Organizational structures are changing. Companies used to rely on in-house training, massive recruitment efforts, and elaborate onboarding processes to try and squeeze potential out of ill-fitted candidates.
With technology making remote work more manageable, businesses are taking advantage of larger talent pools and outsourcing for more than mundane tasks.
This trend won’t stop anytime soon. The global business process outsourcing market size is nearly $250 billion, and projections have it more than doubling between 2023 and 2032.
If you aren’t using some sort of outsourcing, you’re already behind. But it’s not too late. In this article, we’ll examine six outsourcing trends to follow in 2023.
What Are the Latest Trends in Outsourcing?
The current trends in outsourcing are shaping the global industry, driven by technological innovations, the quest for cost reduction, and the continuous demand for expert services.
As we move through 2023, these trends will continue and accelerate, powered by the global demand for the most efficient, cost-effective, and high-quality business processes.
Nearshore outsourcing has seen a significant surge in recent years as businesses actively explore the benefits of working with external providers located geographically close as opposed to offshore outsourcing to providers much farther away.
This nearshoring trend opens up new possibilities for collaboration while minimizing potential challenges associated with offshore outsourcing, such as time zone differences and language and cultural barriers.
Nearshore outsourcing also helps redress the tight labor market in the US.
It offers several significant benefits to companies:
- Improved communication: With minimal time zone differences, businesses can communicate more effectively with their nearshore partners, enabling seamless collaboration and faster resolution of issues.
- Cultural compatibility: Clients experience higher cultural compatibility with outsourcing partners from geographically proximate countries.
- Cost-effectiveness: While nearshore outsourcing may not (at times) offer the same cost savings as offshore outsourcing, it provides businesses with cost-effective services without compromising on the quality and efficiency of their processes.
- Simplified travel: Traveling to nearshore locations is often faster and less expensive than visiting offshore destinations, making it easier for companies to meet face-to-face with their remote teams when needed.
- Easier compliance: Working with providers in closer proximity often means dealing with similar or more easily understandable legal and regulatory frameworks.
As nearshoring trends continue to gain momentum, companies can leverage this strategy to enhance their operational efficiency and reap the benefits of outsourcing.
The rise of cloud-based technologies has disrupted how businesses operate, including how they outsource various tasks and operations.
By using cloud-based computing services, businesses can easily outsource IT infrastructure management, data storage, and software development functions. Delegating essential business functions to third-party service providers enabled by cloud infrastructure allows for a more efficient, agile, and resilient outsourcing model.
Key features of cloud-based outsourcing include:
Companies can rapidly scale up or down their outsourced operations based on immediate requirements, ensuring smooth growth and more effective resource management.
Cloud-based outsourcing enhances data security and privacy using robust data encryption, secure data centers, and extensive access control measures. Sensitive information remains protected, which is crucial for businesses outsourcing tasks involving essential or proprietary data.
Robotic process automation
Robotic process automation (RPA) is a game-changer in the outsourcing industry, dramatically transforming how businesses approach routine and repetitive tasks. RPA employs software bots that mimic human actions, automating structured, rules-based processes to improve operational efficiency and reduce human labor dependency.
Providers who implement RPA can offer competitive advantages to their clients by delivering cost-effective, high-quality, and efficient services. RPA-driven enhancements in the speed and accuracy of outsourced processes can lead to:
- Better customer satisfaction
- Increased retention rates
- Ability to attract clients seeking cutting-edge outsourcing solutions
According to a recent report, the global RPA market is expected to witness a compound annual growth rate (CAGR) of 39.9% between 2023 and 2030, showcasing the potential impact of RPA on the outsourcing landscape.
Artificial intelligence and machine learning
It’s no surprise that one of the biggest technology trends, the rise of artificial intelligence (AI) and machine learning (ML) technologies, has significantly influenced the outsourcing industry, offering vast potential for enhanced efficiency, cost reduction, and innovative solutions.
AI and ML have the transformative capacity to drive smarter, more data-driven decisions, automate complex tasks, and optimize various business processes, redefining how companies approach outsourcing partnerships.
The shift toward multi-vendor outsourcing has become increasingly prominent in recent years. This approach involves working with multiple service providers to cover various business tasks and processes, allowing companies to tap into diverse expertise, technologies, and domain knowledge.
Here are some key benefits of adopting the multi-vendor outsourcing approach:
- Access to specialized skills: Working with multiple vendors allows businesses to access extensive niche skills and expertise, ensuring that the most suitable provider gets each task.
- Risk mitigation: Businesses can minimize reliance on a single provider by spreading their tasks across several vendors. This diversification helps to mitigate risks associated with single points of failure, enabling smoother operations even in unexpected issues with a specific vendor.
- Agility and flexibility: Multi-vendor outsourcing allows companies to adapt their strategies depending on changing demands, industry trends, or innovations.
- Competitive pricing: Companies can benefit from the competition between vendors, as each provider will strive to offer the best possible pricing and service levels to retain or gain customers.
By engaging multiple vendors, businesses can reduce their dependency on a single provider, minimize risks, and increase flexibility in their outsourcing strategy.
Knowledge process outsourcing (KPO)
KPO involves outsourcing high-value tasks that require advanced analytical and technical skills, such as research and development, data analysis, decision support, and process improvement.
For instance, consider a pharmaceutical company that requires support in research and analysis for a new drug development project. Instead of investing heavily in building an in-house team, the company can collaborate with a KPO provider specializing in pharmaceutical research.
