Freelance & Outsourcing Industry

See also: Industries | Upwork

Remote Work Trends

Linkedin

2023

Sample:These analyses are based on millions of job postings and Linkedln profile positions added each year. From January to December 202a, more than 30 million job postings were added to Linkedln across the 12 countries analyzed (Australia, France, Germany, India, Ireland, Israel, Netherlands, Singapore, Sweden, United Arab Emirates, the United Kingdom, and the United States). Similarly, more than 20 million positionswere added to Linkedln profiles from members in these countries in the same year.

At its peak in April 2022, the percentage of U.S. job postings on Linkedln that were offered as remote was 20%, more than double the share of job postings offered as remote in January 2021, at around 10%. Similarly, in other countries we saw the rise of remote work post-pandemic. Over the same period (January 2021to April 2022) in India, the share of remote job postings grew from 6.4% to 17.8%, a 2.8x increase. In Europe, the increase was more muted - the share of remote postings in France jumped from 3.7% to 9.8% (2.6x increase), in Germany(rom 8.7% to 12.3% (1.4x increase), and in the U.K. from 12.2% to 15% (1.2x increase).

The share of remote U.S. job postings on Linkedln’s platform dropped over 9 percentage points January  2022 to December 2023. Remote U.S. job postings currently make up about 10% of all jobs despite receiving 4ó% of all applications in December 2023. That translates to remote roles receiving nearly 5x the share of applications compared to jobs available. Similar trends are found in other countries with the share of remote job postings decreasing 6 percentage points in the U.K., 6 percentage points in Germany, 5 percentage points in France, and 3 percentage point in India in the same period.

	Remote Work December 2023			Hybrid Work December 2023
Country	% of Job Postings that are Remote	% of Job Applications that are Remote	% of Member Positions added thot ore Remote	% of Job Postings thot are Hybrid	% of Job Applications thot are Hybrid	% of Member Positions added that are Hybrid
United States	9.5%	45.9%	24.4%	13.1%	19.8%	24.4%
United Kingdom	9.5%	18.4%	13.9%	43.0%	47.7%	43.8%
France	6.2%	7.7%	4.5%	31.1%	37.1%	22.8%
Germany	7.9%	22.4%	13.0%	31.1%	36.6%	43.3%
India	11.2%	20.0%	10.2%	18.1%	18.5%	22.1%
United Arab Emirates	4.0%	5.1%	3.8%	9.5%	8.9%	10.1%
Netherlands	3.0%	13.5%	3.8%	35.8%	42.3%	39.4%
relond	8.6%	19.8%	9.3%	42.4%	44.0%	42.9%
Sweden	4.8%	13.2%	3.7%	36.8%	36.8%	29.1%
Israel	3.9%	9.6%	6.0%	44.1%	46.9%	41.7%
Australia	6.0%	13.4%	7.4%	33.1%	42.6%	35.8%
Singapore	3.3%	6.2%	5.7%	28.2%	33.1%	29.3%

When analyzing trends in terms of hires rather than job postings and applications, we see still see similar trends. France, which had earlier office mandates, had the highest share of hires for onsite positions compared to the other countries analyzed with 73% of positions added on Linkedln profiles in 2023 being onsite. Similarly, Índia also has a higher share of onsite hires, with ó8% of positions added in 2023 being onsite.

https://economicgraph.linkedin.com/content/dam/me/economicgraph/en-us/PDF/global-state-of-remote-and-hybrid-work.pdf

The Technology, Information and Media industry hired the most employees in remote positions in all countries analyzed, with the U.S. leading the way as almost 1 in 2 tech positions added to Linkedln profiles 2023 were exclusively remote (46.7%), and 73.2% of positions as remote or hybrid.

The Professional Services, and Administrative and Support Services were also among the top industries with the highest prevalence of remote positions added in 2023. Together with Tech, these industries have shown the most openness in having a remote workforce and are most likely to continue investing in them in the long term.

Developments Freelance Industry

Upwork Jobs Posted

More Details: Upwork: Main Insights from Jobs Posted in Upwork Platform

Month and Year	Average number of open jobs	M/M (%)	Jobs by new clients	Growth(%)	Contract- to-hire roles	Growth(%)
Jul-22	164,310		59,993
Aug-22	165,350	0.63%	60,097	0.17%
Sep-22	163,634	-1.04%	58,117	-3.29%
Oct-22	168,623	3.05%	59,080	1.66%
Nov-22	177,527	5.28%	64,625	9.39%	34,683
Dec-22	182,623	2.87%	69,328	7.28%	40,770	17.55%
Jan-23	191,081	4.63%	78,201	12.80%	43,592	6.92%
Feb-23	199,302	4.30%	84,007	7.43%	47,774	9.59%
Mar-23	203,238	1.98%	85,040	1.23%	52,913	10.76%
Apr-23	200,385	-1.40%	84,085	-1.12%	57,519	8.70%
May-23	194,580	-2.90%	80,029	-4.82%	59,137	2.81%
Jun-23	196,526	1.00%	83,980	4.94%	62,219	5.21%
Jul-23	192,269	-2.17%	80,266	-4.4%	62,595	0.61%
Aug-23	191,217	-0.55%	78,342	-2.4%	60,464	-3.40%
Sep-23	184,587	-3.47%	68,970	-12.0%	57,748	-4.49%
Oct-23	170,863	-7.43%	59,145	-14.25%	52,353	-9.34%
Nov-23	169,064	-1.05%	61,259	3.58%	50,461	-3.61%
Dec-23	160,970	-4.79%	58,535	-4.45%	47,028	-6.80%

Freelancer.com Fast 50 Quarterly Index

Based on Freelancer.com data

Q3 2023

Analyzed over 277,000 jobs posted by employers to Freelancer.com between July and September 2023

“Our Freelancer Fast 50 Report is a forward leading indicator of the skills and expertise businesses need today. Artificial Intelligence is powering a boom in content creation, in particularly focusing on writing, marketing and video production skills, ”said Matt Barrie, Chief Executive at Freelancer. “Generative AI is superskilling freelancers and their ability to produce extremely high quality content and faster than ever before. Tools like ChatGPT and Bard have changed the game when it comes to producing and refining written content, while advances in video AI such as Runway Gen-2, HeyGen and Pika Labs means that video production and editing can be done with a click of a button.”

