IT outsourcing has evolved in a big way where size of Indian IT industry has increased to $110 billion. In the global outsourcing survey, Deloitte predicts that the IT outsourcing will grow by 12-26% in 2017.

Businesses have relied on outsourcing to reduce cost, attain efficiency and manage growth in a competitive environment. This has led to a drastic boom in the outsourcing industry. One of the early trends to reduce cost via outsourcing is no longer that important. US based companies are looking for ways to leverage the business expertise and technical knowhow of vendors to achieve better outcomes.

Although cost reduction is one of the major drivers of outsourcing contracts, the US companies are moving away from fixed price contracts and are interested in employing local specialists and having agile contracts. Companies are looking for teams who can work as an extension of their existing development team. Companies that are adopting digital strategy are employing vendor managers who can negotiate with vendors and close deals much faster.

One of the other trends is that companies are looking for virtual employees in offshore locations. They prefer to have an employee who works exclusively for their requirements. This will keep a client well informed on the progress of work and task completed by the employee.

Automation and cloud services are taking a big chunk in the market. The companies are looking for robots that can replace repetitive tasks of human. The challenge is in managing the touch points with the customer where robots can replace human. Chatbots have become very popular with banks and ecommerce organizations. One of the downsides of automation is the security of the processes and companies have concerns on sharing their data with the vendors.

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Cloud technology is set to become the trendsetter as more businesses are moving to cloud in coming year. This requires vendors to improve upon their cloud based offerings. As per Forrester, 38% of 1000+ North American and European companies are either building private cloud or procuring public cloud services. Rest of the companies are planning to implement some form of cloud technology in 12 months.

Forrester mentions that companies will refactor apps to consider the cost of public cloud systems and will leverage migration services rather than simply dumping existing apps into a public cloud. The optimum option is to rewrite the application so that it can advantage of cloud’s elasticity. However, the changes in the application can be costly.

Big Data has been the buzz word during the 2016 but it is still not simplified to a level where user can access and analyze big data sets with simple tools. The demand for data scientists isn’t easing up and now companies have separate analytical departments to handle and manage data. Companies are looking for solutions that allow sharing of data across services and democratization of data within the company. We see large companies have adopted big data and similar trend to continue with mid and small size companies.

People say that Trump may not have that much impact on the outsourcing trend. However, the markets are conscious of his next moves. Under these circumstances, the IT service providers have to focus on clients and respond to their needs with better solutions.

As outsourcing contracts are going to increase in the coming year, we see that some of these trends will have impact on the IT industry. Automation, Cloud computing and Big Data will dominate the trends in 2017.