Top 10 IT Outsourcing Trends That Will Matter in 2023

Article by:
Elizabeth Boyarko
9 min
How will the IT outsourcing landscape look like in 2023 and beyond? What technologies will shape the global outsourcing market? In this article, we have singled out 10 trends in outsourcing software development that will matter in unprecedented times.

Digital advancement continues to shape the pace of innovation as technology is evolving rapidly and the demand for custom software development rises every year. As a result, we see increasing interest in software development outsourcing from organizations. And outsourcing trends let companies revolutionize how they perceive their own development and bring unrivaled opportunities to seize the global market.

In this article, we have singled out ten IT outsourcing trends that will matter in 2023 and further on.

The Latest ‚Äč‚ÄčSoftware Development Outsourcing Trends

How is the IT outsourcing landscape changing? Currently, companies focus on reducing vulnerability to fluctuations in the global economy, opting for MVP agile development and remaining flexible without losing product quality. As a result, relations between businesses and software vendors are changing into strong partnerships with better collaboration. Let's take a look at some of the most prominent IT services outsourcing trends.

1. Increased Demand for IT Outsourcing Services

The pandemic has made a critical input in reshaping the expected future of the whole technology industry. Yet, there are more reasons why companies around the globe are increasing their budget spend on outsourcing (which is, perhaps the biggest IT outsourcing trend today). It is due to the fact that the majority of businesses embraced the inevitability of digital transformation to stay competitive and viable, hence they need to find the most effective ways to scale the team.

According to the latest statistics, the overall market value of the IT outsourcing field is expected to exceed 587 billion USD already in 2027. Most of the revenue is forecasted to come from the USA. Plus, worldwide spending on such services as application outsourcing is visibly growing by the year as well.

Global IT Outsourcing Revenue Forecast 2023 - 2027

2. Building Better Collaborative and Strategic Partnerships

Interestingly, a recent survey of business leaders found that 20% of those surveyed are already using third-party outsourcing services. Furthermore, 22% of the respondents stated that they were considering starting to use such services as part of their digital transformation and growth strategy.

Statistics: Companies Relying More on Outsourcing

Nonetheless, finding a trusted provider and building productive relationships with remote teams can be pretty challenging. A few years ago, there was a tendency to partner within one project with multiple software development vendors. Today, most companies prefer single-vendor outsourcing to avoid all the headaches and risks of managing multiple vendors. Instead, they will focus on developing a strategic partnership with one vendor, which is also among the trends of outsourcing.

The difference between outsourcing core and non-core tasks will be less evident as vendor-customer relationships will be more reliable and trustworthy. For instance, if you hire a dedicated software development team, such offshore teams will easily integrate into the client's company and become a part of it. Thus, they will cover any tasks of varying degrees of importance necessary for the customer's success.

In previous years, companies chose outsourcing when they wanted to focus on quantity and be strictly profit-oriented. Now, results and quality play a more valuable role. As a result, outsourcers will need to alter their approach and stir their work by emphasizing quality and customization. It's the area where small outsourcing companies will win because of their unique custom software solutions, focusing on technology and a specific approach to each client's business challenges. Fair enough, this can be considered one of the new trends in outsourcing.‚Äč

3. A Growing Demand for Narrowly Specialized Software Companies

The pace of technological progress is very swift and vast, so is the scope of digitalization. For this reason, it's hard for many in-house IT departments to possess all the needed skills and and keep up with all the innovations and emerging ways to apply existing technologies, which appear day-to-day.

That's why more and more businesses start looking for more niche-specific software development companies to fill their skill gaps and quickly obtain the required talent. Finding and teaming up with experts specializing in some narrow sphere can bring maximum value to the project due to their deep knowledge of a particular technology or domain.

Trends in outsourcing come along with emerging technologies affecting particular industries like logistics and healthcare. They will be in high demand for outsourcing services needed for their digitalization using AI, Blockchain, VR, and other technologies.

At Upsilon, we have subject-matter expertise in various segments, including logistics and medtech, that we have built up over the years of software development. All the companies (be they in search of early-stage or growth-stage startup services or are established businesses seeking assistance with development) that come to us with their complex business challenges receive a unique solution based on their domain and specific requirements. Here are a few case studies you can explore.

4. A Greater Focus on Flexibility and Adaptability

COVID-19 has exposed the weaknesses of companies and shown that the ability to adapt is the only way for companies to keep their head above water. In the coming years, this tendency will stay, so it will become crucial for software development companies to manifest utter adaptability and agility in several aspects.

First of all, businesses will expect that their software vendors will have the ability to ramp things up and down if they request. So outsourcers will need to be ready to restructure teams within the shortest time frames and be agile to deliver results faster.

Acceptance of a company's business ethics and its adoption is also among the outsourcing software development trends. Client companies are waiting for their offshore partners to integrate seamlessly into their company and become a part of their current in-house team.

Third and last, modern businesses are looking out for innovations. How quickly software vendors react to the appearance of new technologies and upskill their personnel accordingly will affect the assessment of the vendor. Therefore, it is crucial for companies to have a decent list of criteria that will help effectively evaluate potential software development partners in accordance with the project requirements and, as a result, choose the most suitable one.

5. Europe Is Becoming a Leading IT Outsourcing Hub

Europe is becoming a more attractive destination for IT outsourcing. India will still be the leading outsourcing country where the largest share of global outsourcing revenue is generated. However, Ukraine, Poland, Estonia, and the UK will be among the direct competitors with high-quality performance, commitment, and affordable prices.

According to the data on Clutch, India alone has over 2500 firms providing IT services compared to the approximate 4700 IT companies in Europe as a whole.

IT Companies and IT Service Providers in the World

Geography is one of the points to consider when choosing between IT outsourcing models. And Europe has now become a great choice for outsourced IT services. This region can provide highly qualified specialists and innovative solutions.