Fastest Growing Jobs - Q2 2023 vs. Q3 2023

Skill	Job Count Q2 '23	Job Count Q3 '23	% Increase
Copy Typing	6381	8213	28.7%
Word	4396	5485	24.8%
Search Engine Marketing	2321	2881	24.1%
Copywriting	8737	10817	23.8%
Ghostwriting	6377	7852	23.1%
Creative Writing	2952	3613	22.4%
Content Writing	10718	12794	19.4%
User Interface / IA	3071	3607	17.5%
Videography	4096	4809	17.4%
Telemarketing	1054	1228	16.5%

Fastest Falling Jobs - Q2 2023 vs. Q3 2023

Skill	Job Count Q2 '23	Job Count Q3 '23	% Increase
Matlab and Mathematica	1349	1011	-25.1%
AngularJS	1722	1318	-23.5%
Django	1216	932	-23.4%
Algorithm	1438	1114	-22.5%
Customer Service	1338	1068	-20.2%
C Programming	4550	3643	-19.9%
Microcontroller	1237	991	-19.9%
.NET	2230	1800	-19.3%
Electrical Engineering	2468	2001	-18.9%
Report Writing	3547	2892	-18.5%

Q2 2023

Analyzed over 280,000 jobs posted to Freelancer.com between April and June 2023.

“AI can’t replace creativity yet. While workers and businesses are benefiting from productivity gains offered by generative AI, the data suggests that the technology in its current form isn’t able to replace creative work. We saw a similar trend occur in the first quarter of the year, as creative design jobs were flourishing despite interest for generative AI tripling,” said Matt Barrie, Chief Executive at Freelancer.com.

• Freelancer.com’s data science team revealed interest for freelance writing jobs are increasing on the platform over the last quarter.
• Other jobs which have been deemed as ‘at risk’ of being automated by AI, such as data entry, have also seen an increase over the quarter.
• The Fast 50 Q2 2023 report also reveals an increase in businesses investing heavily in freelance marketing support. This trend comes off the back of an unprecedented rise in jobs usually associated with the creation of new businesses and new ventures as found in the Fast 50 Q1 2023 report.
• This quarter saw Local Jobs grow by 37%, from 2,122 to 2,905. The two key drivers for growth for these types of jobs relate to Photography and Videography which are up by 40% (from 2,101 to 2,945) and 32% (from 3,095 to 4,097), respectively.
• The latest figures from the Fast 50 report for Q2 2023 shows interest is beginning to slow down as 16 of the top 25 fastest falling jobs are related to tech, which are the same jobs which climbed heavily towards the end of last year.

Fastest Growing Jobs - Q1 2023 vs. Q2 2023

Rank	Skill	Job Count Q1 '23	Job Count Q2 '23	% Increase
1	Creative Writing	1868	2961	58.51%
2	User Interface Design	2017	3075	52.45%
3	Twitter Marketing	1650	2334	41.45%
4	Photography	2101	2945	40.17%
5	Microsoft Word	3175	4401	38.61%
6	Statistics	1359	1862	37.01%
7	Local Job	2122	2905	36.90%
8	Videography	3095	4097	32.37%
9	Copy Typing	4867	6389	31.27%
10	Search Engine Marketing	1840	2328	26.52%
11	Objective C	1207	1505	24.69%
12	Sales	2614	3233	23.68%
13	Ghostwriting	5212	6404	22.87%
14	Data Processing	9076	11024	21.46%
15	Business Analysis	1967	2389	21.45%
16	Web Search	4782	5795	21.18%
17	Marketing	8269	9867	19.33%
18	Video Production	5391	6369	18.14%
19	Social Media Marketing	6524	7574	16.09%
20	Excel	13246	15301	15.51%
21	Research	4238	4887	15.31%
22	Corporate Identity	3067	3536	15.29%
23	PDF	2474	2852	15.28%
24	Caricature & Cartoons	2033	2342	15.20%
25	Facebook Marketing	5602	6410	14.42%

Fastest Falling Jobs - Q1 2023 vs. Q2 2023

Rank	Skill	Job Count Q1 '23	Job Count Q2 '23	% Increase
1	Blockchain	1339	859	-35.85%
2	Digital Marketing	1717	1169	-31.92%
3	Metatrader	1471	1006	-31.61%
4	Arabic Translator	1245	895	-28.11%
5	Software Development	1308	942	-27.98%
6	API	1516	1109	-26.85%
7	iOS Development	1220	894	-26.72%
8	.NET	3029	2234	-26.25%
9	Microsoft SQL Server	1309	975	-25.52%
10	YouTube	1575	1175	-25.40%
11	Node.js	4077	3047	-25.26%
12	German Translator	1209	904	-25.23%
13	ASP.NET	1370	1034	-24.53%
14	Academic Writing	1219	937	-23.13%
15	Blog	2324	1790	-22.98%
16	Article Rewriting	6045	4663	-22.86%
17	Web Development	1531	1188	-22.40%
18	C# Programming	5625	4423	-21.37%
19	SQL	1981	1608	-18.83%
20	React.js	3606	2939	-18.50%
21	Linux	4990	4067	-18.50%
22	Amazon Web Services	2354	1928	-18.10%
23	Unity 3D	1194	987	-17.34%
24	AngularJS	2084	1723	-17.32%
25	React Native	1380	1148	-16.81%

Q1 2023

The data is based on 304,000 jobs posted to the Freelancer platform between January 1 to March 31 2023.

Fastest Growing Jobs

• Jobs, particularly logo design, packaging design and t-shirt creation, are typically the starting point for many founders launching a new business. The sudden influx of design, eCommerce and marketing jobs are a key indicator of a boom in startups.
• Jobs requiring skills in Artificial Intelligence were the seventh fastest growing skill on Freelancer.com (up 20.62% in Q1 2023 from 1,038 to 1,252). Jobs demanding Generative AI skills, such as ChatGPT, Dall-E, Midjourney and Chatbots, grew by more than 325% from 286 in Q4 2022 to 1,216 in Q1 2023.
• The data also shows an increase in Digital Marketing (up 12.8%, from 1,524 to 1,720) and Videography (up 14.2%, from 2,716 to 3,102) jobs which also suggests businesses are focusing more on their online marketing and content creation strategies to amplify their brands

