How the outsourcing industry has evolved, and what to expect in the future

How has the outsourcing industry evolved, and what should you expect next?

The outsourcing industry has evolved from a simple cost-cutting tool into a core growth strategy, and its future points to more automation, cloud work, and flexible models.

• It grew from bulky in-house offices in the 1950s into a global service network.
• New tools made outsourcing cheaper, so even small firms can now use it.
• Next, expect more automation, cloud computing, and stricter data security.

The outsourcing industry has changed a lot over the years. It has adapted to client needs and to new technology that once threatened it. Today, sending work offshore is a normal way for firms to grow and reach new markets.

Outsourcing has evolved thanks to new tech and the trends that came with it. As the world moves into new ways of working, many of these trends still shape the industry. As a result, they will keep shaping how businesses run in the future.

These trends were discussed by Dave Palmer, president of Everise, and Derek Gallimore in the Outsource Accelerator podcast.

The outsourcing industry over the years

The idea of outsourcing began with large in-house offices in the 1950s and 1960s. Firms saw they could grow faster if they focused on their core strengths. So they started to hand off other tasks. For a fuller timeline, see this history of outsourcing.

However, the real practice started in 1989. That year, Eastman Kodak outsourced most of its IT systems. Many firms then followed suit in the 1990s.

The industry saw ups and downs for decades. Meanwhile, places like the Philippines and India grew into top spots for offshore work. First it was mostly customer service. Next, firms began to send both front and back office tasks offshore too.

Some people once said traditional outsourcing was dead in the age of disruption. Automation and artificial intelligence (AI) looked like a threat that could replace it. Still, the industry proved flexible. As a result, it turned these tools into an advantage and kept up with global change.

Significant changes in the outsourcing industry

Dave has watched the industry grow for more than 27 years. He worked at AOL before joining Everise. Because of this, he has seen outsourcing change in a few key ways.

Capital investment

First, Dave points to the cost of setting up outsourced work. Over time, the tech behind outsourcing got cheaper. As a result, both providers and clients now spend far less capital to start.

This shift opened the door for small businesses. Now they can send work offshore and enjoy the same benefits of outsourcing that big firms use.

Work and communication tools

Next, Dave notes that most tools are not brand new. However, many have moved to the cloud. This makes them cheaper and easier to use. In fact, cloud computing now powers most remote teams.

Meanwhile, this shift let BPOs add more services. For example, many now offer back-office support on top of phone work.

Telecommuting

Today, remote work is not just for freelancers and in-house staff. Outsourcing firms now use it too. As a result, they can keep serving clients around the world without a break.

Changing perspective

Finally, Western firms have changed their perspectives on outsourcing. It was once seen as taboo. Now it is a normal step for growth. The industry offers access to skilled talent, lower risk, and steady support through busy seasons. Because of this, BPOs have become a real secret weapon for business.

What companies should expect in the future

Outsourcing is here to stay. One 2021 Technavio study projected the industry to grow up to US$ 40.6 billion by 2021-2025. Today, analysts value the global BPO market even higher, with 2026 estimates ranging from about US$350 billion to US$437 billion. So the growth story clearly continues.

Because of this growth, firms can expect a few trends to keep shaping the industry:

• Robotic process automation (RPA). Automation will not stop the industry from serving clients. Instead, firms use chatbots and bots to work faster and raise service quality.

• Wider offerings and outsourcing methods. Clients now outsource part of their pro services to specialists. At the same time, they use DIY methods like staff leasing, seat leasing, and multisourcing.

• Cloud computing and storage. Cloud tools are still key for outsourced teams. As BPOs move to flexible work, they need the cloud to work together well.

• Stricter data security. Remote work raises risk. So firms and clients will push harder on data security rules and standards.

For a wider view of where the sector is heading, explore the latest outsourcing trends to watch.

Everise’s end-to-end digital outsourcing solutions

Started in 2016, Everise builds end-to-end customer and product experience solutions. It serves Fortune 500 and high-growth firms in healthcare and tech. The goal is simple. First, find each client’s pain points. Next, fill the gap and lift customer satisfaction.

Everise knows there is no “one size fits all” in outsourcing. So the team takes time to teach clients about the options. As a result, they can match each plan to a client’s needs, goals, and budget.

Send them an email through [email protected] or check out their website for more. You can also listen to Dave’s Outsource Accelerator Podcast episode here..

Frequently asked questions

When did the outsourcing industry begin?

The idea grew from large in-house offices in the 1950s and 1960s. However, the modern practice started in 1989, when Eastman Kodak outsourced most of its IT systems. Many firms then followed in the 1990s.

Why has outsourcing become so popular?

Cheaper tech lowered the cost to start. As a result, even small firms can outsource. It also gives fast access to skilled talent and lowers risk.

Will AI and automation replace outsourcing?

No. Instead, the industry uses AI, chatbots, and RPA as tools. Because of this, providers work faster and offer better service.

What should companies expect from outsourcing in the future?

Expect more automation, wider service menus, and heavy use of cloud computing. In addition, firms will set stricter data security rules for remote teams.

Key takeaways

• The outsourcing industry has evolved from a cost tool into a core growth strategy.
• Cheaper tech opened outsourcing to small firms, not just large ones.
• AI and automation now support the industry rather than replace it.
• The future points to cloud work, flexible models, and stronger data security.