Outsourcing Statistics
By Elma Mrkonjić | December 9, 2020 | 0 Comments

20+ Outstanding Outsourcing Statistics You Should Know

The business landscape is changing all the time, and the outsourcing statistics you’re about to read showcase that.

Outsourcing is a company practice of hiring a third party outside of the organization to carry out services traditionally performed in-house. Commonly outsourced areas include IT support, web design, and accounting, but you can outsource virtually any part of your business process.

While outsourcing can help organizations in many ways, its public perception has been predominantly negative, mostly because it moves American jobs offshore.

Let’s take a look at some fascinating facts and stats about outsourcing.

Top 6 Outsourcing Trends and Facts (Editor’s Choice)

  • Business process outsourcing (BPO) market size is expected to reach $405.6 billion by 2027.
  • US-affiliated companies overseas employ 14.4 million workers.
  • More than 654,000 Californians have lost their jobs since 2001 due to outsourcing to China.
  • 10 US companies alone outsource more than 200,000 jobs in total.
  • 70% of companies outsource their operations to save money and cut costs.
  • 93% of organizations are considering or have adopted cloud technology to improve outsourcing.

Outsourcing Statistics 2020: The Current State of Outsourcing

1. Business process outsourcing (BPO) market size is expected to reach $405.6 billion by 2027.

(Grand View Research)

BPO involves companies outsourcing business-specific processes rather than individual tasks to third-party agencies. Expected to reach $405.6 billion by 2027, the BPO market is currently growing at a compound annual rate of 8%.

The key driving force behind such growth is the companies’ need to cut costs by outsourcing some of their processes. BPO can also contribute to improvements in flexibility, operational efficiency, innovation, and customer service.

2. HR outsourcing statistics show that the market is currently worth $32.8 billion.

(PR Newswire)

In the US, the human resources outsourcing market is worth $9.7 billion, more than a quarter of its global worth. As the world’s second-largest economy, China is currently lagging, but the country’s market should reach $8.2 billion by 2027, growing at a compound annual rate of 4.7%.

The global market is also projected to grow by more than 39.6% in the next 7 years, reaching a value of $45.8 billion by 2027 and continuing the positive HR outsourcing trends.

3. 78% of companies feel positive about their outsourcing relationships.

(Deloitte)

Relationships are at the core of outsourcing. Companies need to maintain a positive relationship with the third party in question and have effective channels of communication in place.

Luckily, it seems that the majority of business owners feel positive about their outsourcing relationships. Additionally, 45% say they’re satisfied with their performance tracking capabilities, while another 2% describe themselves as extremely satisfied.

4. 29% of companies with under 50 employees outsource, compared to 66% with 50 or more workers.

(Clutch)

If you take a look at outsourcing statistics graphs, you’ll see that the curve gets higher in correlation with the number of employees at a company. The bigger the business, the more inclined it will be to outsource. This can be attributed to the fact that small business owners believe it’s better to keep operations in-house and not spend money outsourcing to a third party.

5. 93% of organizations are considering or have adopted cloud technology to improve outsourcing.

(Deloitte)

The vast majority of organizations decide to improve their outsourcing practices by adopting the so-called “disruptive solutions,” outsourcing statistics show. According to a 2018 global survey, cloud technology is by far the most common of these solutions.

Companies have different reasons for adopting cloud technology. For 64% of them, it’s a way to encourage IT innovation, while 63% see it as a way to ensure their product reaches the market more quickly. 56% of organizations use it to increase efficiency, and 54% to improve scalability.

Another “disruptive solution” is robotic process automation (RPA), which uses pre-programmed software to perform tasks usually done by humans. 72% of companies are currently considering or adopting this technology.

The Number of Jobs Outsourced Around the World

Outsourcing Statistics 2

6. US-affiliated companies overseas employ 14.4 million workers.

(The Balance) (Quartz) (Marketplace)

The US currently outsources 14.4 million jobs, more than twice the number of unemployed people nationwide before the COVID-19 pandemic (5.9 million). Since the pandemic started, unemployment rose to 12.6 million, which is still lower than the total number of outsourced jobs.

