Software Outsourcing: Statistics and Predictions

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The term “IT outsourcing” was once meant to be associated with cheap labor in developing countries to handle low-value IT projects and back-office services. Traditionally, companies outsourced simple projects because they were concerned that the outsourcing providers may not have the expertise to execute complex software development projects. But as the global economy has become more cohesive and the quality of outside tech services has improved, outsourcing has become a key part of a strategic path to digital innovation. 

Today’s innovation outsourcing has much less to do with saving money with cheap labor and much more to do with finding specialized skills and on-demand technology expertise to keep initiatives on track. 

Software outsourcing predictions

Looming recessions are creating a sense of uncertainty for midmarket technology companies. As a result, businesses that never considered outsourcing some or all of their software development efforts are doing so now to support their go-to-market strategies. Software development outsourcing is an emerging hot trend because it enables companies to speed up product innovation and cut costs, especially in uncertain times. We predict 2023 will be the tipping point when this trend takes root. 

The International Monetary Fund (IMF) predicts global inflation will peak at 9.5% before dropping to 4.1% by 2024. According to many experts, there will be a worldwide recession in 2023. When a financial crisis hits, some believe that companies will struggle, projects will get cut and innovation will dwindle. However, recessions often present opportunities for innovators to discover new approaches to problems. Some of the best innovations germinate especially during an economic downturn.

Nonetheless, companies still must find resources to contend with economic uncertainty, talent shortages, and complex regulatory requirements, which can be challenging. We see a trend where companies are turning to third-party services for software development projects that were once only accomplished in-house. In 2023, as tech-driven businesses look to save costs and stay agile, we predict this trend will continue regardless of global inflation and market volatility.

Software outsourcing statistics 

In reality, Software Development Outsourcing services are on-demand and rapidly expanded to $66B’ worth globally – according to Statista. Additionally, it is anticipated that the software outsourcing market will hit $99B in 2024.

Based on numerous surveys companies do software outsourcing to avoid hiring mistakes and recruitment costs. When searching for an external software developer, your firm invests on average three months in the hiring process. The three-month cost you will risk in these months would be for example 30K on average with no profitable outcomes. Furthermore, software outsourcing maximizes in-house productivity. You can meet on-demand services and maximize your tech skills. And one of the biggest benefits of outsourcing software development services is having a project completed on time. Experienced software teams will have workflows in place to ensure that project milestones are met. 

Working with an outsourcing partner can help mitigate the risks associated with your project, such as underestimating timescales and lack of scalability. A good software development service will take the time to study your project specification and identify any potential issues.

Software outsourcing facts 

According to Fortunly, freeing up resources to focus on core business is the most widely cited reason for outsourcing IT functions, at 49%. Saving money is secondary but still a top priority. About 45% of companies that outsource IT functions say that their information technology outsourcing projects are meant to save money. About 46% say outsourcing lets them access skill sets that aren’t available in-house.

Also, according to a McKinsey study – 87% of respondents said they either are experiencing gaps in their IT teams now due to recruitment bottlenecks or expect them within a few years.

And IT services make up 72% of all global outsourcing contract values. 

Based on the recent publication of Sumatosoft, outsourcing helps companies reduce costs by about 15% on average but up to 60% and 57% of companies outsource their work to increase productivity. 65% do it to focus on business objectives, 53% to solve capacity issues, 28% to improve service quality and 26% to take help from talented professionals.

More than 94% of organizations use some form of IT outsourcing. Outsourcing IT-related business processes is one of the best strategic ways to handle tasks that are traditionally handled by internal staff. Surprisingly, even IT companies outsource some of their services. There are lots of innovative IT outsourcing companies all around the world that can ensure the best use of technology for both small and big companies.

Outsourcing software development has many advantages, including cost reduction, improved efficiency, mitigated risk, and enhanced security. In today’s largely digital business landscape, companies have the ability to access the world’s top software developers. Established companies are using software outsourcing to develop their products.

Due to the fact that companies that offer outsourced development have a large variety of talented developers, their specialists can start working immediately after the contract is signed. If you’re short on time, finding an outsourced development team will be easier and faster than having in-house developed software.

