Software Development Outsourcing: 10 Trends You Should Know

8 min read


Statista estimates that the IT outsourcing market will have a value of $777.7 billion by 2028. That’s massive, especially considering this value reached $460.1 billion in 2023. 

Interestingly, the industry has undergone many changes in the past few years. New software development outsourcing trends have emerged in response to the ever-growing demand for innovative software solutions. 

Below, we look at some of these software outsourcing trends. We also discuss how these software development outsourcing trends may impact your business. 

1. Adoption of Hybrid Work Models

Hybrid work is here to stay. Major publications like Forbes and global brands like Logitech agree. So, it’s not surprising that hybrid work models are also making their way into the software development outsourcing industry. 

Your software development team no longer has to be in the same office at all times. The UX designer could work from India, while the front-end developer could be a New York City resident. They can all connect through a centralized project management tool. They can also rely on other tools like video conferencing software, virtual collaboration boards, cloud-based storage systems, and productivity apps to work together. 

Hybrid work models mean businesses have access to larger talent pools. They can also spend less on in-house employee expenses as they hire remotely. These include rent, in-office provisions (food, coffee, etc.), office supplies, and other amenities.

Hybrid work models also allow for greater diversity and inclusion in the workplace. For instance, individuals with disabilities or those who cannot commute to work can still be a part of the team and contribute their skills and expertise.

2. Adoption of Agile and DevOps Practices

Software development services have hopped on the Agile and DevOps bandwagon. Agile development allows for incremental updates, leading to iterative development. Other benefits of Agile development include better product quality, increased business value, higher customer satisfaction, and enhanced adaptability.

Similarly, DevOps enables faster delivery by combining the efforts of your development and operations teams. In simple words, these frameworks make your outsourcing partners more efficient — just what you need. 

3. Emphasis on Cybersecurity in Outsourced Projects

Cybercrime may cost global businesses a cumulative $10.5 trillion in losses per year by 2025. Understandably, businesses are now more vigilant than ever in this regard. 

Businesses use cybersecurity as a criterion for choosing software development companies. They also require transparent policies for data handling and protection. The rise of hybrid models further warrants the need for strong cybersecurity measures. With remote work, data is accessed and shared across multiple devices, increasing the risk of cyber attacks. 

So, outsourcing partners have to step up their cybersecurity game. This could mean streamlining incident response plans, educating the workforce on security best practices, and using the best technology to defend against cyber threats. 

Outsourced projects require stricter data protection measures. For instance, software development partners must comply with GDPR (General Data Protection Regulation) regulations when handling personal data. The requirement becomes even more important when they work for companies in the EU.

4. Integration of Artificial Intelligence (AI) and Machine Learning (ML)

We live in a time where AI and ML are becoming the norm. Outsourcing firms can invest in these technologies to automate mundane and repetitive tasks, improve efficiency, and increase accuracy.

AI integration into software development can have many benefits, such as cost reduction, quicker time to market, and more. It also brings software houses to par with their competitors. After all, you can’t risk falling behind in such a dynamic market.

There are many ways software teams can use AI in their development processes. One common approach is to incorporate AI chatbots to handle customer queries.

A more ”software development” approach is to use AI algorithms to assist in code refactoring and bug identification. Development partners can also leverage AI for predictive maintenance. For example, they can predict potential issues in an application’s codebase. Then, the relevant development team can address the issues before they worsen. 

5. Increased Focus on Cloud-Native Development

Gartner forecasts the cloud will be the ”pervasive style of computing” by 2027. Software development services have taken this as a cue to shift towards cloud-native development. 

When outsourcing software development, businesses can now leverage cloud computing to build and deploy applications. This saves them from the subsequent burden of infrastructure management or cloud migration. Some other benefits of cloud-native development are: 

  • Accelerated time-to-market 
  • Rapid resource provisioning
  • Remote accessibility 
  • High-quality app performance

Cloud-native development also eventually benefits customers. For one, software upgrades and releases are faster. Second, since the company saves costs during development, the end product is also more budget-friendly for the user. The centralized data security further increases reliability and trust in the product. 