In theory, if all those outsourced positions were brought back home, the US wouldn’t have any unemployed people. To make matters worse, if it weren’t for all the jobs lost to outsourcing, statistics reveal that millions of part-time workers in the US could be hired on a full-time basis.

7. 43% of all outsourced US jobs are in the IT sector.

(Venture Beat) (CodersLink)

In 2015 alone, US tech companies outsourced more than 211,000 jobs to overseas contractors. Experts claim that Silicon Valley jobs are most at risk in this era of increased tech outsourcing.

Commonly outsourced processes in the sector include app development and maintenance, data centers, and customer support. Frontend, backend, and full-stack developers are among the most common positions outsourced by tech startups. IT outsourcing trends show that web hosting, system support, and disaster recovery are also often outsourced to third parties.

8. India is the world’s top country for business process outsourcing.

(Kearney)

This is easily explained by the fact that the country offers a skilled, cheap, and educated workforce fluent in English. According to a 2018 report, India has at least 1,140 global in-house centers, more than any other country in the world.

Hundreds of the world’s largest companies currently outsource to India, stats on outsourcing reveal. The financial services giant Barclays employs by far the most locals, with more than 16,000 people already working in their Chennai-based facility and a further 8,800 in their newly built center in Pune.

9. 20% of US companies outsource their entire IT support abroad.

(KPMG)

At the same time, 15% of US-based companies outsource their entire app maintenance and development process to suppliers in other countries, and 10% do the same for their master data management. These trends in outsourcing are expected to continue in the future, with between 9% and 11% of businesses planning to outsource more of their IT operations offshore.

10. Ukraine is the leading IT outsourcing destination in Central and Eastern Europe.

(IDAP)

With a steadily increasing IT workforce, Ukraine has become one of Europe’s top outsourcing destinations for software development. The country is currently home to more than 1,600 IT outsourcing companies and has about 200,000 IT professionals, double the number it had just five years ago.

Ukraine’s job outsourcing statistics reveal that the country’s IT outsourcing market was valued at $2.7 billion in 2015 and is expected to reach $5.7 billion by the end of 2020, a 111% increase over a 5-year period. Some of the companies outsourcing their operations to Ukraine include tech giants like LG, Microsoft, Slack, and Facebook.

11. More than 800 companies outsource their call centers to the Philippines.

(DBOS) (Flatworld Solutions)

Some of the organizations with call centers based in the Philippines include Chevron, Safeway, and Citibank. According to statistics on outsourcing, the Philippines’ outsourcing industry is projected to surpass the $50-billion mark in 2020. This marks an increase of more than 100% since 2016. Most of this revenue was generated by call centers, which is why the country has been dubbed the “Call Center Capital of the World.”

12. Under NAFTA, the US lost more than half a million jobs to Mexico.

(The Balance)

The North American Free Trade Agreement (NAFTA), which came into force in 1994, was supposed to make cross-border trade easier for North American countries. And while it did bring many benefits, United States outsourcing statistics show that, by 2010, the country had lost 682,900 jobs. All these jobs went to Mexico, and even though 116,400 of them were lost to the global financial crisis of 2008 and 2009, the US still lost 566,500 jobs across different industries.

Things weren’t that great south of the border, either. Despite the influx of new jobs outsourced by US-based companies, the local agricultural industry suffered severe losses. Research reveals that close to 1.3 million Mexican farmers lost their jobs over that same 16-year period.

US Outsourcing Statistics

Outsourcing Statistics 1

13. In 2017, a massive 84.2% of outsourcing deals came from the United States.

(KPMG)

It’s no secret that the United States is the world’s biggest outsourcer, but the country’s share in the global outsourcing market is staggering. This is especially true when you consider that the UK is in second place with just 5.2% of all outsourcing deals. Most companies in the US look to the likes of India and Bangladesh to outsource so they can cut costs on labor.

14. Outsourcing statistics show that the US defense and government sectors are two of the biggest users of outsourcing.

(KPMG)

Both the government and the defense industry are known to be two of the biggest users of outsourcing in the United States, accounting for 81% of the total value of all outsourcing deals made in 2017. Governmental contracts are highly regulated at both the federal and state level, and the contract terms are very different from what you’d find in private sector contracts. For instance, many have mandatory clauses that give special rights to government entities.

