Application Outsourcing Market Overview
As per MRFR analysis, the application outsourcing market size was estimated at 79.07 (USD Billion) in 2022. The application outsourcing market industry is expected to grow from 88.43(USD Billion) in 2023 to 241.89 (USD Billion) by 2032. The application outsourcing market CAGR (growth rate) is expected to be around 11.83% during the forecast period (2024-2032).
Key Application Outsourcing Market Trends Highlighted
The application outsourcing market is rapidly evolving, driven by trends such as the proliferation of cloud computing, the increasing adoption of agile methodologies, and the growing need for specialized services.
Key market drivers include the rising demand for cost optimization, the shortage of skilled IT professionals, and the requirement for improved agility and flexibility. Opportunities to be explored include the expansion into emerging markets, the bundling of services, and the development of new tools and technologies.
Source: Primary Research, Secondary Research, MRFR Database and Analyst Review
Application Outsourcing Market Drivers
Growing Need for Digital Transformation
Enterprises are increasingly recognizing the need to digitally transform their operations to remain competitive in today's digital economy. Application outsourcing enables them to access specialized expertise, innovative technologies, and best practices to drive digital transformation initiatives. By leveraging the experience and capabilities of external service providers, enterprises can accelerate their digital journeys, enhance customer experiences, and gain a competitive edge.
Rising Adoption of Cloud Computing
The application outsourcing market has grown with the expansion of cloud computing. Cloud-based applications have gained immense popularity as they are scalable, flexible, and cost-effective. The cloud platform enables application outsourcing providers to deliver scalable, agile solutions that address changing business requirements. Therefore, the relationship between cloud computing and application outsourcing is a driving factor behind market expansion.
Increased Focus on Cost Optimization
Enterprises are constantly looking for ways to optimize costs and improve operational efficiency. Application outsourcing offers a cost-effective solution by enabling enterprises to leverage shared infrastructure, skilled resources, and economies of scale provided by service providers. By outsourcing non-core applications and focusing on strategic initiatives, enterprises can free up internal resources and allocate them to more value-added activities.
Application Outsourcing Market Segment Insights
Application Outsourcing Market Application Type Insights
The application outsourcing market is segmented by Application type into enterprise resource planning, customer relationship management, supply chain management, business intelligence, and human capital management.
ERP is the largest segment, accounting for 35% of the Application Outsourcing Market revenue in 2023. The growth of this segment is driven by the increasing adoption of cloud-based ERP solutions, which offer greater flexibility and scalability. CRM is the second-largest segment, accounting for 25% of the application outsourcing market revenue in 2023.
The growth of this segment is driven by the increasing adoption of CRM solutions by businesses of all sizes. SCM is the third-largest segment, accounting for 20% of the application outsourcing market revenue in 2023. The growth of this segment is driven by the increasing complexity of supply chains. BI is the fourth-largest segment, accounting for 15% of the Market revenue.
The growth of this segment is driven by the increasing availability of data and the need for businesses to make sense of it. HCM is the fifth-largest segment, accounting for 5% of the application outsourcing market revenue in 2023.
The growth of this segment is driven by the increasing importance of human capital to businesses. This growth is driven by several factors, including the increasing adoption of cloud-based applications, the need for businesses to improve their efficiency and productivity, and the growing complexity of business operations.
Source: Primary Research, Secondary Research, MRFR Database and Analyst Review
Application Outsourcing Market Deployment Model Insights
The application outsourcing market is witnessing a paradigm shift in deployment models, with cloud and hybrid models gaining significant traction. In 2023, the cloud deployment model is projected to account for over 45% of the market share, driven by its scalability, cost-effectiveness, and enhanced security.
The hybrid model, which combines on-premise and cloud infrastructure, offers flexibility and customization options, making it suitable for enterprises with complex IT environments. On-premise deployment, while still prevalent in certain industries, is gradually declining due to the growing adoption of cloud-based solutions.
By 2024, the cloud deployment segment is expected to witness a substantial CAGR of 12.5%, reaching a market valuation of US$ 105.63 billion. This growth is attributed to the increasing adoption of cloud-based software-as-a-service (SaaS) and platform-as-a-service (PaaS) offerings.
