IT outsourcing is taking the world by storm, with $587.3 billion in revenue predicted by 2027.
And it’s easy to see why. Outsourcing offers can’t-miss advantages such as cost savings, scalability, expertise and more. The list goes on and on!
Yet, the IT outsourcing industry has significantly evolved in recent years. To navigate the modern business landscape, it’s important to understand outsourcing trends.
Let’s take the pulse on software development outsourcing trends in 2024. This way, you’ll know what to expect – and what to leverage – as you kick off a new IT outsourcing project.
It’s no secret that competition for tech talent is fierce. Customers are demanding newer and better digital products. At the same time, tech professionals are in short supply. In fact, the talent shortage is estimated to reach a whopping 85.2 million developers by 2030.
Luckily, IT outsourcing is a great solution for companies who need tech experts. Businesses no longer have to worry about lengthy recruitment cycles and sky-high salaries. Instead, they can simply look to an outsourcing partner.
This is especially true as companies are desperate to tap into tech talent in new regions. Often these global developers have top specializations, but incur much lower competitive salaries.
In this way, software outsourcing trends are focused on filling the skills gap. It’s ideal for businesses without the capacity to invest in hiring in-house staff.
91% of businesses are undergoing some form of digital initiative today. Yet, few companies have the in-house skills and technologies to stay at the forefront.
Companies rarely have core competency in AI, big data, the cloud, and so on. What’s more, they must overhaul out-of-date legacy systems. Realistically, businesses don't have the bandwidth for such wide-ranging changes on their own.
To avoid being left behind, companies are leveraging outsourcing. With the right partner, they can get access to digital specialization and innovation. They can also guarantee full development teams for rapid product releases.
It’s no wonder that digital transformation spending is at an all-time high. IT outsourcing has played a key role for industry titans such as Audi (via CARIAD) and Nike (via Laiye). Sectors as diverse as telecom and manufacturing have also undergone these transformation initiatives.
The impact of a cyberattack can be devastating – both in money and reputation. In particular, the costs can be dizzyingly high, averaging $4.35 million per breach. So far in 2024, dozens of high-profile organizations have suffered attacks.
83% of organizations suffer more than one data breach annually. It’s clear that a cyberattack is now a matter of when, not if. But organizations can better protect themselves by employing cutting-edge cyber security protocols. To do this, they need highly specialized security professionals and systems.
For example, businesses with AI monitoring are able to flag breaches 28 days earlier. This spares them huge reparation costs in the long run.
Companies are now looking to IT outsourcing partners to access cyber specialists. The best cyber defense involves security, compliance, monitoring and remediation plans. Outsourcing is first-rate for addressing security as you focus on business as usual.
Remote work is now the norm. 71% of companies allow some amount of remote work. Plus, 62% of immediate teams are distributed across multiple time zones.
Overall, the comfort level with remote work models has increased significantly. Companies are now embracing the possibilities of IT outsourcing.
This is especially true considering that outsourcing partners are leaders in remote work. They are experts in collaboration, reliability and compliance from a 100% virtual workplace.
For businesses, outsourcing trends are closely aligned with their remote strategy. With it, they can boost productivity, cut costs and get access to the tech expertise they require.
(Source: McKinsey)
The stakes are high when you build a business-critical product. In fact, 75% of CEOs rated partnerships as important to their businesses. To maximize outcomes, it’s essential to align your goals and working style with your partner.
Partnership management is at the core of a successful relationship. It defines how both parties should act before the project even begins. It also sets the stage for deeper levels of trust.
IT outsourcing agencies intrinsically understand this. They’ve led the industry in cultivating great partnerships. Key areas of partnership management include:
Ultimately, partnership management has evolved as a powerful software development outsourcing trend.
In addition to digital transformation, IT partners are also on the front lines of AI.
80% of industry-leading companies are investing in AI initiatives – and for good reason. Applications such as RPA, computer vision and predictive analysis can revolutionize businesses. Specifically, they enable greater efficiency and customer engagement.
To access them, companies need AI experts and infrastructure. For most, it’s easier, faster and more cost-effective to do these AI efforts through IT outsourcing.
In this way, businesses can leverage AI expertise and innovation without the risks.
Data-driven insights are at the heart of strategic decision-making. Businesses who need advanced analytics have turned to outsourcing for top data scientists.