A look at outsourcing facts also reveals that more and more US-based insurance companies are starting to outsource their work. In 2017, the sector saw unprecedented growth in outsourcing deals, more than half of them worth billions of dollars.

15. US-based call center workers cost companies up to 7 times more than their counterparts in India.

(The Balance)

Access to a cheap workforce is one of the main reasons US companies choose to outsource their work, and that’s especially true for call centers. According to small business outsourcing statistics, a call center worker in India would cost a company $5–$9 per hour. The hourly price is slightly higher in the Philippines, where it’s in the $8–$14 range. However, in the US, companies would have to pay call center workers between $22 and $35 per hour.

16. Only 9% of companies opted to stop outsourcing after the global financial crisis.

(Nearshore Technology)

After the global financial crisis hit, you’d assume that companies would’ve stopped outsourcing so heavily and focused on employment within their own country. But the opposite happened in the US. Looking at jobs sent overseas, statistics show that 57% percent of businesses actually decided to increase their use of outsourcing. For 46% of companies, this was no time to be patriotic — their main goal was to cut operating costs, so outsourcing was the logical move.

17. 71% of Americans believe outsourcing harms the US economy.

(NCBFAA) (Investopedia)

While it seems that most business owners are all for outsourcing, the general feeling is not shared by most Americans. In fact, about 7 in 10 Americans have said they believe outsourcing is harming the economy of the United States. According to outsourcing statistics from 2019, they’re not entirely wrong. While outsourcing helps businesses turn a profit and build a healthy, competitive market, it has also hurt the working middle class in urban centers across the US.

18. More than 654,000 Californians have lost their jobs to China since 2001.

(Los Angeles Times)

California has lost more jobs than any other state, which can be attributed to Silicon Valley, as well as the decline in the apparel sector in the state. A 2018 study, which aimed to establish how many jobs have been outsourced to China, found that the number exceeded 2 million. Most of these jobs (1.2 million) were in the electronics parts manufacturing industry. Other industries that outsourced to China include clothing and apparel (169,000 jobs) and furniture (135,000).

19. The healthcare outsourcing sector is growing rapidly in the United States.

(Research and Markets)

The US healthcare outsourcing market started increasing rapidly in 2017 when it achieved a 36% growth year-over-year. In 2020, the total value of this market was estimated at $52.9 billion. According to the latest stats on outsourcing, the upward trend will continue. Growing at a compound annual rate of 3.8%, the healthcare outsourcing market is expected to reach $66.3 by 2025, driven by the need for better IT and records management solutions.

20. 10 US companies outsource more than 200,000 jobs in total.

(LoveToKnow) (The New York Times)

As mentioned earlier, the bigger the company, the more likely it is to outsource. This is certainly the case with the 10 tech companies that outsource over 200,000 jobs, outsourcing statistics show. The list includes Intel, Computer Sciences Corp, EDS, Accenture, Convergys, General Electric, Dell, Siemens, Cognizant, and IBM.

In fact, according to a 2017 New York Times article, IBM currently has more employees in India than in the US. At the time, the company’s Indian office had 130,000 employees compared to under 100,000 at its US headquarters. The reason for this is simple — although both countries offer an English-speaking workforce with comparable skills and qualifications, the company can save between 50% and 80% on salaries by hiring India-based workers.

Why Do US Companies Outsource Jobs?

21. 70% of companies turn to outsourcing to save money and cut costs.

(Deloitte)

The 2020 COVID-19 pandemic hit the global economy hard, so businesses are once again looking to stay afloat by cutting costs wherever possible. According to a 2020 survey, a vast majority of companies have cited this as their main reason to outsource. This is in stark contrast with 2018 when most companies saw outsourcing as a way to improve their internal processes.

22. 24% of small companies outsource to boost their business efficiency.

(Clutch)

Small business outsourcing statistics show that 37% of small companies outsource at least some part of their operations. While most do it to improve efficiency, 18% outsource to acquire expert help they don’t have in-house. Small organizations most commonly outsource IT services and accounting (37%). Other typically outsourced positions include digital marketing (34%), customer service (24%), and human resources (24%)

23. 47% of businesses outsource to solve capacity issues.