Fastest Growing Jobs - Q4 2022 vs. Q1 2023
Rank	Skill	Job Count Q4 '22	Job Count Q1 '23	% Increase
1	T-Shirt Design	1,403	1,868	33.14%
2	Covers & Packaging Design	1,128	1,436	27.30%
3	Corporate Identity Design	2,474	3,073	24.21%
4	Product Design	1,214	1,493	22.98%
5	3D Design	5,027	6,135	22.04%
6	Local Job	1,756	2,138	21.75%
7	Artificial Intelligence	1,038	1,252	20.62%
8	Shopify	2,302	2,775	20.55%
9	Logo Design	32,963	39,694	20.42%
10	Banner Design	4,956	5,949	20.04%
11	Illustrator	28,447	33,593	18.09%
12	Web Development	1,317	1,540	16.93%
13	Shopify Templates	1,392	1,617	16.16%
14	eCommerce	4,212	4,866	15.53%
15	Photoshop	38,224	44,126	15.44%
16	Customer Service	1,332	1,532	15.02%
17	Customer Support	1,554	1,777	14.35%
18	Videography	2,716	3,102	14.21%
19	Business Cards	1,747	1,973	12.94%
20	Digital Marketing	1,524	1,720	12.86%
21	API	1,350	1,516	12.30%
22	Graphic Design	61,709	69,204	12.15%
23	User Interface / IA	1,811	2,019	11.49%
24	YouTube	1,416	1,576	11.30%
25	Video Production	4,899	5,401	10.25%

Fastest Falling Jobs

• Jobs that were in less demand in this quarter are related to tech, development and writing. Software Development, which was ranked as the fastest growing job in Q2 2022, began to decline this quarter and was down by 34.4% (from 2,001 to 1,311)
• Demand for these types of jobs surged last year as many tech employees were laid off globally. However, the new data suggests demand is beginning to stabilize and return to pre-mass layoffs levels.

Fastest Falling Jobs - Q4 2022 vs. Q1 2023
Rank	Skill	Job Count Q4 '22	Job Count Q1 '23	% Increase
1	Software Development	2,001	1,311	-34.48%
2	Report Writing	5,368	3,741	-30.31%
3	Blockchain	1,921	1,342	-30.14%
4	Statistical Analysis	1,315	931	-29.20%
5	Technical Writing	4,710	3,412	-27.56%
6	Algorithm	2,145	1,566	-26.99%
7	Statistics	1,861	1,362	-26.81%
8	Matlab and Mathematica	1,952	1,448	-25.82%
9	German Translator	1,621	1,210	-25.35%
10	Research Writing	9,910	7,506	-24.26%
11	Ghostwriting	6,895	5,235	-24.08%
12	eBooks	1,003	773	-22.93%
13	Unity 3D	1,546	1,197	-22.57%
14	Mathematics	1,952	1,512	-22.54%
15	Business Writing	1,324	1,036	-21.75%
16	Blog	2,973	2,331	-21.59%
17	C++ Programming	5,899	4,665	-20.92%
18	Transcription	1,194	948	-20.60%
19	English Grammar	1,236	984	-20.39%
20	Research	5,309	4,249	-19.97%
21	Computer Security	1,020	820	-19.61%
22	Game Design	1,235	996	-19.35%
23	Game Development	1,890	1,535	-18.78%
24	Article Rewriting	7,448	6,062	-18.61%
25	Business Plans	1,507	1,238	-17.85%

Freelance Demand

Upwork Survey 2022

More than 1,000 U.S. hiring managers were surveyed through a third-party, independent online sample between April 25, 2022 through May 10, 2022.

• Use of skilled independent professionals poised to accelerate: Nearly 60% of hiring managers who engage independent talent say they plan to increasingly rely on freelancers over the next six months (58%) and over the next two years (66%).
• Freelancers help businesses solve the talent shortage: Nearly 80% of hiring managers who engage skilled freelancers say they are confident (78%) in their ability to find the talent they need, compared to just 63% of those who don’t engage freelancers.
• Organizations that work with independent talent are more confident about withstanding turmoil: Among those hiring managers who use freelancers, 84% say they are confident in their company’s ability to respond to disruption, compared to 69% of those who do not use freelancers.
• 85% say that working with independent professionals allows them to access talent with specialized skills or expertise.
• 79% of businesses agree that working with independent talent enables their business to be more innovative.

Fiverr Survey 2022

Fiverr conducted a nationwide survey of over 1,000 owners of businesses of varying sizes and revenue in partnership with Censuswide.

Freelancers have already proven to be an essential resource for businesses.

• 81% of respondents said they are already using freelance talent to support their full time staff and fill skills gaps.
• 40% say independent talent provides a larger talent pool for recruitment.
• 38% believe freelancers are more efficient.

Given the possible recession, business owners surveyed said they will hire freelancers to fill talent gaps in their workforce.

• 43% of business owners surveyed plan to hire freelancers
• 8 in 10 said independent flexible talent can help companies during times of economic downturn.

Survet also find, that Executives at larger companies are more likely to want employees back full time in the office

• Executives/Managers surveyed at large companies (500+ employees) are the most likely to want employees back 5 days a week (67%).
• Managers at Large Cap companies (revenue $500 million+) are the most likely to want employees back 5 days a week (57%).

MBO Survey 2022

MBO Partners and Emergent Research surveyed 504 Human Resource managers, directors, VPs, and CHROs from large corporations in May of 2022

Firms with a relatively high share of contingent workers plan to increase their use of contingent labor substantially more than those with lower shares.

• The average company surveyed reports that contingent labor makes up 28% of their workforce (the median was 25%). (contingent labor was defined as all non-permanent workers)
• The average contingent labor share of enterprise workforces is also forecast to increase, growing from 28% today to 33% in 18 months and 36% in 5 years.
• Over the next 18 months, two-thirds (67%) expect their use of contingent labor to increase substantially (13%) or increase somewhat (54%), with only 5% expecting their use to decrease
• Over the next five years, almost 8 out of 10 corporations (77%) expect their use of contingent labor to increase substantially (33%) or increase somewhat (44%). Again, few (6%) expect their use of contingent labor to decline over this period.

Freelace Supply

Upwork Survey

2023

The study is conducted by independent research firm Edelman Data & Intelligence. 3,000 U.S. working adults over the age of 18 were surveyed for it online between October 24, 2023 - November 9, 2023. Of those, 1,142 were freelancers and 1,858 were non-freelancers. Results were collected to ensure demographic representation in line with the United States Bureau of Labor Statistics’ 2023 Labor Force Statistics from the Current Population Survey and the American Community Survey. The study has an overall margin of error of ±1.7% at the 95% level of confidence. Freelancers: ±2.8%, Non-freelancers: ±2.2%.

