Given a boost by the COVID-19 pandemic, as companies moved to implement technology and digital solutions more quickly, acquire talent, and shore up resiliency, the global outsourcing market saw significant growth over the past two years. Despite having to contend with potential challenges posed by inflation, supply chain shortages, and talent acquisition, momentum is expected to continue into 2023 as companies undergo digital transformation and invest in cloud technology, customer experience enhancements, and automation and artificial intelligence (AI).

• Look out for headwinds. As for other sectors of the economy, inflation, the potential for a recession, and supply chain issues could present a challenge to the technology market this year. The competition for talent and the need to grow a talent base at a higher cost is driving pricing considerations in deals. Regulations dealing with third-party risk mitigation, operational resiliency, and data safeguards on the use of technology services also come with potential take-up and cost implications.
  • Keep in mind that some “headwinds” are also opportunities. While regulations could influence outsourcing costs, having to comply with new rules could lead companies to outsource certain work and projects to get up to date on new standards.
• Continued focus on the cloud. Digital transformation is driving engagement with outsourcers and technology providers to implement new technology solutions. Companies are increasingly turning to cloud investments as part of these larger modernization projects.
• Define successful digital transformation outcomes early. Digital transformation models are not one size fits all but are instead complex with long implementation periods that usually impact multiple businesses and/or core functions within an organization. Defining terms of success ahead of time—be it cost savings, better organizational design, or improved customer satisfaction—will help when setting outsourcing contract terms to lead to a desired outcome.
• Remote work is a reality. A recent McKinsey survey showed how ingrained remote work has become, with workplace flexibility emerging as the key reason US employees accepted a job in 2022. Outside the United States, a survey from HFS Research found a marked preference by employees in the major offshore outsourcing centers of India and the Philippines for working from home with occasional office visits. These trends will have a long-term impact on outsourcing and technology agreements, which will have to address remote working as a factor that is here to stay.

[View source.]