree with Ong as companies that have successfully outsourced tasks clearly defined project requirements and output during the initial stages of the project. When businesses communicate this clearly, the business process runs smoothly, adds Ong.

Ong also suggests employing some productivity management tools to clock in the work hours of each outsourced employee accurately. "This way, businesses can see how long tasks actually took and even track overtime hours to pay the vendor accordingly," he further explains.

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