Also, outsourced development is a more flexible approach in terms of team composition. For example, a team lead, a backend dev, a frontend dev, and a QA engineer worked on a project for 3 months. After the release, such a large team is no longer needed. For instance, you don’t need to have backend and frontend devs working as much as they did during ‌in-house development. If you hire these developers in-house, you will have to look for additional tasks to occupy them with or pay them in full for an incomplete workload. Outsourced development allows you to avoid the problem of bloated teams.

The rapid pace at which technology evolves means that the software development industry is ever-changing. New programming languages are introduced, new methodologies are constantly being developed, and previous industry-standard practices become obsolete as more innovative approaches take over. That’s why using software outsourcing as a global strategy has become so important for businesses today.

Once you identify the skill gaps in your tech team, you can identify the elements of your project that need to be outsourced. High-quality outsourcing services like the ones Apiumhub provide, allow companies from all over the world to instantly fill any skill gaps in their teams, setting them up for digital acceleration in the long term.

Nowadays, software outsourcing providers are seen as valuable business partners who can play a major role in growth. Specialized development areas are no longer a challenge for companies that have a knowledge gap. 

Outsourcing speeds up the software development process without compromising on quality. Working with experienced developers who understand the principles of your project can definitely accelerate your product’s time to market.

Outsourcing allows companies to focus on their core business functions and direct their time and resources toward solving capacity issues. This is a great way to increase cost efficiency.

When you outsource a software project, you only pay for the expertise that you need. It eases pressure on internal staff and frees up company time to focus on the day-to-day running of the business.

A software outsourcing company can help mitigate the risks of developing your project. An experienced team will be able to foresee potential liabilities and identify errors through robust testing and QA practices.

An experienced software outsourcing team like Apiumhub has robust workflow processes in place to ensure that progress is monitored, milestones are met and projects are completed on time.

There are 3 principal software outsourcing models that companies can choose from. Each model has its own advantages. The outsourcing model that suits your project will depend on its level of complexity, your budget, timescale, and level of involvement: 

  1. The simplest form of software outsourcing is the staff augmentation model, where an outsourced team works alongside your internal team to develop the software. Augmented teams typically have face-to-face contact with existing staff, working hand in hand together and sharing a common goal.
  2. The dedicated team model presents outsourced talent which has more responsibility for overseeing the project. Our team thus provides management structure, allocating specific tasks and monitoring workflow. In this way, you benefit from the expertise of highly-skilled developers who provide a specific service.
  3. With a project-based model, the outsourcing company oversees the entire software development process, from defining the specification to allocating workflow, setting timescales, and quality testing.

Software outsourcing key players

Before you commit to hiring a software development company, it is important to check its reputation in the marketplace. Take a look at their website and read through their case studies. You should also check third-party review sites and their social media channels to see how they’re positioned in the industry. 

We contribute a lot to the software development and software architecture communities, and we have identified like-minded companies that focus on working software, deliver great results, and care about community and knowledge sharing. Let us share the companies that you can definitely trust: 

ThoughtWorks
ThoughtWorks is a leading global technology consultancy that integrates strategy, design, and software engineering to enable enterprises and technology disruptors across the globe to thrive as modern digital businesses.
ThoughtWorks is well-known worldwide, and they have leading software development minds on the team, such as Rebecca Parsons, Martin Fowler, Neal Ford, Andrew Hamel-Law, and others. Everything they do is of high quality, from events to blog posts. They are a reference in the software development industry.

Apiumhub
Apiumhub helps software engineers enjoy their work by improving their estimation, development, QA, automation, and delivery practices. Apiumhub is a software partner with years of experience applying best practices that help technical teams deliver robust, scalable, and better-performing working software on time.
Every year, Apiumhub organizes the Global Software Architecture Summit, an event that reunites leading software architects such as Mark Richards, Michael Feathers, Nick Tune, Sandro Mancuso, Eoin Woods, Diana Montalion, and others. Also, Christian Ciceri, Apiumhub’s co-founder and software architect, has published a book, “Software Architecture Metrics”, which he co-authored together with Neal Ford, Eoion Woods, Andrew Harmel-Law, Dave Farley, Carola Lilienthal, Michael Keeling, Alexander von Zitzewitz, Joao Rosa, and Rene Weiß.

