Global outsourcing activity declined 5% in the fourth quarter of 2019, but service providers saw their revenue increase because of the growing demand for digital services, according to consultancy firm Everest Group.
According to the report, the traditional outsourcing services are fast losing the luster, but digital services, such as cloud, are gaining traction like never before.
“We continue to see that the majority of outsourcing deals include digital services, as opposed to traditional services only,” said H. Karthik, partner at Everest Group.
The surge in revenue was mainly due to the increased demand for services such as robotic automation, artificial intelligence (AI), analytics, mobility, and cybersecurity.
“Less commonly included but certainly worth noting were other digital services such as IoT, social media, blockchain, and digital interactive components,” Karthik added.
Also, service providers are increasingly moving their operations to smaller cities in a bid to cut costs. The consultancy says that during the three months, many new delivery centers sprang up in tier 2 and 3 cities.
Low-cost locations in Africa and the Middle East were their favorite hunting grounds. In countries including India, Ireland, and Poland, services providers were seen exploring smaller cities for scaling up their operations.
The expansion in the manufacturing sector was the main reason for service providers to expand their global in-house centers, the report noted.