• Freelancers contributed $1.27 trillion to the U.S. economy in annual earnings in 2023. This was a 78% increase from the estimated $715 billion to the economy in 2014, the first year of the study.
• The number of professionals freelancing increased to 64 million Americans, or 38% of the U.S workforce, an increase of 4 million from 2022.2
• Freelancers are 2.2 times more likely to regularly use generative AI frequently in their work: 20% of freelancers use generative AI tools on a regular basis (multiple times per week), which compares to just 9% of non-freelance professionals.
• Nearly half of freelancers provide skilled knowledge services: 47% of all freelancers, or nearly 30 million professionals, provided knowledge services such as computer programming, marketing, IT, and business consulting in 2023.
• A quarter of freelancers are creating influencer-style content: 23% of all freelancers, or 14.7 million professionals, created influencer content including livestream services, social media videos, images or blogs in 2023.
• Gen Z and Millennials are the most likely to explore freelancing: In 2023, 52% of all Gen Z professionals and 44% of all Millennial professionals performed freelance work.
• Older Americans continue to be part of the freelance market: In 2023, nearly 8.3 million professionals, or 13% of all U.S. freelancers, were aged 59 or above.  
• The future is bright, according to freelancers: Over 85% of freelancers say the best days are ahead for freelancing.

2022

Upwork's 2022 Freelance Forward survey, a representative study of 3,000 professionals.

• Freelancers contributed $1.35 trillion to the U.S. economy in annual earnings in 2022, up $50 billion from 2021.
• The share of professionals freelancing increased to 60 million Americans, up three percentage points from 2021 to 39%.
• Nearly three-quarters of freelancers (73%) say that perceptions of freelancing as a career are becoming more positive, up from 68% in 2021.
• In 2022, 43% of all Gen Z professionals and 46% of all Millennial professionals performed freelance work.
• 17% of U.S. workers are now diversified, meaning they seek multiple sources of income from a mix of traditional employment and freelance work, up three percentage points from 2021.
• 26% of all U.S. freelancers hold a postgraduate degree, up from 20% in 2021.

Aspire Survey

• Of the 65.6% of candidates actively seeking work, the overwhelming majority (90.9%) are ideally looking for permanent employmen
• In comparison, just over a fifth (22.3%) are looking for part-time work, while a third (33.6%) are seeking contract or freelance wor

• Surveys throughout 2022 showed increasing candidate intent to find freelance work; in Q1 of 2022, 9.5% of candidates were looking for these sorts of roles. That grew to 11.2% in Q2 and jumped sharply to 31.3% in Q3 – likely a direct result of economic conditions.

Freelancers VS Full Time Employees

Cost Differences

According to the Small Business Administration (SBA), the general rule of thumb is that the real cost of an in-house employee is typically 1.25 to 1.4 times more than an employee’s salary.

Costs to Hire Freelancers	Costs to Hire In-House Employee
Hourly rate or set project fee	Salary Bonuses Health, dental, and life insurance Paid time off Retirement account matching Payroll taxes (such as Social Security, Medicare, and unemployment) Workers’ compensation Other perks

Other Cost to Take into account, however these costs are only a 1 time expense at the onbording stage.

Recruiting costs

• Time of internal HR team
• Time of team conducting interviews
• Job board fees
• Background check and drug screens

Administrative costs

• Time of the administrative team to enroll new employees in benefits, payroll, etc.
• Fees associated with enrolling new employee in benefits programs

Deferred productivity cost

• Cost to productivity while new employee gets up to speed

Provisioning costs

• Cost of equipment necessary for employee to perform duties
• Cost of new accounts for required software programs

Training cost

• Time of team training new employee
• Cost of training programs for new employee

Example Software Developer Cost Differences

Could be significantly cheaper to hire freelance developers.Discount of up to almost 50% by hiring freelancers instead of full-time employees.

The annual salary for hiring freelancers at an hourly rate of $60 – $100 will result in $107,400 – $179,000. While the base salary of full time employee could be about $112k

However direct and indirect cost of full time employees makes up the difference, these cost could increase full time employee cost to almost 200k.

• Legally required benefits (Social Security, Medicare, unemployment insurance): 8.5%
• Insurance (medical, dental, life): 7.6%
• Paid Leave: 6.7%
• Retirement and savings: 4.3%
• Annual Bonus: 3.5%
• Supplemental pay (overtime and premium): 2.6%
• Employment training tax: 0.1% on first $7,000
• Overhead and G&A: average of 25% and 18%

Pros and Cons

Pros		Cons
Freelancers	Full-time Employees	Freelancers	Full-time Employees
Reduced costs	Loyalty	Challenges in establishing company culture	An average workweek of 40+ hours
Reduced risk and more flexibility	Cost-effective	Unavailability and unresponsiveness	Greater requirements for employee training
Simple hiring process		Lack of effective communication and management	Increase in labor costs
Industry-standard quality:
Connections
Access to the best-in-class talent

Freelance during Recession

Current Trends

According to Linkedin, while economy is taking a toll on full-time employees, it’s offering a silver lining to gig workers and contractors.

• The share of U.S. paid job posts for contractor roles increased +26% YoY, while full time roles only grew by 6% YoY.
• Many employers consider hiring contract workers vs. permanent workers as a less expensive option that reduces their tax obligations and benefits costs and increases flexibility.
• “If you’re a recruiting leader in 2023," says Stephen Lochhead, senior VP of global talent acquisition at Expedia Group, “and you don’t have a decent mix of contingent talent, you’ll be more risk-exposed to whatever the future brings — good and bad. You need some elasticity so you can flex up or down as needed.”
• 69% of recruiting pros say the macroeconomic environment is negatively impacting hiring.
  

In January, ResumeBuilder.com surveyed 1,000 U.S. business leaders at companies with at least 50 employees to find out how many are currently “quiet hiring,” or will be soon.

Key findings:

• 57% of companies have had layoffs in the past 3 months; 56% say they plan to lay off employees in the next 6 months.
• 37% of companies with recent layoffs are hiring contractors to replace laid off workers
• 62% of businesses recently asked employees to take on new roles within the organization; 10% say employees weren’t given additional training
• 66% asked employees to take on additional work; 5% of companies doubled employees’ workloads
• 53% asked full-time employees to move to a contract position
• 34% have cut salaries in the past 3 months; nearly 1 in 10 reduced ALL employees’ salaries

ODesk 2008-2009 Recession

Odesk Hours by Week https://techcrunch.com/2009/08/13/in-a-tight-economy-outsourced-developers-on-odesk-work-100000-hours-a-week/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAD_YdAANCPQpqh9y0s_6W-keNLs1zGAx6MKERuCqdWuB-AOj1-KFAxh8jON7S19xBoAUluF192t2bW3Ppt_VCxzDoHZJCrhjfeijKWex6L_wAZrYcRxW7MfqHWbsD-2Mt20n5SnNEVbw4Asvx1Niu56q3MnHiyeDgh-Th30HBEtJ

During the economic crisis of 2008, outsourcing on oDesk nearly tripled.

• U.S. buyers outsourcing to U.S providers rose.

• The amount of work done in the US grew faster relative to other countries known for outsourcing(a rate of 367% from 2007 to 2008), like India and Russia, in 2008.

