Outsourcing and shared services market to soon exceed $1 trillion

02 May 2019 Consultancy-me.com

Deloitte has forecast the outsourcing and shared services market to cross the $1 trillion threshold within six years, with the UAE to move toward a $7 billion share over that time.

A leading hub in the region, the UAE’s Outsourcing and Shared Services (OSS) industry looks set to capitalise on widespread business disruption, projected to pull in $6.8 billion by 2023 according to a joint report from professional service leader Deloitte and Dubai Outsource City. Globally, the market is forecast to cross the $1 trillion threshold within six years, from an estimated base of just $600 billion in 2016.

As highlighted by the report, the reasons for the rapid market growth are two-fold but aligned;   the recent innovations and advancements that have given rise to new exponential technologies, “leading to the digital disruption and transformation not only of organisations, but also of entire industries and even nations”, and the technological advancements such as cloud, AI and robotic process automation being adopted within the OSS industry itself.Reasons for business outsourcing“Globally and regionally, the outsourcing and shared services industry is transforming,” opens the report, led by Deloitte Middle East TMT practice leader Emmanuel Durou. “By adopting new technologies, the industry is evolving from a pure cost-efficiency model to new innovative value-creation models. This tech-enabled transformation presents significant opportunities for the industry’s potential impact and growth.”

Described as primarily involving an organisation hiring or subcontracting another specialised entity to perform certain tasks or functions at scale, ‘outsourcing’ includes both IT and business process outsourcing (BPO), while ‘shared services’ traditionally involves the centralisation of an organsiation’s administrative and back-office functions such as HR and finance – typically excluding core operations, but expanding in scope with technological revolution.

While the practice of OSS has long been adopted by organisations to achieve cost reduction, cited by 63 percent of respondents in an earlier Deloitte survey, the firm notes a growing trend toward OSS for other strategic objectives, such as multiplying performance (speed, quality), reducing capability as well as capacity gaps, increasing agility, accessing intellectual capital, reaching new markets and accelerating innovation across the business.Global outsourcing and shared services marketThis, according to Deloitte’s estimates, will see the global OSS market reach a worth of ~$970 billion by 2023 from around $688 billion last year – at a compound annual growth rate of 7.4 percent, with the shared services component expected to jump above BPO ($212 billion) to a $240 billion share at a CAGR of 17.2 percent. The remaining ~$520 billion will be spent on IT outsourcing, which involves the day-to-day management and operation of IT assets and processes.

For the UAE – the largest of the Middle East’s OSS market, which altogether includes at least 150 shared service centers and more than 50 outsourcing providers, this growth trend could see revenues rise to $6.8 billion by 2023, from a base of $4.8 billion last year. “While the local OSS industry is still developing and catching up to global market levels,” said Durou, “adoption and progress is fast, with almost one third of OSS players surveyed already using transformational technologies to accelerate OSS business growth.”

“In the Middle East region, countries are undergoing major economic transformations, targeting diversification and non-oil growth. This has fueled the rapid adoption of new disruptive technologies and raised OSS as a key non-oil industry of significant strategic importance, alongside ICT, and telecom,” added Durou. “Cost reduction, strategic and competitive advantages and major exponential technologies disrupting the industry are the key growth drivers and trends pushing OSS to the top of board agendas.”