With software development outsourcing becoming the new norm across all industries, we all love a good read on software outsourcing trends and what to expect shortly.
As we close the third quarter of 2021, CMC Global believes this is the perfect time to predict IT outsourcing trends quickly. If you are a business owner or outsourcing decision-maker, CMC Global’s overview of software outsourcing trends will help you make sense of the most important ones.
1| Changing Software Outsourcing Relationships
Today, IT outsourcing has become an essential service for Asian and African companies. With countless advantages such as reduced costs, easy access to IT talent, and high production speeds. As a result, outsourcing service providers in the high-tech industry have gradually shifted from simple manual work to high-level solutions for many important software architecture issues or complete product development.
Because of this reliance, outsourcing companies are no longer regarded as ‘developer hiring agencies.’ Many vendors have evolved from IT Talent Connectors into real strategic partners for business owners, focused on long-term partnerships, shared risk, and business alignment.
This new collaboration is much more people-oriented. It focuses on cooperation and quality of implementation, simplifying the process, but not on price. With this strategic vision, by helping a trusted partner to understand the customer’s processes well, you can believe in a superior end product.
2| A Sense of Scarcity and lack of Qualified Software Engineers
Global spending on IT services expects to exceed $1 trillion in 2021 and increase slightly – by 5.5% – due to the contradictory economic force of the coronavirus (COVID-19). But such a short break is not the problem: the real issue is the shortage of qualified in-house specialists, which should be the main reason most companies will outsource IT services.
The problem is quite severe: according to a study conducted by Robert Walters, Totaljobs, and Jobsite, which surveyed over 550 technology professionals, over 70% of UK tech employers will face a talent shortage in the next 12 months. The US predicts that local universities will not be able to fill a third of the 1.4 million IT jobs by 2021.
New technologies have evolved so rapidly that it has not been easy to meet the demand for talent. With such rapid technological growth, IT companies must remain competitive in all kinds of services, from AI and cybersecurity to cryptocurrency and blockchain. Many new technologies and employee shortages have led to a search for highly skilled professionals with knowledge of cutting-edge technologies.
3| Businesses will start Contributing more to Outsourcing Providers.
The fact is that you will not turn to IT outsourcing if your local agencies or engineers agree to do the same thing at the same or lower price. Of course, everyone wants to optimize their business with cost in mind. However, the situation in 2021 is slowly changing. These trends toward software outsourcing are a natural consequence of the shortage of IT professionals. As highly skilled employees increase their rates, companies will be forced to adjust their software development budgets.
Besides, according to the National Outsourcing Association’s “Outsourcing in 2021” report, product quality is now the primary driver of outsourcing, rather than cost reduction. The study found that customer experience, improved security, and business development are the areas that companies focus on when developing outsourcing.
Many Asian IT outsourcing companies, such as CMC Global, are looking for reliable long-term partnerships, trust, and value. After all, product/service quality is the key to evaluating a company, which requires greater integration of the IT company with its customers’ services.
4| More than one External Supplier at a time.
As IT spending increases, large companies are also tending to outsource software development more widely. However, the wider the scope, the harder it is to overload all human resources, from senior managers to experienced IT engineers, bad salespeople, and creative designers. These challenges lead to the decision to outsource to different countries/companies at the same opportunity to enhance the best of both worlds or even several.
According to outsourcing trend data obtained by the ISG, the number of outsourcing service providers moving away from the multi-service provider model has decreased from 42% to 15% over the last decade. They desire to bring higher significance to their customers with a better overall customer experience with niche services. These trends in outsourced software are highly valued by business owners, as the GSI data show. In 2008, 42% of the Forbes G2000’s largest companies chose to outsource their IT activities to individual companies. And then a decade later, this figure has fallen to just 15%.
However, this trend does not equate to significant outsourcing service providers’ failure to outsource full-cycle software development. For large providers, building a diverse team and establishing deep communication channels within departments and units is undoubtedly advantageous to their smaller competitors. Ultimately, it is always essential to have full control over delivery and to maintain a minimum of customer involvement throughout the process.
5| High Demand for Network Services
A CDI report released at the Cointelegraph conference predicts that global network spending will reach $16 billion annually by 2023. This colossal figure means that this leading IT department will soon become a global trend in outsourced software development.
Across all customer processes and activities, distributed ledger technology has its advantages in improving security and transparency and providing an innovative fundraising solution. In conclusion, there exists a growing demand for trained and skilled chain professionals across various sectors, from private companies to financial institutions, which is undoubtedly an opportunity for any outsourcing company with an experienced team of economic chain specialists.