6. Expansion of Nearshore and Onshore Outsourcing

Another of the many software development outsourcing trends is the rise of nearshore software outsourcing. More and more companies are opting for software development service providers in neighboring countries or even within the same country. 

Some benefits of this approach include: 

  • Better collaboration 
  • Reduced time zone differences 
  • Similar culture and language 
  • Efficient communication 

US businesses can look to Latin American countries like Mexico for outsourcing services rather than offshore destinations like India or China. The surge in nearshore development helps tackle the developer shortage in the US. Plus, it saves costs and diminishes risks associated with cultural differences. 

More importantly, nearshore outsourcing helps US companies remain competitive. They can delegate tasks to their nearshore development teams. At the same time, the in-house team can focus on innovation and new projects without compromising daily tasks.

7. Sustainability and Green Software Development

Going forward, businesses will increasingly focus on completing software development projects with eco-friendly practices in mind. IBM calls it a ” powerful catalyst for sustainability initiatives.”

The outsourcing industry can help reduce businesses’ carbon footprint. One, you don’t have to invest in hardware and data centers. Two, there is no need for a huge office space, which contributes to reducing the carbon footprint. 

However, the software development process will also have to incorporate specific measures for sustainability. Some examples include:

  • Using energy-efficient hardware and servers
  • Developing software with a smaller codebase to decrease energy consumption
  • Implementing coding practices that reduce waste and unnecessary processes
  • Adopting cloud-based technologies for efficient resource utilization 

If you’re a software-related service provider, consider placing sustainability as part of your core values.

8. Continuous Learning and Skill Development

Every year, we see new developments in the software space. That means the specialized skills your in-house developers or house team members have will become outdated in a few years.

You have two ways to tackle this issue. First, invest in continuous learning and development programs for your employees. Second, outsource your projects to nearshore software development companies.

The latter is better for cost reduction because the outsourcing companies are responsible for keeping their employees up to speed. Since they want to remain competitive, they don’t lag in this aspect.

Also, nearshore software development teams understand the nuances of your industry, especially if they have a rich portfolio of working with similar clients. They also keep on top of new trends and tools. That means you get the best of both worlds — specialized skills and up-to-date knowledge.

9. Personalized Customer Experiences Through User-Centric Design

Every business has to be at its best when it comes to customer satisfaction. It’s because customer satisfaction is the key to retaining customers, gaining new ones, and driving repeat business.

In software development, companies make and keep customers happy by developing applications that provide a seamless and personalized user experience. So, when businesses outsource projects, they want their development partners to include user-centric design as part of the project scope.

Let’s explain this concept with an example. You want to create a shopping app for your business. When you outsource the project to a development company, you want it to build an app that is visually appealing and easy to navigate. It should also include features like personalized recommendations and quick checkout options.

The bottom line is the company should design the final product with the end-user in mind. 

10. Blockchain Integration in Outsourced Solutions

We can’t forget blockchain when talking about software development outsourcing trends. The outsourcing industry has taken it up after businesses embraced its potential. 

There are many ways to integrate blockchain technology into outsourced solutions. For instance, it can help with secure data sharing and transaction tracking. Businesses may also use blockchain to create smart contracts — no more lengthy legal procedures.

The decentralization of data and transactions means greater transparency and immutability. It also leads to cost savings through the elimination of intermediaries.  

Flatirons has provided software development outsourcing services since 2018. So, we understand the importance of staying at the forefront of industrial innovation and evolution. We don’t only lower your labor cost by eliminating the hassle of hiring in-house software developers but also ensure your business aligns with all recent development trends. 

From full-featured software development to maintenance of existing applications, Flatiron has you covered. Get in touch today to learn more about our services.  

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