This partnership grants the company access to highly skilled professionals, leading-edge technology, and industry insights that can accelerate the development process and improve the overall quality of the research.
By leveraging the KPO provider’s expertise, the pharmaceutical company can ensure that its resources remain focused on core business functions, such as production and marketing, while benefiting from potentially significant cost savings.
Which Outsourcing Trends Are Latin American Remote Workers Receptive To?
The remote workforce in Latin America (LatAm) has been very receptive to the US nearshore outsourcing trend. US companies are looking to LatAm remote workers to help them overcome talent shortages in many areas and reduce their overhead spending. And LatAm-based remote workers are seizing the opportunities coming their way.
One of the work trends that particularly appeals to LatAm-based remote workers is flexible work arrangements. Like everyone else, LatAm remote workers appreciate the flexibility of remote work arrangements, enabling them to maintain a healthy work-life balance.
US companies looking to hire from the region and attract top talent can appeal to these preferences by offering flexible schedules and collaborative platforms that facilitate easy asynchronous communication and collaboration among team members.
This emphasis on flexibility attracts skilled professionals and boosts productivity and job satisfaction among remote employees.
What Are the Expected Outsourcing Trends in the Future?
As the outsourcing landscape evolves, businesses must stay updated on what are likely to be future trends to remain competitive and extract maximum value from their outsourcing partnerships. There are already markers indicating some upcoming trends.
Increased focus on cybersecurity
Data breaches and cyberattacks have become significant threats to businesses. The average data breach cost in 2022 was $9.44 million for US businesses, an amount that would be crippling to most small companies.
As a result, there will continue to be a rising demand for cybersecurity measures and expertise in the outsourcing industry. Companies will prioritize partnering with outsourcing providers with robust data protection frameworks and proven compliance with the prevailing security regulations.
This trend will drive the growth of cybersecurity-focused outsourcing services, such as security operations, vulnerability assessments, and compliance management.
Gig economy and freelance models
The gig economy has steadily gained traction and will continue to influence the outsourcing landscape as companies recognize the benefits of engaging with freelancers and independent contractors on a project-by-project basis.
This flexible approach to engaging talent provides access to a diverse pool of specialized remote workers, enables cost-effective and scalable resource allocation, and allows businesses to adapt quickly to market changes.
Outsourcing providers will increasingly incorporate gig economy models into their service offerings, using platforms and technologies that connect freelancers with clients seeking their skills.
This shift toward freelance-driven outsourcing will allow companies to strategically engage with skills and expertise on-demand, resulting in more efficient and agile project execution.
Sustainability and ethical outsourcing
As awareness of environmental and social issues grows, business decision-making will focus increasingly on ecological and societal impact.
Consequently, there is a heightened emphasis on sustainable and ethical outsourcing practices, with companies considering factors such as their outsourcing providers’ environmental footprint more than ever.
Outsourcing providers who adopt eco-friendly measures, ensure fair labor practices, and prioritize ethical business conduct will attract clients committed to sustainability and social responsibility.
Which Outsourcing Trends Are Unlikely To Last?
Not every trend is built to last. Certain current practices may lose momentum or become obsolete due to changing market dynamics, technological advancements, and shifting client preferences.
The following are some outsourcing trends that are less likely to prevail in the future:
Offshore call centers
Offshore call centers have long been a popular outsourcing service for businesses seeking to cut operating costs. However, this trend may face a decline shortly for several reasons.
The increasing adoption of AI-driven customer support tools like chatbots and virtual agents provides more cost-effective and efficient ways to handle basic customer service inquiries.
Furthermore, rising concerns around linguistic and cultural barriers, time zone differences, and poor customer experience with offshore call center services may lead many businesses to reconsider their approach and opt for nearshoring or onshoring alternatives.
Labor-intensive, low-skilled task outsourcing
The demand for outsourcing labor-intensive, low-skilled tasks may diminish due to the growing role of automation and digital technologies. RPA, AI, and ML advancements enable businesses to automate repetitive and manual tasks faster and more accurately, reducing the need for human labor.
As more companies adopt these technologies—and the technologies themselves become more affordable—the demand for outsourcing low-skilled tasks may decrease, shifting the focus of the outsourcing industry toward specialized expertise, high-value services, and knowledge-based processes.
Outsourcing that lacks transparency and control
Traditionally, outsourcing arrangements have been criticized for their lack of transparency and reduced level of control.
In this era of increasing consumer awareness and stringent regulatory compliance requirements, such practices are becoming increasingly unsustainable.
Companies looking to outsource will prioritize partnerships with providers that offer transparency, an acceptable level of control over their outsourced functions, and the ability to monitor and manage outsourced operations in real time.
The outsourcing landscape continually shifts, driven by changes in technology and the labor market. Current trends are reshaping the industry, catering to the diverse challenges and demands of the global market while addressing the evolving preferences of businesses and remote workers alike.
LatAm countries—particularly Mexico, Argentina, and Brazil—are emerging as prime outsourcing destinations for US companies due to their skilled workforce. As businesses seek to capitalize on the latest outsourcing trends, they should recognize Latin America’s unique advantages.
To learn more about why LatAm remote talent is an ideal fit for US businesses, get our guide to hiring remotely in Latin America; you will see how you can adapt to the trends shaping talent acquisition and make strategic decisions that drive business growth and productivity in the era of global outsourcing.