The world of IT outsourcing is no stranger to change, but 2024 throws a curveball that’s reshaping the entire game. A potent cocktail of geopolitical and economic factors – the US-China tech war, a potential global recession, and the ongoing conflict in Eastern Europe – is posing challenges to companies, making it difficult for them to invest in development and ensure uninterrupted production. Let us explore which strategies are helping companies drive continuous growth and revenue in the wake of these multi-faceted challenges.
1. Tech Titans Clash: The US-China Tech War and its Implications on AI Innovation and IT Outsourcing
Amid the ongoing US-China tech war, the global geopolitical landscape is witnessing a battle not just for technological supremacy but also a profound disruption to vital supply chains, particularly those of one key material: Semiconductors. The struggle for technological dominance manifests as uncertainties in the supply of these components (essential for both hardware and software facets of AI), which are expected to impact the timeline and costs associated with AI-focused software initiatives.
Beyond the immediate technological concerns, the US-China tech war has triggered apprehensions about the cost-effectiveness of AI-related projects. As the demand for substantial computing power intensifies with the emergence of larger models like GPT-4, companies are actively seeking alternatives.
2. Tightening Belts: The Looming Fear of Economic Instability
While the likelihood of a strong economic downturn hitting the US in 2024 is still being debated –with some experts saying the US might dodge it, one thing remains true for most companies navigating these uncertainties: cost-effective strategies are on the rise. As companies tighten their belts, they’re shifting toward nearshore outsourcing options, minimizing risk, and –according to IDC’s 2023 Future Enterprise Resiliency & Spending, CIOs are “trying to keep talent costs under control by leveraging cost differentials between countries.”
Plus, according to the latest forecast by Gartner, despite the looming fear of a potential disruption in the US’s economy, IT services will be the largest segment of IT spending in 2024, growing at a rate of 8.7% globally. This means that there is a strong overall trend towards increased outsourcing and reliance on IT services, an area in which trusted partners in Latin America can excel.
3. Reshuffling the Deck: How the Ukraine Conflict is Redrawing the Map of IT Outsourcing
The ongoing conflict in Eastern Europe continues to disrupt outsourced IT teams in the region. When asked about the next best course of action in such a delicate scenario, Alexei Miller (MD at a firm based in New York City with operations in Ukraine) stated: “This will take longer than most of us anticipated even a few months ago.
For IT services customers –he clarified– that means planning for risk appropriately and building mixed teams across regions.” Consequently, companies may prefer to outsource to countries closer to the US, minimizing geopolitical risks and logistical challenges. With their cultural, geographical, and time zone proximity, Latin American tech hubs emerge as an attractive alternative.
Outsourcing Talent from Latin America: The Key to Weathering the Storm
Countries like Brazil, Mexico, Chile, and Colombia boast thriving tech hubs and a growing availability of skilled IT professionals in the region (particularly in software development and data analytics).
If we add all the benefits related to time zone alignment, shared cultural values, and cost-efficiency mentioned above, hiring top 1% talent from Latin America while still having full control over the managerial aspect of AI-related projects emerges as a short and long-term solution to the current macroeconomic and political difficulties disrupting both the US and global markets.
The world of IT outsourcing is on the move, and staying ahead of the curve requires agility and informed decision-making. In this rapidly evolving sector, it’s not just about keeping up with trends – it’s about understanding how to strategically leverage these changes for business growth. Your ability to scale, adapt, and innovate in your outsourcing strategies is critical.
InclusionCloud is your trusted partner in navigating this dynamic landscape. We provide insightful analyses, expert advice, and insider perspectives to help you make informed outsourcing decisions. Follow us on LinkedIn for more insights and join the conversation!