• Higher satisfaction rates help U.S. workers remain competitive versus less expensive providers overseas.
• The number of freelancers using the platform also increased. 18 months prior to the recession, there were 2.5 service providers for each buyer. During the recession, the number rose to nearly 4.
• Even so, as competition for freelance tech jobs increases, wages have remained stable or even increased

• The influx of skilled developers also drives hourly rates higher.

• oDesk used data from over 200,000 technology buyers and providers

In July 2029, the hours worked on oDesk surpassed 100,000 a week for the first time, and $65 million worth of work was posted on the site. In contrast, oDesk workers are earning about $6 million a week

In March 2009, oDesk surveyed 600 buyers of remote services and 350 service providers.

• 41.9% said they were planning to outsource more in the recession, either because they have cut full-time staff (7.0%), or because they cannot hire full-time staff (34.9%).

• 14.6% of buyers have replaced employees with oDesk providers in the last year, while 14.5% of buyers have hired an oDesk provider who would have otherwise been unemployed or a victim of the economic downturn.
• Buyers cited cost savings, the ability to audit providers, and access to talent not available locally as their top three reasons to use oDesk.

• Of the 350 providers surveyed, a vast majority said that there are enough jobs available on oDesk to meet their needs (73.9%), and feel that they are making fair rates (77.9%).

• Majority (59.0%) said that if they weren’t providing services on oDesk, they wouldn’t be able to meet their financial obligations and 32.4% said oDesk earnings are their primary source of income.

• 53.9% of buyers are employing at least some US providers, while 84.3% of providers are working for a US-based buyer.  

Outsourcing

ISG Index

Q1 2023

Data from the ISG Index, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more

Global spending on IT and business services in the first quarter fell sharply from an all-time high in the prior year, as modest growth in managed services failed to overcome continuing weakness in cloud demand

https://isg-one.com/docs/default-source/default-document-library/1q23-isg-index-presentation.pdf?sfvrsn=4439d631_0

• First-quarter ACV for the combined global market (both as-a-service and managed services) was $24.1 billion, down 8 percent from a market peak in the first quarter of 2022.
• Sequentially, the global combined market grew 1 percent, ending a streak of three consecutive quarters of decelerating results.
• Most ever contract restructuring awards (renewals, extensions) as providers focus on pursuits with existing clients

Managed Services Segment

https://isg-one.com/docs/default-source/default-document-library/1q23-isg-index-presentation.pdf?sfvrsn=4439d631_0

• Global managed services ACV reached an all-time quarterly high of $9.8 billion in the first quarter, up 1 percent versus the prior year and up 2 percent over the fourth quarter.
• During the first quarter, 703 contracts were signed, down 1.5 percent against record volume in the 2022 first quarter, but up 2 percent sequentially.
• IT outsourcing (ITO) ACV rose 7 percent, to $6.8 billion, fueled by growth in application development and maintenance (ADM) services, which advanced 23 percent in the quarter and now represents more than 65 percent of ITO ACV.
• ITO Managed Services pricing continues to fall annually, most deals included Y/Y reductions but typically not in step with market declines.
• Business process outsourcing (BPO), at $3.0 billion, declined 10 percent against a record first quarter in 2022.
• Provider revenues continue to show steady growth, but provider margins remain under pressure. Right-sizing activities in the market are occurring to improve margins

https://isg-one.com/docs/default-source/default-document-library/1q23-isg-index-presentation.pdf?sfvrsn=4439d631_0

As-a-service (XaaS) Segment

• ACV was $14.3 billion, down 13 percent, the fourth consecutive quarter of sequentially declining results following a record first quarter in 2022.
• Infrastructure-as-a-service (IaaS) fell 16 percent, to $10.4 billion, the second straight quarter of declining year-over-year ACV in this segment. Cloud consumption is slowing
• The Big Three hyperscalers ((AWS, Azure and GCP) saw their combined ACV drop 12 percent in the quarter, the first time they have experienced declining quarterly ACV versus the prior year.
• Software-as-a-service (SaaS), likewise, saw a drop in ACV in the first quarter, down 4 percent from the prior year, to $3.9 billion. Sales cycles lengthened with enterprises looking to optimize cloud workloads.

By Region

	Combined			Managed Services			XaaS
Region	ACV (B)	Y/Y	Q/Q	ACV (B)	Y/Y	Q/Q	ACV (B)	Y/Y	Q/Q
Americas	$   12.50	-7%	0%	$      5.20	-1%	12%	$      7.30	-11%	-7%
EME	$      7.40	-5%	0%	$      3.70	-4%	4%	$      3.70	-6%
Asia Pacific	$      4.10	-14%	4%	$      0.83	62%	-37%	$      3.30	23%	-24%

Americas

• First-quarter ACV for the combined market at $12.5 billion, down 7 percent, the steepest year-over-year drop for the region since ISG began tracking the combined market in 2015.
• Managed services ACV declined 1 percent versus the prior year, but was up 12 percent against the fourth quarter, to $5.2 billion.
• IT outsourcing, at $3.2 billion of ACV, was flat with the prior year, but up 2 percent versus the fourth quarter, while business process outsourcing, at $2.1 billion, was down 3 percent from the prior year but up 32 percent over the fourth quarter
• Demand for cloud-based XaaS solutions, at $7.3 billion of ACV, declined 11 percent from the prior year, its sharpest quarterly drop ever, and 7 percent versus the fourth quarter.

EMEA

• ACV for the combined market at US $7.4 billion in the first quarter, down 5 percent from the prior year, but essentially flat with the fourth quarter.
• Managed services ACV, at US $3.7 billion, was up 4 percent sequentially from the fourth quarter, but down 4 percent from the prior year.
• IT outsourcing (ITO) rose 5 percent year on year, to US $3.0 billion. Business process outsourcing (BPO), meanwhile, slumped 30 percent year on year, to US $750 million.
• Demand for cloud-based services (XaaS) declined 6 percent versus the prior year, to US $3.7 billion, with infrastructure-as-a-service (IaaS) off 10 percent, at US $2.7 billion, even as software-as-a-service (SaaS) rose 6 percent, to US $1.1 billion.

Asia Pacific

• First-quarter ACV for the combined market rose 4 percent sequentially from the fourth quarter to US $4.1 billion, but was down 14 percent versus the prior year.
• Managed services, with ACV of $825 million up 62 percent versus the prior year, but down 37 percent from the fourth quarter.
• IT outsourcing in the first quarter soared 74 percent, to US $643 million, and business process outsourcing climbed 32 percent, to US $182 million, both versus the prior year.
• Cloud-based XaaS market grew 24 percent sequentially versus the fourth quarter, to US $3.3 billion, but was down 23 percent from a year ago.

