The software development outsourcing market has evolved drastically in the last decade. Just consider that IT global spending reached a whopping $4.6 trillion this year.
In addition to growth, the IT outsourcing landscape has shifted in exciting ways. New horizons such as remote work, AI and green software have transformed the industry.
To stay competitive in our digital age, you must understand the IT outsourcing market. Here are key software development outsourcing statistics so your business has 360° vision.
Software outsourcing involves hiring a third-party provider to handle your IT needs. Your partner will work closely with you throughout all product phases. This includes discovery, design, development, deployment and post-launch support.
Outsourcing has become a popular option, especially due to the developer shortage crisis. Choosing to outsource lets your business access top talent with no strings attached. It also unlocks cost savings, flexibility and more.
Let’s dive into the software development outsourcing statistics defining the market today.
It’s clear that outsourcing plays a major role in the total IT services market. Experts predict software outsourcing will continue to grow worldwide in upcoming years.
The growth of the software outsourcing market is also reflected in business decisions. Keep in mind that:
(Source: World Bank’s ICT Service Exports)
According to the World Bank, Ireland ($206.35 billion) and India ($144.8 billion) are top-ranked for ICT exports.
Other countries with leading ICT outsourcing numbers include:
Be aware that these ICT values include both computer and communications services. Other reports that isolate IT services suggest that Japan is also a leading provider.
(Source: 2021 Kearney Global Services Location Index)
Of course, the value of IT outsourcing isn’t just in the numbers, but also in the quality of services. Kearney ranks the top 5 IT outsourcers as India, China, Malaysia, Indonesia and Brazil.
As remote work has become the norm, smaller tech hubs are also gaining traction. Typically these locations have stable governments and budding IT ecosystems. This includes:
(Source: Statista)
By 2024, there will be 28.7 million software developers available for hire worldwide. Specifically, the top 5 producers of IT talent include:
In the coming years, we’ll likely see an uptick of IT talent from other high-growth regions. These may include countries in Eastern Europe, Asia and Latin America.
(Source: Pentalog’s 2022 World Ranking Report)
Over the years, there have been many studies on the most skilled developers around the world. Though largely subjective, the most recent reports come from Pentalog and Coursera.
Overall, Coursera’s insights suggest that:
(Source: Statista)
Businesses are especially keen to hire for skills that lead to the best digital products. The most in-demand areas include:
Specifically, there's a high demand for AI, big data, business intelligence, IoT and so on. This speaks to the greater trend of digital transformation. 91% of organizations are prioritizing digital efforts, while 80% are undertaking AI-specific initiatives.
(Source: 2023 HackerRank Developer Skills Report)
Other studies on in-demand skills include more specific technical areas. For example, the most popular HackerRank skills tests were:
(Source: Deloitte’s 2022 Global Outsourcing Survey)
Of course, businesses are looking to IT outsourcing partners to cover specific gaps.
The #1 software area is cybersecurity, with 81% of businesses using outsourcing for it. This makes sense considering that 83% of organizations suffer 1+ data breach per year.
A few other highlights from these top software areas include:
(Source: Turing’s 2022 Most In-Demand Tech Skills Report)
Organizations are seeking IT partners with the hottest programming language skills. The top 5 requested by businesses include React, Node.js, Python, AWS and JavaScript.
(Source: StackOverflow Developer Survey 2023)
Developer surveys from industry leaders such as StackOverflow reflect similar demands. The top 5 here included JavaScript, HTML/CSS, Python, SQL and TypeScript.
(Source: 2023 ManPower Group Report)
Essentially, all industries are facing increasing digital demands from their customers. The fields with the greatest IT talent shortage include:
(Source: SourceSeek’s Global Software Marketplace Insights)
However, these numbers fluctuate depending on the region. For example, Eastern Europe’s #1 industry is finance/banking (25.3%), with healthcare (17.3%) not far behind.
(Source: Krusche & Company)
The type of software project can also be a factor. For the app development industry, the #1 industry served is financial services at 72%. Next, you’ll see retail (60%) and manufacturing (59%) projects.
(Source: Statista)
In the past, businesses chose IT outsourcing primarily to save costs. While price is still a key factor, the #1 priority today is getting access to top talent (46%).
What’s more, software development outsourcing can help your company:
Small businesses who outsource have similar concerns. For them, flexibility (21%) and efficiency (19%) take the lead in benefits.
(Source: UpCity’s 2022 Small Business Outsourcing Report)
Of course, these benefits are just the tip of the iceberg. You can learn more about the full range of outsourcing advantages in our guide here. Some other serious benefits include:
(Source: SmallBizClub)
IT outsourcing has become a reliable, high-quality option for businesses. Yet, there are certain challenges to be aware of.
At 57%, miscommunication is the primary reason for outsourcing failure. This speaks to the importance of building a trust-driven relationship with your partner. After all, 75% of CEOs have stated that partnerships are “critical” to their businesses.
(Source: Deloitte Global Outsourcing Survey 2022)
It’s no wonder that businesses are seeking key traits in their outsourcing partners. Qualities such as transparency (54%) and trustworthiness (41%) rank at the top of their lists.
The software outsourcing sector is booming. Spending in the sector grew 22% between 2022 and 2023.
These numbers are only set to grow in upcoming years. The annual growth rate for IT outsourcing is estimated at 11.07% (between 2023-2028). What’s more, some experts predict the IT outsourcing market will reach $1.06 trillion by 2030.
