The IT outsourcing market has witnessed significant growth in recent years, driven by the rising global adoption of technology solutions. According to Statista, the IT outsourcing market was valued at approximately $395 billion in 2022. With a projected compound annual growth rate (CAGR) of 8.26%, it is estimated to reach $587.3 billion by 2027.
This substantial increase in demand for outsourcing services can be attributed to the numerous benefits that software companies seek, such as development flexibility, access to a vast pool of tech talents, reduced time-to-market, meeting client demands, cost-effectiveness, enhanced software quality, and decreased burnout of in-house developers.
To stay ahead in a constantly evolving IT outsourcing landscape, companies must be aware of the latest trends in the industry. This article will discuss the top 10 software outsourcing trends to watch out for in 2023.
Securing Applications:
While digital technology has revolutionized best software development service processes, it has also exposed vulnerabilities. Hackers now have multiple avenues to compromise application security due to increased digital transformation. Forbes reported that 82% of businesses experienced cyber attacks in 2022, highlighting the importance of robust application security.
To counter these threats, most companies are outsourcing their data operations to advanced Managed Service Providers (MSPs). These third-party service providers offer specialized services, including data security, leveraging technical expertise, resources, and advanced technologies to ensure application security remains uncompromised.
Evolution towards Digitalization:
Software development companies that embrace emerging technologies gain a competitive edge in the industry. Automation, IoT (Internet of Things), AI and ML (Artificial Intelligence and Machine Learning), and other technologies continue to evolve rapidly, making it challenging to keep up with all of them. As a result, companies are turning to outsourcing service providers to tap into these advancements and enhance their development operations.
AI and ML technologies are increasingly deployed to automate tasks, handle customer interactions, and improve customer service through chatbots and cloud-based Interactive Voice Response (IVR) systems. The global AI and ML outsourcing market was valued at $93.5 billion in 2021, projected to grow at a CAGR of 38.1% from 2022 to 2030.
Furthermore, outsourcing cloud computing allows software development companies to access AI, RPA (Robotic Process Automation), and ML capabilities, enabling efficient data storage and cloud-based services. The combined market value of cloud computing and the cloud platform is expected to reach $832.1 billion by 2025.
AR or VR Technology:
Augmented Reality (AR), Virtual Reality (VR), and Mixed Reality (MR) have gained significant traction in recent years. The market for these technologies was valued at $28 billion in 2021 and is projected to exceed $250 billion by 2028. Companies are increasingly incorporating AR/VR into their offerings to enhance user experiences and drive sales.
AR technology is leveraged in applications for real estate, allowing potential buyers to virtually inspect properties. Similarly, VR technology facilitates real-time interactive learning processes. The demand for AR is expected to make it one of the top outsourcing trends in 2023.
Putting the Cloud’s Might to Work:
The reliance on cloud technologies in software development outsourcing has witnessed rapid growth. The global market for cloud technologies reached $410.92 billion in 2021 and is estimated to reach $598.4 billion by 2023. The benefits of cloud adoption include low overhead costs, quick access to data, enhanced global connectivity, increased efficiency, improved infrastructure, and improved data security.
Given the continuous growth of cyber threats, cloud technology will remain a key software development trend in 2023 and beyond.
Rising Interest in RPA:
The shortage of skilled talent, global economic recession, and increased competition has prompted companies to explore robotics in software development. The global robotic process automation (RPA) market witnessed a 31% revenue growth in 2021, reaching a total value of $2.4 billion, twice the overall software market growth rate (16%).
The robotics market was estimated at $55 billion in 2020 and is expected to reach $165 billion in the next five years. RPA adoption is becoming increasingly popular among software development company seeking cost-efficient and innovative solutions.
Multiple Vendor Selection:
Companies have learned from crises such as the pandemic, economic insecurity, and geopolitical conflicts, the importance of having multiple outsourcing partners to mitigate disruptions. The trend of relying on a single outsourcing partner in a specific offshore location is giving way to engaging with multiple vendors across various countries.
This approach allows companies to access a broader talent pool, minimize risks associated with regional challenges, and access specialized skills from diverse locations through nearshoring, offshoring, and onshoring strategies.
An Enhanced Focus on Delivery:
As digitization drives competition in the tech industry, software companies have shifted their focus from launching numerous products to delivering high-quality solutions to customers. To achieve this, many companies turn to software development outsourcing, which enables them to access expert developers with advanced technology capabilities.
Outsourcing also allows companies to customize solutions and efficiently manage development processes, ensuring a 70% growth rate in software development outsourcing between 2022 and 2023.
Working From Home: The New Normal:
The COVID-19 pandemic has normalized remote work, with many companies adopting hybrid work models. The software development industry has embraced remote work, providing flexibility and paving the way for outsourcing software development to remote teams.
Statistics show that remote work is favored by 82% of workers and leads to reduced stress and increased productivity. The remote work culture is expected to continue growing in the coming years.
Outsourcing Gains Ground Due to Skills Shortage:
The demand for software developers continues to outpace the available skilled workforce. Outsourcing offers a solution by providing access to a vast pool of talent from various global locations, mitigating the challenges of hiring and retaining qualified developers. Companies can tap into regions with less acute labor shortages, ensuring continued growth and competitiveness.
Advanced Methods for Managing Collaborations:
Partnerships in the outsourcing market are becoming more focused on results, leading to the transformation of outsourcing firms into service integrators. The old approach of treating outsourcing service providers merely as developers is replaced with strategic partnerships, where risks are shared among partners. This ensures that both parties are aligned in mitigating risks and delivering successful outcomes.
Conclusion:
As the IT outsourcing market continues to expand rapidly, companies must stay abreast of emerging trends to remain competitive and innovative. The top 10 software development outsourcing trends for 2023 encompass enhanced application security, evolving digitalization, the integration of AR/VR technologies, increased reliance on cloud technology, rising interest in RPA, multiple vendor selection for risk mitigation, a focus on high-quality service delivery, the normalization of remote work, the addressing of skills shortages through outsourcing, and the implementation of advanced collaboration methods.
By understanding and leveraging these trends, companies can strategically outsource their software development needs, access cutting-edge technologies, and achieve business growth and success in an increasingly competitive global market.