6| Business Automation in IT Outsourcing.
Another primary technology application emerging in various aspects of our daily lives is business process automation, thanks to robotic process automation (RPA) and its combination with artificial intelligence (AI).
The upward trend in workplace automation was predicted by CMC Global not so long ago.
With leading outsourcing providers, robots (bots) and virtual assistants can effectively integrate into the workflow to replace human employees’ primitive and repetitive tasks. According to a GSA report, more than 80% of business leaders believe that RPAs and AI will play the most crucial business role by the end of 2021
7| Cloud Shopping
The latest technology trend in IT outsourcing is cloud services. Hosting everything on a cloud platform is a priority for many business owners these days. Many projects (many of which cost billions of dollars) move to cloud storage to save costs.
However, we should note that cloud computing is characterized by alarming cybersecurity. With the kind of sensitive data that IT outsourcing can deal with, it is crucial to outsource to a reliable and secure provider to protect your users’ private information and project details.
8| The growing need for Better Cybersecurity
Data has long been the most valuable resource for all businesses, making cybersecurity a top priority for all IT departments, including outsourced software development.
In its report on cybercrime during the pandemic, the UN reported a “600 percent increase in malicious emails during the current crisis”. The growing digital dependency increases businesses’ vulnerability to cyber-attacks, with a cyber-attack occurring every 39 seconds worldwide, the UN analyzed in the same report.
Therefore, adequate data protection is needed now to avoid falling victim to a cyber attack. For example, innovative outsourced software development companies have now adopted multi-layered security approaches to eliminate risks and protect corporate data.
According to a Computer Economics study on IT security outsourcing’s growth, 47% of IT companies use external security services rather than relying solely on in-house staff.
9| The Evolution of Alternative IT Outsourcing
Statista’s report on the world’s leading offshore business services countries in 2019 shows that India and China are the leading outsourcing countries with IT exports of around $150 billion. Meanwhile, areas like Vietnam, Ukraine, Poland, and Romania are emerging as the next offshore software development centers.
Thanks to a dynamic IT industry and thousands of IT outsourcing offers, Eastern European countries now threaten to compete with traditional and popular Asia options.
10| There is significant Digitization in the High-tech, Healthcare, and Telecommunications sectors.
Digital transformation is occurring everywhere, especially in specific industries such as fintech, healthcare, and telecommunications. Again, it is potential customers who are looking for outsourced services. In fintech, AI, blockchain, or peer-to-peer transactions will become the new norm, while AI-enabled VR will dominate healthcare in both the public and private sectors to expand diagnostic horizons.
Finally, the 5G network’s impact on the telecoms industry is undoubtedly an exciting area, with outsourcers vying for their share of the 5G market. This trend will indeed open the door to incredible opportunities for massive IoT connectivity.
When should we look at these trends in outsourcing software development?
11 | Lack of technical expertise or speed
Outsourcing is the answer for you if you lack the technical expertise or if you don’t have IT talent on-site. Speed is also something to consider, as in some countries or regions it is quite challenging to get a flexible team of available engineers.
Outsourcing companies, especially in technology hubs such as China, India, and Vietnam, offer specialists in various technologies. They can hire IT talent with different skill sets and C-specialists such as CTOs to get a fresh perspective and set up the right workflow and agile principles.
Outsourcing is a big step to stop wasting time on micromanagement, which happens when your employees have to keep track of everything, even unimportant details, which can cause you to miss or ignore the relevant ones.
When you want to outsource, you can optimize your business and core competencies like marketing, fundraising, or sales, leaving all technical decisions to the outsourcing experts.
The primary purpose why businesses turn to outsourcing. Having an offshore development team doing all the bulky IT work for you, rather than paying for an entire in-house team, will cut costs significantly, from bonuses, perks, and other hidden fees to keeping your employees happy and engaged.
When you prefer to outsource IT services, you stay ahead of the competition through constant innovation. In this way, you’re always opening up new competitive opportunities for your business through a much broader knowledge base.
A reliable outsourcing service provider is always up to date with the latest IT solutions and market technology trends, and it’s a shame you’re not taking advantage of this.
The year 2021 is undoubtedly a wild one. It’s good that it will be over in just over two months, but we must comprehensively recognize the situation we are now developing the right business strategy. The trends mentioned above expect to impact the IT industry shortly, prompting businesses to change accordingly as an immediate reaction to market trends.