(Source: 2023 ManPower Group Report)
The developer shortage crisis is a real phenomenon affecting businesses worldwide. 77% of companies are struggling to find the tech talent they need – a record high. In particular, Taiwan (90%), Germany (86%) and Hong Kong (85%) are facing difficulties.
Most importantly, this tech skills gap is only expected to widen. The current shortage is predicted to rise to 85.2 million developers by 2030.
(Source: 2023 ManPower Group Report)
The remote work revolution has made businesses everywhere feel more comfortable with outsourcing.
Today, 55% of companies are willing to hire outside their borders. As a result of new strides in remote hiring, more teams are hybrid today. In fact, 62% of immediate teams are distributed across multiple time zones.
(Source: 2022 Global Software Outsourcing Trends and Rates Guide)
The cost of software development outsourcing varies. It depends on the scope and specifics of your project, as well as your chosen partner.
On the whole, however, IT outsourcing offers opportunities for cost savings. Accelerate estimates that the total cost of an offshore developer is $41-81/hour. That’s about half the price of a U.S. developer.
This makes sense considering the many categories you can cut when choosing outsourcing. For example, you don’t have to pay for recruitment, salary/benefits, training, equipment, etc.
At the end of the day, hiring an in-house developer is a huge investment, often involving 2.7x the base salary. Outsourcing lets you hand off these costs to a partner instead.
(Source: Precedence Research)
Let’s now analyze software development outsourcing statistics by region. Forecasts predict that the engineering outsourcing market will enjoy 20.3% annual growth.
(Source: Grand View Research)
The North American IT outsourcing market is currently the largest in the world. Revenue this year is predicted to reach $182.70 billion. Other key forecasts include:
However, the U.S. and Canada still face a huge developer and tech skills gap. It’s likely that North America will grow at slower rates compared to other regions worldwide.
The European IT outsourcing market is also quite strong. $145.50 billion revenue is anticipated for 2023. In addition, 72% of European businesses plan to outsource at the same rate or more in the next two years.
This trend follows positive predictions for the IT outsourcing market in Europe, including:
(Source: Statista)
Western Europe has traditionally been the center for tech professionals in the region. Germany and the U.K. lead the pack with over 800,000+ developers each.
Besides Ireland, these two countries have the highest IT outsourcing revenues in Europe. Each has reached over $42 billion in ICT exports.
(Source: Coursera’s Global Skills Report 2023)
In addition, European countries have topped the Coursera skill rankings for Technology. These include Switzerland, Spain, Germany, and Slovakia.
Other countries such as the U.K. Germany and Portugal are also listed on Kearney’s IT destinations.
(Source: SourceSeek’s Global Software Marketplace Insights)
Eastern European countries boast of some of the most exciting IT outsourcing talent. Just consider that this year’s revenue for the region will reach $5.07 billion.
Eastern European countries are well-represented on Kearney’s index. These include Estonia, Poland, Bulgaria, Georgia and Latvia.
What’s more, Pentalog’s World Ranking lists Moldova as the top destination for IT talent. Romania, Ukraine and Poland aren’t far behind, either.
Finally, Eastern European countries are particularly known for their start-up culture. Estonia, where Netcorp is based, is a major player here. Estonia has the highest number of start-ups and venture capital per capita. It also ranks highest for government stability.
(Source: Coursera’s Global Skills Report 2023)
Asia is also seeing excellent growth in IT outsourcing. Revenue estimated to reach $101.10 billion in 2023.
Overall, India is the top IT outsourcer in the region, with $144 billion in ICT exports. Japan and China are also considered IT leaders in revenue.
In terms of skills, Coursera ranks Japan, Indonesia and Singapore high in Technology. At the same time, Kearney’s index includes numerous Asian countries. These include India, China, Malaysia, Indonesia, Vietnam, Philippines and Thailand.
(Source: Statista)
Latin America also has huge potential as an IT outsourcing destination. Its major player Brazil has one of the largest talent pockets with 500,000 developers.
Specifically, South America is one of the fastest-growing regions for software development outsourcing. This year, the market is predicted to attain $8.09 billion in revenue.
(Source: Coursera’s Global Skills Report 2023)
Finally, Coursera lists Colombia, Mexico, Brazil and Argentina as leaders in Technology skills. Kearney’s top-ranked IT list also includes LATAM countries Brazil, Mexico and Colombia.
Software outsourcing can be a slippery slope if you don’t stay up-to-speed with the industry. As your business chooses IT outsourcing, be sure to get the latest on trends such as:
Check out our in-depth trends list to learn more. By getting into the nitty-gritty, your business can maximize your IT outsourcing partnership.
Get the full picture with the software development outsourcing statistics above. Our experts have curated this list, so that your business can stay on top of the industry.
No matter how IT outsourcing evolves, you can benefit from a first-rate partner. Navigate the software outsourcing landscape with our Netcorp team of experts. We're proud to build high-caliber products aligned with your business goals. Contact us today!
Paavo Pauklin is a renowned consultant and thought leader in software development outsourcing with a decade of experience. Authoring dozens of insightful blog posts and the guidebook "How to Succeed with Software Development Outsourcing," he is a frequent speaker at industry conferences. Paavo hosts two influential video podcasts: “Everybody needs developers” and “Tech explained to managers in 3 minutes.” Through his extensive training sessions with organizations such as the Finnish Association of Software Companies and Estonian IT Companies Association, he's helped numerous businesses strategize, train internal teams, and find dependable outsourcing partners. His expertise offers a reliable compass for anyone navigating the world of software outsourcing.
Download the free copy of our "Software Development Outsourcing" e-book now to learn the best strategies for succeeding in outsourcing!
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