2023 Forecast

ISG lowered its forecast for XaaS revenue growth in 2023 to 15 percent, down 200 basis points from its January forecast, and maintained its growth forecast for managed services at 5 percent.

“The macro environment remains uncertain, with interest rates, inflation and trouble in the banking sector topping concerns for enterprise clients,” said Hall. “There continues to be more scrutiny on deal signings, especially in discretionary spending areas. Enterprises are revisiting cost optimization, efficiency gains and vendor consolidation deals.”

Q2 2023

Data from the ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show second-quarter ACV for the combined global market – both cloud-based as-a-service (XaaS) and managed services – was $22.7 billion, down 9 percent from the prior year – the third straight quarter the market has seen a year-over-year decline.

https://assets.swoogo.com/uploads/2741432-64b10de85d3d9.pdf

By Region

	Combined				Managed Services				XaaS
Region	ACV (B)	Q/Q	YTD	Y/Y	ACV (B)	Q/Q	YTD	Y/Y	ACV (B)	Q/Q	YTD	Y/Y
Americas	10.9	-11%	-10%	-13%	4.40	-17%	-3%	-6%	6.5	-6%	-14%	-17%
EME	7.8	10%	-2%	4%	4.50	22%	5%	15%	3.3	-3%	-10%	-8%
Asia Pacific	4	-9%	-19%	-17%	1.10	18%	47%	38%	2.9	-17%	-29%	-28%
Total	22.7	-4%	-10%	-9%	10	1%	4%	5%	12.7	-9%	-17%	18%

By Segment

• Combined Market ACV falls under $11B for the first time since 2Q21
• Managed Services registered all-time high, surpassed $10B in ACV for first time.
• Restructuring ACV up 28% Y/Y while New Scope ACV was down 20% Y/Y
• During the second quarter, 10 mega-deals (managed services contracts with annual value of more than $100 million) were signed. The 10 contracts were worth a combined $1.7 billion of ACV, up 35 percent from the combined value of the 10 megadeals signed in the second quarter last year. In all, 703 managed services contracts were inked in the second quarter, up 6 percent from the prior year.
• 70%+ of enterprises say reducing cost is key to their strategies. Extensions and renewals accelerated due to strong focus on cost optimization.
• Since peaking in 1Q22, XaaS ACV has fallen sequentially each quarter since

“Cost optimization has led to more deal restructuring in managed services than we’ve ever seen,” Hall said. “It’s also worth noting that BFSI, the largest market vertical, dropped 10 percent year-to-date, driven by weakness in BPO in the Americas.

“On the cloud side, the slowdown we’ve been seeing in China’s hyperscaler market is now spreading to the big three in the U.S. It was the first time we’ve seen a down market for cloud services in a first half. Overall, the drop in cloud spending was steeper than we anticipated.”

Segment	ACV (B)	Q/Q	YTD
Managed Services	10	1%	4%
- ITO	7.70	19%	13%
- BPO	2.30	-24%	-16%
XaaS	12.6	-9%	-17%
- IaaS	8.7	-22%	-21%
- SaaS	3.9	-7%	-6%

2023 Forecast

ISG lowered its forecast for XaaS revenue growth in 2023 to 11.5 percent, down 350 basis points from its March forecast, and maintained its growth forecast for managed services at 5 percent.

“In determining our forecast, we considered macro uncertainties that have delayed decision-making and tightened discretionary spending, thus slowing movement in the pipeline,” said Hall. “Digital transformation is not discretionary spending, but enterprises are more cautious about investments.

“We also noted that interest rates have risen more in the past year than in the previous 30, which may dampen big infrastructure investments. But the difficult comps will soon be behind us, and excitement is growing around generative AI. That could provide a much-needed tailwind for cloud services.”

Q3 2023

https://isg-one.com/docs/default-source/default-document-library/3q23-isg-index-presentation.pdf?sfvrsn=a65d431_4

Data from the ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show third-quarter ACV for the combined global market (both XaaS and managed services) at $23.1 billion, down 3 percent versus the prior year. It was the fifth straight quarter the combined market has declined year over year, although the rate of decline slowed this quarter.

• Combined market ACV for the first nine months was down 7 percent, to $70.0 billion, the first down market for this period since 2015, after averaging 21 percent growth over the previous five years.
• Within managed services, spending on IT outsourcing (ITO) climbed 17 percent, to $8.2 billion, fueled by 28 percent growth in application development and maintenance services. Business process outsourcing (BPO), meanwhile, fell 6 percent, to $2.1 billion, as spending slowed on customer engagement, procurement and engineering, research and development (ER&D) services.

Segment	ACV (B)	Q/Q	YTD	Y/Y
Combined Market	23.1	1.76%	-7%	-3%
Managed Services	10.4	4.00%	6%	11%
- ITO	8.2	6.49%	14%	17%
- BPO	2.1	-8.70%	-12%	-6%
XaaS	12.8	1.59%	-16%	-13%
- IaaS	9	3.45%	-19%
- SaaS	3.8	-2.56%	-6%	8%

2023 Forecast

ISG raised its forecast for managed services growth by 40 basis points, to 5.4 percent for the year, and maintained its forecast for XaaS revenue growth in 2023 at 11.5 percent.

“From a macroeconomic perspective, we've seen modest improvement in decision making and increased spend, but global interest rates remain high and concerns persist with energy prices, a strong dollar, and the expectation of a prolonged period of high interest rates,” Hall said. “Clients continue to restructure their IT landscape to adopt to multi-cloud environments and hybrid work arrangements, and are beginning to experiment with enterprise-grade GenAI use cases. We expect the applications market to continue to expand in 2024.”

Q4 2023

https://isg-one.com/docs/default-source/default-document-library/4q23-isg-index-presentation.pdf?sfvrsn=18f6d431_4

Data from the ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, show fourth-quarter ACV for the combined global market (both managed services and cloud-based as-a-service) was $23.4 billion, down 3 percent versus the prior year. Although it was the fifth straight quarter the combined market has declined year over year, the rate of decline continues to slow and the market may be poised for an upswing in 2024, ISG said.

“We’re seeing a sequential improvement over the last two quarters, indicating the market may have bottomed out and is ready to rise,” said Steve Hall, president of ISG. “Conditions are right for a turnaround. Inflation is cooling rapidly and central banks are planning interest rate cuts. That should create a more friendly environment for enterprise spending and capital deployment in 2024.”

“As AI technology matures and new use cases are identified, it will have a massive impact on the IT and business services and software industries. AI is the next great leap forward.”

