IT Outsourcing - NAFTA

NAFTA

Revenue in the IT Outsourcing market is projected to reach US$215.30bn in 2024.
Revenue is expected to show an annual growth rate (CAGR 2024-2029) of 8.07%, resulting in a market volume of US$317.40bn by 2029.
The average Spend per Employee in the IT Outsourcing market is projected to reach US$843.70 in 2024.
In global comparison, most revenue will be generated in the United States (US$197.30bn in 2024).

Key regions: Netherlands, United States, Japan, Germany, Italy

Definition:
The IT Outsourcing market refers to the external contracting of IT functions, services, or projects instead of relying on company-owned resources. By outsourcing IT tasks (e.g., to IT suppliers or software developers), enterprises are able to focus on their core functions and save internal resources and costs (e.g., office space, maintenance, and utilities). Thus, outsourcing teams becomes a viable cost resilience strategy in an environment where companies are looking to save money more than ever.

In an IT context, these activities include IT administration, IT application, and web hosting services. Non-IT-related outsourcing services are excluded.

Structure:

IT Outsourcing contains four distinct markets that are based on different services:

Administration Outsourcing refers to the market for services associated with the external sourcing of typical IT administration tasks such as hardware supply, setup, configuration, maintenance, security, and support.
Application Outsourcing refers to the market for all IT application services in a software production context, spanning from requirement assessments to concept and design of software applications.
Web Hosting includes all types of internet hosting services that allow companies or individuals to provide access to their web page via the World Wide Web.
Other IT Outsourcing refers to aggregated revenues of the types of IT outsourcing that are not specifically mentioned in the other IT Outsourcing markets, such as infrastructure outsourcing, network outsourcing, and managed services.

Additional Information:

The IT Outsourcing market comprises revenues, revenue change, average spend per employee, and revenues of the outsourcing types. Market values represent revenues that are generated by primary vendors either directly or through distribution channels at the manufacturer price level (excluding VAT). Reported market revenues include spending by enterprises (B2B) and governments (B2G). Detailed definitions of each market can be found on the respective page where the market data is displayed. Key players in the market include IBM, Accenture, Capgemini, NTT, and Hewlett Packard Enterprise.

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Market

Region

Region comparison

Currency

Analyst Opinion

The IT outsourcing market in NAFTA has been experiencing a steady growth in recent years. The North American Free Trade Agreement (NAFTA) is a trilateral trade bloc between Canada, Mexico, and the United States. The IT outsourcing market in NAFTA is driven by several factors, including customer preferences, local special circumstances, underlying macroeconomic factors, and trends in the market.

Customer preferences: One of the main customer preferences driving the IT outsourcing market in NAFTA is cost reduction. Many companies in the region are looking to reduce their operational costs, and outsourcing IT services to countries like India and the Philippines has become a popular way to achieve this goal. Another customer preference is the need for specialized skills. As technology becomes more complex, companies are finding it increasingly difficult to find the talent they need locally. Outsourcing IT services to countries with a large pool of skilled workers is an effective solution to this problem.

Trends in the market: One of the biggest trends in the IT outsourcing market in NAFTA is the rise of nearshoring. Nearshoring involves outsourcing IT services to countries that are geographically close to the customer's home country. This trend has become popular in NAFTA due to the proximity of Mexico to the United States and Canada. Nearshoring offers several benefits, including lower costs, shorter travel times, and better cultural alignment.

Local special circumstances: Mexico is one of the largest players in the IT outsourcing market in NAFTA. The country has a large pool of highly skilled workers and a favorable business environment. Mexico also has a time zone advantage, making it an attractive destination for companies in the United States looking to outsource IT services. Another special circumstance in the region is the high demand for bilingual workers. Many companies in NAFTA require workers who are fluent in both English and Spanish, making Mexico a popular destination for outsourcing.

Underlying macroeconomic factors: The IT outsourcing market in NAFTA is also influenced by underlying macroeconomic factors. One of the most significant factors is the growth of the digital economy. As more companies move their operations online, the demand for IT services is increasing. Another factor is the political climate in the region. The recent renegotiation of NAFTA has created uncertainty in the market, but the agreement's continuation has provided some stability. Finally, the COVID-19 pandemic has accelerated the shift towards remote work, making IT outsourcing an even more attractive option for companies looking to reduce costs.

Methodology

Data coverage:

The data encompasses B2G, B2B, and B2C enterprises. Figures are based on enterprises' technology spending on products, consulting, and outsourcing services.

Modeling approach / Market size:

Market sizes are determined through a combined top-down and bottom-up approach, building on a specific rationale for each market segment. As a basis for evaluating markets, we use annual financial reports of key players in the industry, Statista's primary research and surveys, and IT associations. In addition, we use relevant key market indicators and data from country-specific associations, such as GDP, internet users, and telecommunication. This data helps us estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the relevant market. For example, the exponential trend smoothing method is used based on the market data characteristics. The main drivers are the GDP and its sector composition, internet penetration, the level of digitization, and the attitude toward IT security.

Additional notes:

The data is modeled using current exchange rates. The market is updated twice a year in case market dynamics change. The impact of the COVID-19 pandemic and the Russia-Ukraine war is considered at a country-specific level.