Codurance
Codurance creates sustainable solutions that make innovation possible. Codurance improves business agility and accelerates innovation while driving business growth – quickly, safely, and securely – with confidence. Codurance shares very high-quality content: videos, articles, and talks. Also, they constantly organize events with a hands-on approach that makes a difference. Sandro Mancuso – the author of “The Software Craftsman: Professionalism, Pragmatism, Pride” book is one of the co-founders.

Endava
By leveraging next-generation technologies, Endava’s agile, multi-disciplinary teams provide a combination of Product & Technology Strategies, Intelligent Experiences, and World Class Engineering to help their clients become more engaging, responsive, and efficient. Among Endavers you may find Eoin Woods – co-author of the books: Continuous Architecture in Practice: Software Architecture in the Age of Agility and DevOps, Software Systems Architecture: Working With Stakeholders Using Viewpoints and Perspectives, and Software Architecture Metrics: Case Studies to Improve the Quality of Your Architecture.

Wps.de
Their expertise in custom software development helps equip your organization with the IT-enabled tools it needs to do its job more efficiently. They grew up with agile software development methods and have helped shape their development through numerous publications. Carola Lilienthal – author of the book “Sustainable Software Architecture” is behind this company and strives to bring more efficiency to software development processes.

Aardling
Aardling helps you make sense of complex environments. Through models, they guide your software design strategy and untangle your organizational constraints. Aardling supports and coaches your teams to create a software design that works for you. They bridge your technical and business stakeholders, often using collaborative techniques. They’re experts in DDD and related techniques like Domain Discovery, Domain Modelling, EventStorming, Context Mapping, etc. Also, an effective socio-technical strategy requires a broad insight into tech, business, product, and organization. They use mapping techniques to help you address the bottlenecks. Build the right skills, focus attention on critical business areas, and set up your teams for success. Aardling also organizes DDD Europe events.

Epam
Epam helps you reimagine your business through a digital lens. Their software engineering heritage combined with their strategic business and innovation consulting, design thinking, and physical-digital capabilities provides real business value to their customers through human-centric innovation.

Habla
Habla is your software architecture companion. Habla boosts digital transformation through functional programming & language-driven architectures. Pioneers in the use of Scala, with more than ten years of experience in the language and its big data & microservice ecosystem.

Autentia
Experts in the development of quality software. They design digital products and create custom-made experiences. Autentia’s mission is to be a technical referrer, for which they make use of good practices and agile methodologies. In addition, they spread these practices and the technical specialty to contribute to the community through books, tutorials, files, success stories, conferences, interviews, etc. In short, add value to the software development community by providing a quality service. Their vision is to change the IT sector by creating a primary demand for highly qualified profiles so that, regardless of the age of software developers, they can continue to be technical referrers.

Naturally, in a field as dynamic as software development outsourcing, trends come and go all the time, sometimes in the span of weeks.

That means that it’s impossible to predict which trend will dominate the field next. Yet, there are certain areas of software outsourcing that are always seeing new trends, including:

  • New digital technologies
  • New development methodologies and approaches
  • New outsourcing services
  • New actors in the outsourcing landscape

Even though you might have an internal policy to have an in-house team only, you can still use software outsourcing services for training or consultancy purposes to increase the tech level of your team. 

Based on our experience, the most requested software outsourcing services are: 

I hope you found this list article useful! The companies that we mentioned really make a difference in the industry and they have high-class experts that may take your software development team to the next level! 

Most of these companies will be at the Global Software Architecture Summit in Barcelona this year, don’t miss this opportunity to meet them there on October 9-11!

 

Author

  • Ekaterina Novoseltseva

    Ekaterina Novoseltseva is an experienced CMO and Board Director. Professor in prestigious Business Schools in Barcelona. Teaching about digital business design. Right now Ekaterina is a CMO at Apiumhub - software development hub based in Barcelona and organiser of Global Software Architecture Summit. Ekaterina is proud of having done software projects for companies like Tous, Inditex, Mango, Etnia, Adidas and many others. Ekaterina was taking active part in the Apiumhub office opening in Paseo de Gracia and in helping companies like Bitpanda open their tech hubs in Barcelona.

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