	Q4 2023			2023
	ACV (B)	Q/Q	Y/Y	ACV (B)	Y/Y
Combined Market	23.4	1.30%	-3%	94.3	-6.0%
Managed Services	10	-3.85%	1%	40.7	5.0%
- ITO	7.7	-6.10%	12%	30.4	13.0%
- BPO	2.3	9.52%	-25%	10.3	-14.0%
XaaS	13.4	4.69%	-6%	53.6	-12.5%
- IaaS	9.4	4.44%	-10%	38.1	-16.0%
- SaaS	4	5.26%	4%	15.5	-3.0%

2024 Forecast

ISG is forecasting 4.25 percent growth for managed services and 15 percent revenue growth for XaaS in 2024.

“We expect spending for application modernization and business transformation projects led by GenAI to continue at high levels in 2024. Public cloud spending should accelerate as optimizations phase out. We also expect small discretionary deals to recover, as well as financial services industry spending to rebound,” Hall said.

Deloitte Survey

• Acquiring talent is a top internal challenge. 53% of surveyed executives reported increased staff levels over the last two years to match strategic organizational priorities.
• Nearly two-thirds of executives do not feel their organization is ready to face their employee retention challenge.
• Organizations are evolving their sourcing ecosystems to include external providers in their future workforce planning and talent acquisition strategies. 87% of organizations consider external workers part of their workforce
• Next-generation technology skill shortages (e.g., advanced cybersecurity, data science and ML, Infrastructure-as-code) were cited by executives as a top external challenge.
• Organizations are turning to service providers to overcome existing challenges related to skills and services, next-generation technology skill shortages (e.g., advanced cybersecurity, data science and ML, Infrastructure-as-code) were cited
• 76% of all surveyed executives indicated their IT services were delivered via thirdparty models. The shift to prioritizing value over cost efficiencies from third-party services has accelerated this evolution toward a highly outsourced IT environment
• Nearly half (48%) of surveyed executives indicated that they handle business functions internally. Significant opportunity remains for business process outsourcing (BPO) to mature in how it engages with, and realizes benefits from, external service providers beyond cutting costs.
• When asked for anticipated budget changes over the next two years, our survey found an even greater demand for external services across all third-party delivery models. Particularly, 67% of executives signaled an increase in budget for Operate Services.
• Two years ago, 70% of surveyed executives indicated cost was a primary reason for outsourcing.6 Today, while cutting costs ranks within the top four primary drivers for engaging Operate and Managed Services, it is overshadowed by access to new capabilities, business and operating model shifts, and keeping up with technology and regulation.

Outsourcing 2008-2009 Recession

According to IDC, BPO contract values peaked in 2008 in most industries, especially government, manufacturing and financial services. There was a decline in total contract value of new and renewed contracts in 2009 and 2010 due to the economic recession. Underlying the decline is a significant reduction in "mega deals" of more than $1 billion in 2009 and 2010 compared to the prior years covered in the study. The financial services sector, which had two significant mega deals in 2008, appears to be returning to pre-recession contract activity levels, though deals are trending shorter and smaller in size.

Unfortunately, the complete study by IDC is not available currently.

• Over half of the companies in the outsourcing market saw increased contract renegotiations in 2009, primarily caused by the recession
• Many companies put outsourcing plans on hold and re-negotiated existing contracts with outsourcing providers at lower prices, in exchange for contract extensions and other trade-offs, such as adjustments to service levels.

Global Research Institute

The empirical research is based on expert interviews conducted with BPO clients and BPO providers.

As investments were delayed and costs were reduced, the BPO market suffered a slowdown from the summer of 2008 until the second quarter of 2009. From the second quarter of 2009 until September 2009 when this study was conducted, the BPO market was experiencing a recovery. In the aftermath of the crisis an increase in the demand for BPO solutions can be expected as a result of companies pursuing outsourcing solutions to gain flexibility.

Companies might consider outsourcing solutions in general as concept to cope with the economic downturn and the increased competition on a global plattform but they are not starting projects during times of crisis and recession.

• Despite the fact, that many companies in the sample were under severe economic pressure, none of them debated apparently BPO as a kind of „emergency‟ solution to overcome the situation. The need for upfront investments and the lack of managerial capabilities to coordinate a BPO solution were often mentioned as key reasons.
• Only one fifth of the experts are supporting the relocation to a low cost location while the majority believes these kinds of short-term action would at the end create more hassle and issues than help to overcome the problems. Employees to be laid off create a substantial severance burden which can turn out to be deadly in times of cash scarcity: “The 40% cost savings in Asia will fall you flat on your face when error resolution costs will kill the business case in the mid-term”
• Outsourcing is not considered an emergency action. Furthermore, respondents consider that outsourcing should be a designed and planned activity orientated to gain competiveness from economies of scale, specialization and location advantages, and it should be aligned with the organizations‟ goals and strategic planning.
• From the financial point of view BPO and Offshoring are not among the most favored concepts to improve the bottom-line in the short-term perspective. Companies prefer cost-reduction strategies and investment delays first in times of crisis and recession.
• Outsourcing is perceived, by most respondents, as a medium to long term investment rather than a fast solution to improve the competitiveness. And the sensitivity towards investments is another reason that put BPO behind.

International Association of Outsourcing Professionals Report 2010

The data used for this report is based on three distinct surveys of IAOP’s more than 100,000 members and affiliates worldwide.

• The largest percentage of companies have been renegotiating current contracts to adjust prices and volumes. In January 2009, 42 percent of respondents indicated that existing outsourcing contracts attheir companies were unchanged from 12 months earlier. By September 2009 this was down to 19 percent and by January 2010 it was 16 percent.
• Trend toward expanding future outsourcing programs in light of the recent economic crisis is clear. In January 2009, 36 percent of respondents indicated that their companies were expanding their future outsourcing programs. By September 2009 this number was 47 percent. By January 2010 it was up to 56 percent.
• The trend in what’s being outsourced is toward more high-skilled, knowledge-based activities. Sixty-one percent say knowledge management is more import than it was a year ago, while only 2 percent say it’s less important.
• Near-term cost savings is always a key driver. In January 2009, 25 percent of respondents indicated that these near-term cost saving had become more important over the previous 12 months. This rose to about 50 percent in September 2009 and stayed at that level in January 2010.
• Over the same period, 50 percent indicated that greater business flexibility had also become more important and just about as many indicated that long-term cost savings, and preparing the company for future growth had grown just as much in importance
• By January 2010, 45 percent of survey participants stated that their company was more focused on bundling services with fewer providers as opposed to less than about half as many, or 18 percent, who indicated that they were doing more multi-sourcing to more suppliers
• Preferences toward offshoring, nearshoring, and onshoring seem to be in a state of flux. By September 2009, 31 percent said they were more focused on offshoring while 33 percent said they were more focused on nearshore and onshore providers. By January 2010, the per cent increasing their focus on offshoring was down to 25 percent while the percent increasing their focus on onshore and nearshore providers was at 26 percent.
• Employment for outsourcing professionals has stayed steady in spite of the economy. In January 2009, 30 percent of customer organizations were increasing the number of out sourcing professionals at their companies as compared to 14 percent who were decreasing the size of their staffs. The percentages were just about the same a year later, 29 percent and 17 percent respectively. Employment was even stronger at provider and advisor organizations.
• Salaries are generally trending up as well. In January 2009 at customer organizations, 21 percent had seen salary increases during the previous 12 months as compared to only 10 percent with salary decreases. By January 2010, these numbers had shifted even higher, with 28 percent reporting salary increases during the previous 12 month period and only 5 percent reporting salary decreases. The story is much the same at provider and advisor organizations.