Teaming up with a European vendor is also among the current trends in IT outsourcing. As such, Europe can offer a number of advantages, for example lower costs, reduction in capital investments, expertise and efficiency. This allows to hire top-rated IT professionals and implement the best technologies possible at a much lower cost, getting ahead of the competition.

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Technology Trends in IT Outsourcing

What are the top 5 outsourcing trends in IT in terms of tech innovation? Let's overview which significant changes and technology transformation to expect in various domains.

6. AI, Machine Learning, and Chatbots

Artificial intelligence (AI) promises to automate routine tasks where most mistakes come up, giving people the chance to concentrate on the main business goals. Automation and quick execution will enable companies to stay competitive in the market, explaining why AI is among the prominent IT outsourcing trends.

Plus, AI's machine learning (ML) empowers workflow automation, allowing software apps to learn instead of blindly following commands. Software vendors who provide data science consulting services and know how to implement AI inventions in their workflow will be able to process information automatically, avoid errors, and enhance productivity.

Moreover, AI increases the quality of customer service. It creates unique customer journeys that assist clients in making wise decisions. Chatbots are effective guides when it comes to consulting on service purchases. As a result, companies will see an increase in customer support effectiveness along with outstanding employment opportunities and a boost in user satisfaction.

7. Cloud Computing and Enhanced Cybersecurity

The demand for cloud computing is increasing because of the amount of data that needs to be stored. It becomes necessary to ensure online data centers and the required equipment by service providers.

More and more businesses are winning from adopting the cloud, which ensures better data protection, faster data operations, and the ability to modernize business processes by painlessly implementing various business apps. Companies turning to third-party vendors for effective cloud platforms is a growing trend in outsourcing. They will actively partner with vendors who offer software cloud-based services or will help to transfer their existing infrastructure to the cloud.

Mentioning specific numbers, a recent report forecasts that the cloud computing market size can go up to 1240 billion USD by 2027. That's up from 545 billion USD in 2022, which is quite a leap for a period of as little as five years.

Global Cloud Computing Market Size Forecast

Along with the need for cloud computing, there is the need for security services to prevent all kinds of threats, which is another outsourcing trend. The necessity to avoid security risks and safeguard the company data from thieves and cyberattacks are among the reasons why businesses turn to IT outsourcing providers. By finding a trustworthy partner, companies will perform their regular tasks and have someone responsible for cloud security.

8. Robotic Process Automation

What's for future trends in outsourcing, robotic process automation is already on the rise due to business automation. Many daily tasks will benefit from implementing RPA tech in, for instance, supply chain management, payment processing, and customer service.

RPA will allow companies to clear time for more complex tasks and leave menial work and repetitive actions for virtual assistants and bots. For instance, there are many ways how to use Slack bots for process automation. It will reduce operational costs, improve work coordination, and decrease manual mistakes.

Thus, outsourcing companies invest their time in business automation to bring better results for the clients. According to Gartner, robotic process automation software will generate revenue of 3.35 billion USD in 2023.

Companies can also supercharge their automation efforts by injecting RPA with cognitive technologies such as ML, speech recognition, and VR, automating higher-order tasks that required the perceptual and judgment capabilities of humans in the past.

9. Progressive Web Apps

The demand for a better user experience is growing as well as the need for progressive web apps. There are many differences between a mobile app vs mobile website, but the main one is that PWAs move back and forth between mobile and web apps. PWAs are designed to create a mobile application-like experience on websites. Moreover, they are fairly easy to develop and maintain.

Getting a PWA seems to be an ideal variant for businesses that don't want to develop a mobile application, yet at the same time wish to live up to the expectations of users who prefer using their smartphones because of their convenience. Both sides will win from PWA because their development is much faster, the web app development cost is relatively low, and they have the same effect as a mobile application. That's why many companies will seek outsourcing vendors to employ PWAs to achieve their business goals and satisfy the rising demands of their clients, therefore making PWA development one of the ‚Äč‚ÄčIT outsourcing trends.

10. Blockchain Technology

Blockchain technology enhances transparency, security and also offers numerous solutions for startups and small businesses to raise money. They enable the development of smart contracts, as well as immediate microtransactions.

As per Statista, global blockchain spending is expected to reach over 19 billion U.S. dollars by 2024.

While the demand for the knowledge of blockchain technology is rising, the need for highly specialized professionals increases accordingly. However, adequate blockchain professionals are rare in terms of availability on the labor market, especially when it comes to complex challenges like DApps or NFTs. Hence, businesses are looking to outsource their software development needs to companies that have blockchain experts, which is becoming a notable IT outsourcing trend.

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Concluding Thoughts on Outsourcing Trends

When a business decides to grow, it may be crucial for it to consider software development outsourcing. Companies that don't want to lag behind have already started learning and adopting the latest development trends. Nonetheless, it can be challenging for in-house developers to keep up with the pace of emerging technologies and implement every digital innovation due to limited human resources. That's why many companies choose to outsource software development.

We, at Upsilon, invest heavily in upskilling our employees to steer in the right direction with cutting-edge transformative solutions and data-driven insights. Upsilon's expertise stretches to multiple areas. As such, we provide various custom software development services from building mobile applications and creating web apps all the way to Slack bot development.

Our web development team is flexible and adaptable in terms of both innovation and cooperation. We easily integrate into our clients' companies (be they early-stage startups or growing businesses) and become a part of the in-house team. And we do care to provide our clients with the best-fit solutions for each business challenge.

If you have a project idea on your company's roadmap and you want to get the most out of innovations, we are ready to lend a helping head in adopting emerging technologies for your business. For more details, contact us for a consultation with our business development specialists.

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