(Deloitte) (Manufacturing Chemist)

A lot of companies are using outsourcing to assist with their own capacity problems, according to US outsourcing statistics. At some point, a business will experience capacity issues, usually because it’s growing faster than projected. This is where outsourcing comes in. By outsourcing part of their non-essential operations, businesses will have more time and resources to focus on their main product or service while letting their contracted vendors take care of other tasks.

Similarly, manufacturing businesses may need to outsource part of their production if their own facilities can’t meet the demand for their products despite working at full capacity.

The Ultimate List of Outsourcing Statistics: Final Words

So there you have it — an insight into some of the most important facts and figures concerning outsourcing. There’s no denying that outsourcing is increasing on a global scale. More and more companies, especially in the US, are embracing remote workers with specialist skillsets to cut costs and move their business forward.

However, while there are many positive sides to outsourcing, most companies agree that it’s best to keep their core services in-house so they can have complete control over them.

Frequently Asked Questions (FAQ)

Businesses choose to outsource IT services for many reasons. These include cutting costs, decreasing time to market, boosting efficiency, improving flexibility, and increasing revenue.

However, the main reason why companies require third-party tech support is that they don’t have in-house personnel with experience and training in IT maintenance and support. This type of work requires specialist knowledge, so it makes more sense for businesses to hire someone who has received the necessary training and has plenty of experience in the field.

Statistics show that 68% of US businesses selling consumer products outsource a portion of their operations. This is according to a 2007 report by PwC. More recent reports show that at least 37% of American small businesses outsource at least one part of their processes.

Research also indicates that approximately 300,000 jobs in the United States are outsourced every year. This shows just how common outsourcing has become in the US, especially for large corporations involved in selling products to consumers both domestically and globally.

Outsourcing is on the rise, and it shows no signs of slowing down. The business process outsourcing market is currently growing at an annual rate of 8% and is projected to reach a value of $405.6 billion by 2027.

IT outsourcing is also growing steadily. In 2018, the market was worth $85.6 billion, only to reach $92.5 billion the next year. Despite the economic impact of the COVID-19 pandemic, IT outsourcing is expected to continue growing, reaching the value of $98 billion by 2024.

All market statistics point to IT as the most common type of service outsourced today. In terms of specific functions, software application development comes out on top. App maintenance is in second place, followed closely by data centers.

Apart from IT, smaller businesses most commonly outsource accounting and digital marketing, mostly due to a lack of in-house staff trained to perform these functions. Other typically outsourced functions include call services and customer support, which are usually delegated to global centers in India and the Philippines.

Of course, trends differ from country to country. While statistics are not available for all countries across the world, it’s clear that the United States is the world’s leading outsourcer. In fact, back in 2017, a monumental 84.2% of all outsourcing deals in the world were made by US-based companies. That same year, the United Kingdom came in second place with a 5.2% share of all outsourcing deals. Australia and Spain rounded out the list of the world’s top outsourcers.

There are many benefits associated with outsourcing, but there’s also one major negative.

On the plus side, outsourcing jobs helps US businesses become more competitive globally. It enables them to sell to overseas markets by establishing branches in different countries and helps them cut costs by hiring a cheap workforce from regions with a lower standard of living.

However, the main downside to all this is that about 300,000 Americans lose work opportunities every year because they’re given to professionals overseas instead.

For companies, there are a number of pros and cons associated with outsourcing.

Some of the benefits include:

  • Cutting costs
  • Freeing up resources to focus on their primary tasks
  • Boosted efficiency levels
  • Global market reach

There are also some drawbacks associated with outsourcing, including:

  • Uncertainty about the stability of the outsourcing partner
  • Management difficulties with the third-party vendor
  • Strict contracts with no room for change

Security and confidentiality could also be at risk if companies don’t outsource with care and choose an unreliable partner. Recent outsourcing statistics show that numerous data breaches have occurred due to third-party vulnerabilities, compromising both the companies in question and their customers.

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