Offshore Outsourcing

World Bank Research

Some clients have frozen contracts, while others have demanded additional services in order to reduce costs. Providers have responded to the changing demand by employing a number of different strategies to reduce their own costs, including lowering salaries, opening offices in cheaper locations and finding innovative solutions to enhance efficiency.

Global Offshore Services Market Size

Source			Revenues (US$ Billions) Year						Comments
			2005	2006	2007	2008	2009	2010
OECD (2008)	Global offshore services market		81.4	100.8	125.6	157.4	198.6	252.4	Includes ITO-BPO & other high value service activities.
NASSCO M (2009)	Global offshore services market		44.25	59	78.3	101	117.5		Includes ITO-BPO & other high value service activities. "Derived from a 40% share of market from India." a
BCG (2007) Based on IDC data	Global offshore services market	ITO	19.2	22.7	26.9	31.9	37.3	43.2	BPO includes other high value service activities.
		BPO	27.4	42.3	65.1	100.3	154.5	238.1
		Total	46.6	65.0	92.0	132.2	191.8	281.3
GARTNER	Global outsourcing and offshoring services market	ITO					268		BPO includes other high value service activities.
		BPO					156
		Total					424

Offshore Services Revenues by Provider

The official recession started on December 2007, but revenues were not affected until almost 1 year later onwards.

Company	Jul-Sep 07	Oct-Dec 07	Jan-Mar 08	Apr-Jun 08	Jul-Sep 08	Oct-Dec 08	Jan-Mar 09	Apr-Jun 09	Jul-Sep 09
Accenture	27.0%	18.1%	17.2%	18.9%	17.7%	6.0%	-6.6%	-16.0%	-16.1%
IBM	6.6%	9.9%	11.2%	12.8%	4.9%	-6.4%	-11.4%	-13.3%	-6.9%
Computer Sciences Corporation	11.3%	14.3%	10.9%	15.6%	5.5%	-5.0%	-8.3%	-12.1%
Automatic Data Processing	13.5%	14.7%	11.8%	10.4%	9.5%	2.5%	-2.2%	-4.5%	-3.6%
CapGemini		21.00%		14.4%		0.2%		-12.7%
Logica		27.60%		16.3%		-1.0%		-20.1%
Affiliated Computer Services	7.8%	5.9%	7.1%	6.2%	7.5%	6.7%	4.4%	5.1%	4.5%
Tata Consultancy Services	40.3%	37.4%	30.3%	23.4%	17.1%	0.5%	-5.3%	-4.3%	-3.2%
Wipro	55.6%	54.7%	45.8%	41.3%	22.3%	0.2%	-8.4%	-10.5%	-3.7%
Infosys Technologies	36.1%	34.9%	33.6%	27.8%	22.2%	9.7%	-0.9%	-4.0%	-6.7%
CGI Group	14.6%	15.1%	19.0%	13.1%	3.3%	-9.6%	-17.8%	-13.6%
Hewitt Associates	5.6%	9.8%	7.6%	7.0%	7.3%	-3.1%	-3.5%	-6.4%
HCL Infosystems	26.6%	27.7%	13.6%	-5.5%	-8.8%	-21.9%	-19.8%	-9.5%	-10.9%
Cognizant Technology Solutions	48.0%	41.4%	39.7%	32.7%	31.5%	25.5%	16.0%	13.3%	16.2%
Convergys Corporation	0.1%	-0.9%	-0.5%	-2.5%	-3.9%	-1.4%	-3.0%	-1.0%	13.2%

Impact of the Economic Crisis on the Offshore Services Industry

• There has been a substitution effect, moving activities from high cost locations to lower cost locations. This phenomenon has continued during the economic crisis. Indeed, some countries have seen acceleration in the offshore services industry. A country case example of the substitution effect is the Philippines, which has continued growing despite the global financial crisis.
• Effect of the economic crisis is a general decline in the demand for offshore services by existing clients. This is the first time that the industry has faced a slowdown; however, it still presents positive growth rates. The slowdown in demand is the result of a number of factors, including frozen offshore service contracts, reduction in the scope of the contracts, and pressure on pricing. The immediate consequences for providers have been the need to lay off workers, reduce salaries and freeze hiring.
• Sectors negatively impacted by the global recession generally faced lower demand for offshore services. In other cases, clients in industries less affected by the recession show similar demand patterns as before the financial downturn, and in some cases there is demand for even more services. The impact of the crisis also depends on the maturity of the industry in different countries, making it difficult to generalize across the value chain
• Banking, Financial Services and Insurance (BFSI) was the economic sector most affected by the global recession. It is also the industry that uses the highest percentage of offshore services. Offshore services providers that serve the BFSI segment thus saw demand for their services decline and clients requested the renegotiation of contracts. In order to respond to client demand, providers reduced internal costs, reorganized production and also cut wages.
• On the supply side, the economic crisis has also forced providers to reduce prices, which has decreased both annual hiring and salaries.
• The largest decline in provider revenues was during the April-June 2009 trimester. Almost all companies show negative growth rates compared to the same period in 2008.
• Providers from developed countries show a sharper decline than providers from India.
• In order to mitigate the effects of the economic crisis, large providers have decided to expand their operations to developing countries and to reduce their personnel located in rich economies. These actions will help cut company costs because salaries in emerging economies are just a fraction of salaries in developed countries. Hiring trends have been concentrated in the developing countries, with most retrenchments and lay-offs occurring in developed economies.
• Another important effect of the economic crisis in the offshore services industry has been the decline in attrition rates, employees became more realistic about their expectations and about their careers.