The hybrid deployment model is also projected to experience significant growth, with a forecasted CAGR of 10.6% during the same period, driven by the need for a balanced approach between cost optimization and customization.
Application Outsourcing Market Vertical Insights
The industry vertical segment plays a crucial role in shaping the application outsourcing market landscape. Banking, financial services, and insurance (BFSI) vertical is projected to hold a significant market share due to the increasing need for data security, compliance, and regulatory requirements.
The healthcare industry is also witnessing substantial growth, driven by the adoption of electronic health records, telemedicine, and other IT applications. Manufacturing companies are leveraging application outsourcing to optimize supply chain management, improve production efficiency, and reduce costs.
The retail sector is embracing application outsourcing to enhance customer experience, streamline operations, and gain insights from data analytics. Telecommunications providers are outsourcing applications to meet the growing demand for cloud-based services, 5G networks, and digital transformation.
The energy and utilities industry is utilizing application outsourcing to improve grid management, optimize asset performance, and enhance customer service. Government agencies are increasingly outsourcing applications to improve citizen services, enhance transparency, and reduce IT costs. Overall, the Industry Vertical segment offers immense growth potential for the Application Outsourcing Market, with each vertical presenting unique opportunities and challenges.
Application Outsourcing Market Service Provider Type Insights
The application outsourcing market is segmented by service provider type into managed service providers (MSPs), system integrators, boutique outsourcing providers, cloud service providers, and IT consulting firms.
The cloud service providers segment is projected to register the highest CAGR of 14.5% during the forecast period. This growth is attributed to the increasing adoption of cloud-based applications and the need for specialized expertise to manage and maintain these applications. Moreover, the growing demand for cloud-based services from small and medium-sized businesses (SMBs) is further fueling the growth of this segment.
Managed service providers (MSPs) are expected to hold the largest share of the Application Outsourcing Market in 2023, with a valuation of USD 35.64 billion. Their ability to provide comprehensive managed services, including application development, maintenance, and support, is driving their growth. System integrators, boutique outsourcing providers, and IT consulting firms are also expected to witness significant growth in the coming years.
Application Outsourcing Market Application Size Insights
By application, the market is segmented into small and medium enterprises (SMEs), large enterprises, and government agencies. Among these segments, Large Enterprises held the largest market share in 2023, accounting for over 60% of the revenue. This dominance is attributed to the increasing adoption of cloud-based applications and the need for specialized expertise to manage complex IT infrastructure.
SMEs are expected to witness significant growth in the coming years due to the rising demand for cost-effective and flexible IT solutions. Government agencies are also expected to contribute to the growth of the Application Outsourcing Market as they seek to improve efficiency and reduce costs.
Application Outsourcing Market Regional Insights
The application outsourcing market is segmented regionally into North America, Europe, APAC, South America, and MEA. North America is expected to account for the largest revenue share in 2023, owing to factors such as the presence of numerous enterprises with complex IT requirements, mature outsourcing infrastructure, and high adoption of cloud and digital technologies.
Europe is also a significant market, driven by the presence of large enterprises and a supportive regulatory environment. APAC is projected to witness the highest growth rate during the forecast period, attributed to the rapid adoption of digital technologies and the presence of a large pool of skilled labor. South America and MEA are also expected to contribute to the market growth, albeit at a slower pace.
Source: Primary Research, Secondary Research, MRFR Database and Analyst Review
Application Outsourcing Market Key Players and Competitive Insights
The application outsourcing market consists of major players constantly investing in research and development to gain a competitive edge. Key market players are expanding service offerings and forming strategic partnerships with other leaders to stay at the top of the market. Accenture and IBM are prominent leaders who are striving to develop innovative solutions to assist businesses in optimizing their application landscapes.
Application development and maintenance have become more complex with time, which resulted in the complexity of IT systems. This has encouraged the market leaders to invest in the market’s development. The market is expected to remain competitive, as key players will cooperate with small businesses to offer end-to-end solutions to customers.
Accenture offers a wide range of application outsourcing services, such as application development, maintenance, and support. The company has a strong presence and an understanding of industry-specific needs. Accenture is also famous for its innovative solutions, as the company has been constantly developing its suite of services.
