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In recent months, AI fanatics have been vocal about how AI will replace our jobs, particularly in technology, service sectors, and outsourcing. Some even predict AI will render outsourcing obsolete by eliminating the need for remote teams.Â
This simply won’t happen. While I do believe AI will help people costs grow more sustainably and improve service offerings; here’s why it won’t replace your jobs or the need for remote teams (outsourcing).
Less than 20% of the global population lives in developed countries
The majority of the global population lives in developing nations where GDP growth averages between 3-8%. However, over the past 20 years, developing countries have grown at an average rate of around 5%, compared to just 1-3% in developed countries.Â
As countries develop, the cost of providing services increases, driving demand for outsourcing to reduce overheads. This has fueled the growth of business process outsourcing (BPO) and IT services outsourcing, both of which are crucial to balancing service costs for developed nations.
In 2023, the global BPO market was valued at $280.64 billion and is expected to grow at a compound annual growth rate (CAGR) of 9.6% through 2030. Similarly, the IT services outsourcing market, valued at $639.59 billion in 2022, is forecasted to grow at a CAGR of 8.0% over the same period. By 2030, these sectors are projected to collectively reach over $1.6 trillion, nearly doubling their market size. This rapid expansion, however, may not be sustainable, with the industry doubling every eight years. Ideally, growth should slow to around 5%, in line with the GDP growth of developing nations, to ensure stability.
As more countries transition to developed economies and existing developed nations shift towards knowledge-based work, demand for services will continue to rise. Despite technological advancements, the need for human expertise in services remains high.Â
I believe AI will be essential in supporting emerging economies. Without AI, maintaining affordable services in a world where 50% of the population is classified as developed would be unsustainable. AI must be leveraged to keep costs low while enabling these transitioning markets to thrive, however, it won’t wipe out the need for human-driven services.
Software development costs are out of control
The era of startups being built in garages has largely passed. Today, many startups require millions—or even hundreds of millions—of dollars to achieve profitability, often leaving founders with small equity stakes in their companies. Â
Software development and developer salaries have nearly doubled in the past five years while the proliferation of programming languages further complicates tech development. While AI can assist a Node.js developer in working with .NET, it doesn’t eliminate the need for coding expertise. Instead, AI simplifies the management of diverse programming languages, reducing costs associated with maintaining multi-language environments.
We’ve seen junior developers become 25-30% more efficient while senior developers are 10-15% faster. This is not transferring to cost reductions, but simply allowing for more features to be shipped.Â
AI will help lower the cost for more businesses to launch and become profitable and prevent the current global monopolies that exist today. AI can also play a key role in curbing these rising costs while ensuring sustained growth in outsourcing. But this will only result in more products being built that are too expensive to make under the current people cost constraints today
AI is not delivering cost reductions. It’s contributing to cost hikes and service improvements
A recent RAND report showed that over 80% of AI projects fail. I think this is largely due to a misguided focus on replacing jobs/reducing costs, rather than measuring improved service quality.Â
Moving forward, AI projects should be measured not by cost savings but by enhancements in service quality and customer satisfaction. I also believe many of the companies claiming to reduce staff due to AI (the 20%) are likely using this narrative to craft positive market stories and boost their share value.
In reality, these reductions are because of tough market conditions, where layoffs are inevitable. The investment vs staff reductions just doesn’t add up. For instance, investing $1 million monthly in AI and automation would require replacing 500-1,000 remote jobs to be cost-neutral.
At Teamified, we’ve harnessed AI, technology, and human expertise to cut hiring times by 50%. However, AI accounts for only 15% of this improvement, mainly by helping our recruiters better understand hiring managers’ needs beyond basic job descriptions.Â
While AI has enhanced service quality and speed, it has significantly increased costs due to the need for expensive developers to support AI platforms. Over time, we expect these costs to stabilise as we scale. For now, we have a much higher cost base to provide a better service.
At 45, I’ve heard predictions about robots and technology replacing our jobs since childhood
Yes, not as many people work in factories anymore. Yet, since the 1980s, new roles like social media managers, influencers, sustainability managers, data scientists, cloud computing specialists, cybersecurity analysts, app developers, AI engineers, and blockchain developers have emerged. These jobs, created by advancements in technology and digitalisation, now support industries valued at over $8 trillion globally. The rapid evolution of these sectors continues to reshape the job market, and over the next 40 years, new jobs will emerge to replace any displaced by AI.Â
I’m really excited about AI’s potential to democratise access to services traditionally reserved for the wealthy, such as legal, financial, and medical advice and more importantly, cheap access to specialised education. AI won’t make these professions obsolete; instead, AI will make their services more accessible by offering preliminary advice and guidance, with human experts stepping in for more complex consultations.Â
As the global population becomes part of the developed world, the demand for these services will grow. Take 99designs for example. It made it easy and affordable to create a cool brand. Many thought traditional branding agencies would suffer, but instead, they flourished as people with newfound budgets invested more in their brands. I believe AI will have a similar effect, boosting industries more than it disrupts them.Â
Conclusion
AI will enhance the quality, speed, and accessibility of services. While AI may slow the rapid growth of outsourcing to a more sustainable 5%, it will not replace people or the need for outsourcing in the foreseeable future.
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