The COVID-19 pandemic has caused companies all around the world to start spending more money on digitizing their goods and services. Market capital and demand for IT infrastructure outsourcing are therefore anticipated to soar in 2021. This potential development will persist through 2022 and beyond, bringing about several innovative market trends and opening up several opportunities for the European outsourcing sector.

The European IT outsourcing (ITO) market helps European businesses concentrate on their core businesses while cutting costs, which was crucial during the pandemic. Europe's key markets for IT outsourcing are Northern and Western Europe.

Let's take a look at the IT outsourcing market from 2022 to 2025.

Nearshoring or Offshoring: a most common practice in European Market

Sweden, Finland, the Netherlands, Poland, Bulgaria, and Romania are among the most preferred nearshore IT destinations for Western European corporations. These countries not only provide the typical nearshoring benefits but also have the same European legal framework as the buying countries in terms of contract management and payment protection.

However, costs in nearshore nations, notably those in the European Union, are growing. As a result, service providers in these nations are less competitive than service providers abroad, which increases the propensity of European firms to outsource to far-off places. You may form subcontracting agreements with these nearshoring companies or engage in competition with them to profit from these developments.

The Demand for ITO is Fueled by Digitalization in the European Market

Digital usage increased during the onset of the pandemic by 5 years in just 8 weeks. The degree of digitization, and notably the use of cloud-based solutions, affect a company's ability to continue operating. In a global KPMG survey on the effect of COVID-19 on digital transformation, respondents said that 67% had accelerated their digital transformation plans and 63% had increased their budget for digital transformation.

Businesses are moving to the cloud more quickly, and doing so requires specialized solutions. Since customers have embraced online purchasing, retailers want data and applications, while the travel sector also requires digital solutions to deliver a smooth experience.

It is projected that this tendency will continue in the upcoming years.

It projects that direct investments in digital transformation will rise at a 15.5% average annual pace between 2020 and 2023. Nowadays, companies are aware of the risk that this sort of interruption might occur once more as well as the potential effects it may have on their operations. As a response to this issue, businesses are understanding that ITO may assist them in being more flexible and resilient in trying times.

Also Read: How Diversity, Work & Technology Will Dominate 2022 and Beyond

Which Countries in Europe Provide the Most Prospects for IT Outsourcing?

ITO vendors do not have a uniform market in Europe. In the past, Northern and Western Europe had the largest ITO markets. While bigger nations provide greater opportunities due to their size, certain smaller countries are prominent participants in the IT sector. Additionally, Central and Eastern Europe (CEE) is seeing success with partnerships with nearshore service providers.

The Nordic ITO market is a prominent role player to create opportunities

Despite being much smaller than other European areas, outsourcing in Finland and Sweden can be a very accessible market. Running a business is not difficult in these nations. The majority of individuals in these nations understand English fluently. 

The Nordic ITO market, which has recently shown outstanding strength, saw a combined ACV of €2.0 billion in 2019. This translates to a 23% annual increase, showing that there are enormous opportunities in this industry. Furthermore, the COVID-19 pandemic is reportedly having the least effect on the Nordic economy.

The Netherlands is making prospects of outsourcing

The Netherlands has Europe's sixth-highest GDP. Outsourcing software development companies in the Netherlands is a real IT hotspot, with 60% of all Forbes 2000 IT companies located there. The country's fundamental profile is akin to that of the Nordic countries. The Dutch economy, like that of the Nordic region, looks to have suffered the least harm from the outbreak, with GDP likely to return to 2019 levels in 2021.

Outsourcing is also quite easy in the Dutch economy. Another similarity is that the language barrier to doing business in the Netherlands is frequently minimal because the Dutch speak English well.

Which emerging services are most promising for the European ITO market?

Growing digitization raises the demand for ITO. Cybersecurity-related skills are in high demand right now. You should consider medium-sized companies as potential clients. In terms of expertise and flexibility, these businesses are an excellent fit for you.

There are several potential developments in the European outsourcing market's desire for outsourcing. Some additional developments and advancements have been facilitated and catalyzed by big data, 5G, and AI. Big data, mobile, and cloud application development, the Industrial Internet of Things, virtual and augmented reality, blockchain, machine learning, and the mastery of technology connected to these breakthroughs are now the most promising areas. The skills gap in Europe and the increased need for added value/specialized service providers both present opportunities.

The top offshore IT services, according to Global Knowledge, include:

Cybersecurity

For instance, this covers data security, infrastructure security, and identity and access management. Because of rising digitization, regulations, and public awareness, there is a huge need for cybersecurity. By 2025, the European cybersecurity industry is anticipated to be worth €38.13 billion.

Learn More About The Biggest Software Security Threats of 2022, here!

Cloud computing

Cloud-based services are in high demand, especially because the epidemic has expedited digitization. Since almost every ITO service uses the cloud, having cloud computing abilities is crucial. In 2025, it is anticipated that the European cloud computing industry will reach €136 billion.

Data science and analytics

The need for services that assist businesses in making the most of this data is increasing along with the amount of data being created in Europe. As a result, the European market for Big Data and Business Intelligence solutions is expected to rise from over €43 billion in 2021 to around €66 billion in 2025.

Custom software design and development 

A significant area of ITO is software development services, where cybersecurity is given considerable emphasis. Once more, growing digitization fuels a rise in demand for software solutions. From around €126 billion in 2021 to approximately €253 billion in 2026, the European software industry is anticipated to increase.

Machine learning and artificial intelligence (AI)

The need for AI in Europe is expanding across industries, and in 2025, it is anticipated that the market will exceed €40 billion. If you need IT services, BJIT follows the European Commission's proposal for a regulatory framework for AI solutions.

The Internet of Things

The need for IoT solutions that are big data integrated is rising throughout Europe. Germany, the United Kingdom, France, Italy, Spain, and the Netherlands are now leading the adoption of IoT in Europe, with Eastern European countries and the Nordics closely behind. IoT opportunities are available for both consumers and businesses, but specializing may provide you with a competitive edge. The home, health, and financial industries are leading IoT adoption, and outsourcing is still being fueled by a shortage of trained workers in these sectors.

Mobile Application

The field of mobile application development is expanding quickly. It is one of the most outsourced IT services among European enterprises. This outsourcing is still being driven by the growing IT skills deficit in Europe.

Blockchain

The use of blockchain technology as a solution has spread beyond the financial industry into a variety of other industries, including supply chains, manufacturing, and healthcare. The significant lack of IT talent in Europe encourages the outsourcing of blockchain services.

The Endnote

The IT outsourcing industry has a lot to offer with an unprecedented growth rate and numerous opportunities in the current, continuously altering market. Outsourcing IT operations will certainly prosper in the future because technology is the basis of our advancements.

The IT outsourcing industry has a lot to offer with an unprecedented growth rate and numerous opportunities in the current, continuously altering market. IT outsourcing will certainly prosper in the future because technology is the basis of our advancements.

Are you looking for an outsourcing firm that you can work with effectively and for a long time through our offshore-onshore-nearshore model? Work with a dependable and knowledgeable technology partner to assist you to get the finest outcomes by getting in touch with us!