In fact, data scientists and analysts are the #1 most in-demand tech professionals (5.5%). Cybersecurity analysts come in at a close second (5.2%).
Outsourcing partners provide this specialization through scalable teams. Businesses don’t have to handle the lengthy, costly and ever-changing recruitment process.
Expert partners also have specialized tools and resources, including security protocols. This means organizations can enjoy the advantages of big data to boost operations and UX.
Closely linked to cybersecurity, data security is vital to protect your business. This involves safeguarding your users’ data and intellectual property from breaches and theft. It also means complying with privacy laws including GDPR, HIPAA and more.
In an age of cloud services and tight global regulations, brands must have top data security. It’s also important to have a well-tested incident response (IR) plan in case of a breach. After all, 45% of breaches occur through new cloud technologies.
Data management and monitoring has become a robust trend in outsourcing. IT outsourcing partners enable access to top specialists and resources. This way, businesses can lock down security and forgo the costs of in-house teams.
Cost was once the driving factor for outsourcing. Now, businesses are now focused on outsourcing's biggest boon: access to best talent. Today, 46% of companies are choosing outsourcing for skills not available in-house.
The shift is largely due to companies realizing the importance of high-quality software. Digital demands and technologies have become more complex. In this landscape, companies need truly excellent developers on hand.
With the growing developer gap, it’s become vital to capture this critical talent. Outsourcing partners have set aside cheap manpower. Instead, they're meeting this need with specialized experts on their teams.
Ultimately, businesses are embracing IT outsourcing talent over cost savings. With it, they're likely to gain a competitive edge and greater market success in the long term.
Another top trend in outsourcing is elevating user experience. In a competitive market, businesses require exceptional UX to stand out.
UX is the cornerstone of boosting customer loyalty. With personalized, seamless interactions, customers are more likely to engage and buy. In fact, studies suggest that great UX design can boost conversion rates up to 400%.
Outsourcing partners can elevate UX by providing specialized, innovative designers and developers. These experts can undergo brand-driven UX design, UX prototyping, usability testing, accessibility, etc.
Unlike permanent in-house hires, your outsourcing partner can scale your team. Doing so lets you adjust the level of UX development for long- and short-term goals.
(Source: State of Agile Report 2022)
DevOps and agile are the go-to methodologies for highly effective software development today. Studies show the agile method has twice the success rate of traditional processes.
Outsourcing partners are now emphasizing these industry best practices. Through them, they offer airtight collaboration that’s aligned with business goals. This results in top-quality software, rapid time-to-market and greater efficiency.
In today’s market, businesses need experts who are well-versed in agile methodologies. Outsourcing agencies are implementing agile to meet their client’s ambitious goals.
(Source: 2021 Kearney Global Services Location Index)
In the past, IT outsourcing targeted giants such as India, China and Malaysia.
However, the remote work revolution has changed the IT outsourcing landscape. It's opened the doors to lesser-known but high-quality digital hubs. Often these locations have stable governments, budding IT ecosystems and reasonable rates.
Case in point: many Eastern European countries ranked on Kearney’s top 20 IT locations. These include Estonia, Poland, Bulgaria, Georgia and Latvia. What’s more, Pentalog’s World Ranking lists Moldova as #1, along with Romania, Ukraine and Poland.
We’re likely to see this trend grow for outsourcing to smaller, stable tech hubs. Other regions have become popular for IT outsourcing for these very reasons. This includes Asian locations, such as Vietnam, Philippines and Thailand. Latin America is also buzzing with Brazil, Mexico and Colombia.
At Netcorp, we’re proud that our expert teams are based in Estonia and Poland. Besides top talent, Estonia has another key advantage: significantly higher government efficacy scores.
The IT sector is predicted to use 14% of the world’s carbon footprint by 2040. This makes green software a vital next step.
Sustainability isn’t just essential for our planet. It’s also important for brands to earn the trust of conscious customers. Some software practices that foster sustainability involve:
Greener software development is becoming a must-have for businesses. In response, they're aligning products with their corporate social responsibility goals.
Stay up-to-speed on the industry by understanding these key software development outsourcing trends. In this way, your business will be prepared to maximize your next outsourcing project.
No matter what outsourcing is like tomorrow, you'll need a top IT outsourcing partner to guide you. Get in touch with Netcorp today to discuss your product vision and requirements. Our developers will bring world-class expertise and innovation to your business table.
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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