IBM is another leader who offers a wide range of services, including cloud-based solutions, managed services, and consulting services. IBM has a long history of working with organizations from around the world. The company’s strengths include expertise in application management and the ability to deliver end-to-end solutions.
Another prominent competitor is Infosys. The company offers a full range of application outsourcing services, and like IBM and Accenture, also aims at improving scalability and the ability to deliver end-to-end solutions. Infosys is also known for its cost-efficient solutions and operational success. Another leading company is Tata Consultancy Services. The company has been working on its abilities to develop and deliver innovative solutions.
Key Companies in the Application Outsourcing Market Include:
Application Outsourcing Market Developments
The application outsourcing market is anticipated to grow from USD 88.43 billion in 2023 to USD 241.89 billion by 2032, exhibiting a CAGR of 11.83% during the forecast period. This growth can be attributed to the increasing adoption of cloud computing, the need for cost optimization, and the growing complexity of IT systems.
Recent news developments include the acquisition of IT services provider Infosys by LTI, which is expected to strengthen LTI's position in the application outsourcing market. Additionally, IBM has announced a collaboration with SAP to offer managed services for SAP applications, indicating the growing demand for managed application services.
Application Outsourcing Market Segmentation Insights
Application Outsourcing Market Application Type Outlook
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Enterprise Resource Planning (ERP)
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Customer Relationship Management (CRM)
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Supply Chain Management (SCM)
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Business Intelligence (BI)
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Human Capital Management (HCM)
Application Outsourcing Market Deployment Model Outlook
Application Outsourcing Market Vertical Outlook
Application Outsourcing Market Service Provider Type Outlook
Application Outsourcing Market Application Size Outlook
Application Outsourcing Market Regional Outlook
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North America
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Europe
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South America
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Asia Pacific
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Middle East and Africa
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Report Attribute/Metric
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Details
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Market Size 2022
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79.07 (USD Billion)
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Market Size 2023
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88.43 (USD Billion)
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Market Size 2032
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241.89 (USD Billion)
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Compound Annual Growth Rate (CAGR)
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11.83% (2024-2032)
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Report Coverage
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Revenue Forecast, Competitive Landscape, Growth Factors, and Trends
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Base Year
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2023
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Market Forecast Period
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2024-2032
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Historical Data
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2019-2023
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Market Forecast Units
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USD Billion
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Key Companies Profiled
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Infosys, Accenture, DXC Technology, Tata Consultancy Services, IBM, Atos, Cognizant, HCL Technologies, TechMahindra, Persistent Systems, L Infotech, Capgemini, NTT Dat, Mindtree, Wipro
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Segments Covered
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Application Type, Deployment Model, Industry Vertical, Service Provider Type, Application Size, Region
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Key Market Opportunities
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Cloud-based Solutions
IoT Adoption
AI-driven Automation
Remote Work Data Analytics
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Key Market Dynamics
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Digitalization
Cloud Adoption
Technological Advancements
Growing IT Complexity
Demand for Cost Optimization
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Countries Covered
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North America, Europe, APAC, South America, MEA
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Frequently Asked Questions (FAQ) :
The application outsourcing market was valued at USD 88.43 billion in 2023.
The application outsourcing market is projected to reach USD 241.89 billion by 2032.
The application outsourcing market is expected to grow at a CAGR of 11.83% from 2024 to 2032.
North America is expected to hold the largest market share in the application outsourcing market in 2032.
The BFSI industry vertical is expected to drive the growth of the application outsourcing market.
Some of the key competitors in the application outsourcing market include IBM, Accenture, Capgemini, and Wipro.
Key factors driving the growth of the market include the increasing adoption of cloud computing, the need for cost optimization, and the growing demand for specialized IT skills.
Some of the challenges faced by the market include security concerns, data privacy issues, and the lack of skilled IT professionals.
Key opportunities for growth in the market include the increasing adoption of emerging technologies, the growing demand for managed services, and the expansion into new markets.
Some of the key trends include the adoption of cloud-based applications, the use of artificial intelligence and machine learning, and the rise of agile development methodologies.
