In the face of macroeconomic uncertainty, most enterprises feel cautiously optimistic about 2023 and expect to tap outsourcing resources to control costs and meet the demand for talent, according to Everest Group’s annual Key Issues survey.
In fact, more than 80% of respondents expect their investments in outsourcing for IT services (ITS) and business process services (BPS) to stay the same or increase in 2023 over 2022, and more than 40% are optimistic about growth in their global services budgets in the coming year.
Asked to rank their top-of-mind issues for 2023, enterprises cited “price and cost pressures” as number one this year, moving into the top position from second place last year. “Talent/skills shortage,” which held the number one spot in 2022, dropped to third. “Slowdown in demand,” which ranked tenth in 2022, has moved into the No. 4 position.
Top-of-mind issues for enterprises in 2023
- Price/cost pressures
- Adapting to evolving customer needs and business models
- Talent/skills shortage
- Slowdown in demand
- Slowdown in customer decision making
As a result of these concerns, enterprises have identified cost optimization, digital transformation, and productivity improvement as their top three priorities going into 2023.
Five trends for 2023
A significant service provider portfolio rebalancing by enterprises is in the cards. The percentage of enterprises expecting to rebalance their workload across providers has increased from 25% last year to 36% heading into 2023. Those expecting to consolidate or rationalize the service provider portfolio in the next 12 months has increased from 20% last year to 34%.
The talent demand-supply mismatch will continue. Enterprises will shift their focus to internal talent management (upskilling and employee experience/engagement) as higher priorities than recruiting.
Service provider bill rates will increase, albeit slower than in 2022. To manage the impact of inflation, service providers will increase price/rate cards and optimize costs by employing automation and adjusting locations mix, scopes and roles.
The service delivery model will continue to evolve. Organizations will leverage alternative delivery strategies to optimize cost and gain access to talent. Examples include remote and hybrid workers, tier-2/3 locations, centre setups in offshore-nearshore countries, and setup of small, satellite centres.
Pragmatic digital investments will be prioritized over moonshot investments. Proven investments such as cloud solutions, cybersecurity, analytics, advanced automation (AI, cognitive) and automation (RPA) will remain high priorities for enterprises in 2023.
Other technologies (such as the Internet of Things, UX/CX design, blockchain, mobility, edge computing, Web 3/metaverse, 5G/6G and extended reality/ AR/VR) will receive relatively lower focus.
Advice for enterprises
“Our advice to enterprises is not to obsess about the uncertainty of their external environment but instead focus on creating the agility to respond with speed as the situation unfolds,” said Rajesh Ranjan, partner at Everest Group.
“This will require them to strategically leverage global services, human capital, technology initiatives, and delivery models to not only address the upcoming challenges but position the organization to capture upsides as we come out of it. Put another way, don’t miss the forest for the trees.”
Rajesh Ranjan
