Trends in IT Outsourcing with Corporate Market Overview

Spending on IT services is expected to reach a record $ 1.1 trillion in 2021.

To reduce development costs, build a professional team and shorten the time required to market, companies delegate software-related tasks to third parties. Due to the fact that this approach has many advantages, it is gaining popularity. Statista expects the global outsourcing market for IT applications to grow from $ 89 billion in 2018 to $ 96.7 billion in 2021. Technavio analysts found business process optimization to be one of the main reasons for the rapid market growth. 


Why do companies outsource software development tasks? 

  • Firms generally delegate more technical operations that include accounting, IT-related services, digital marketing, and development tasks. 
  • The main reasons for outsourcing are to achieve better efficiency, increase specialized knowledge, increase flexibility, relieve employees from other activities and expand available resources. 
  • Reducing operating costs is not the only reason to employ an external IT service provider. Previously, this was the main reason to outsource software development (according to Deloitte’s 2016 Global Outsourcing Survey). 
  • Firms that employ 50 or fewer are less likely to outsource than companies with more than 50 specialists. 

 As the ITO market extends to different regions, you can access talents in various fields and technologies. There are no restrictions on the area, so it’s easier to find a dedicated software development company that fits your project perfectly, including cost, time zone, culture, technology stack, and experience. 


Top 5 Trends in IT Outsourcing 2021 

  1. New priorities: value over price

 If companies used to outsource software engineering mainly because of lower costs, they are now looking for improved efficiencies, improved operations, and highly qualified specialists. As long as competition increases between IT service providers from different regions, most of them are working hard to provide quality solutions. 


  1. Small businesses are outsourcing more

 As IT outsourcing makes it possible to cut costs, hire a professional team and not have to worry about hiring issues, startups and small businesses are increasingly working with outside vendors. 

 However, large corporations and even corporations also delegate their projects to external IT service providers. With the increasing need for complex innovative solutions related to artificial intelligence, Blockchain and IoT, this option is particularly preferred by many companies around the world. 


  1. Increased demand for outsourcing close

 Now clients often delegate software-related tasks to IT service providers who are not far from their companies. For example, a UK based digital marketing agency hires a team of experts from Belarus. Since the lead time is about 2-3 hours, both sides benefit from smoother connection and more convenient workflow. 

 Software development outsourcing abroad continues to be popular in the United States and Australia while cooperation with wild houses is declining. In addition, companies in these countries often choose Europe, as the specialists there have a high level of specialist knowledge, in-depth technical knowledge and speak good English. Additionally, most of them are ready to stick to the client’s work schedule. 


  1. Models of new contracts and joint liability

 Analysts at the National Outsourcing Association found that creating new contract models is one of the most important ITO trends for 2021-2022. This year, the agreements between clients and software development companies are focusing more on project outcomes. All KPIs are discussed, approved, and written into the contract. 

 In addition, notice periods are expected to be shorter. The IT service providers share responsibility for the success of the product and become true strategic partners. As customers can choose the vendor that offers the best results or takes more risks, competition between IT companies will increase. 


  1. An increasing number of IoT, artificial intelligence and blockchain projects

 Today, companies of all sizes are investing massive resources in IoT, AI, and blockchain initiatives. Global IoT revenue is projected to reach nearly $ 1.6 trillion by 2025. Markets expect the global AI market to grow from $ 21.46 billion in 2018 to $ 190.61 billion by 2025. IDC expects blockchain spending to reach $12.4 Billion in 2022. 

 As demand for AI, Internet of Things, and blockchain solutions grows rapidly, customers are recruiting outside vendors to reach the talent they need and meet their challenges. There are many industrial use cases for these technologies. For example, blockchain is often used to enable the highest level of data security. It also enables the removal of middlemen from transactions while building trust between independent parties. Additionally, blockchain can help logistics companies ensure complete traceability of the supply chain. 

 When a client lacks in-house engineering talent, this becomes one of the main reasons for outsourcing. To meet the need for highly specialized skills, it makes sense to hire an outside company that has a dedicated development team designed specifically for your project. 


What do companies do the most? 

 Clients from all over the world are turning to third-party software development companies with the aim of solving various business challenges. According to an outsourcing report released by the National Outsourcing Association in 2020, 70% of companies said they would undertake to outsource in the future. 

 According to research, the following sectors outsource most software development tasks: 

  • The Financial industry is the leading customer. 
  • Manufacturers are the second third-party mandate for app development work. 
  • Retail and wholesale distributors are in third place on the list. 
  • The Health sector closes the list of major sectors that outsource software engineering and maintenance activities. 

 IT service providers help companies achieve a number of goals, such as when optimizing resource planning for companies running an ERP system. Automate sales activities with CRM and ensure data security with the blockchain or shifting from legacy technology suite to reduce infrastructure costs and increase scalability. The number of examples is not limited. So, let’s take a look at 6 features that are currently being outsourced. 


The 6 most important jobs today have been outsourced 

  1. Application development

 Application development and optimization is the most outsourced function: nearly 50% of companies worldwide delegate it to external IT service providers (Information Technology Outsourcing Statistics 2019/2020. As long as developing a new product is very expensive, companies try to reduce their costs while maintaining high quality. 

 In addition, many companies want to improve existing solutions such as go to the cloud to expand data storage, add various features to meet customer needs, redesign a mobile application to provide an amazing user experience, or break down the homogeneous architecture into microservices. To increase the scalability of systems and ensure ease of maintenance. 


  1. Information technology security

 Security is a top priority for many companies, especially those that deal with personal customer information, sensitive business information, financial information, and payment information. Because there are so many threats – malware, hacker attacks, data corruption, ransomware, etc. – you must protect them from them. 

 Companies are outsourcing various tasks such as security improvements (such as two-step authentication integration, hashing), running security services and penetration tests (scanning the system for vulnerabilities that an attacker can exploit). 

 Today, companies are increasingly delegating such processes to outside software development companies. according to “Information Technology Outsourcing Statistics 2019/2020. 48% of companies plan to increase the amount of work that they outsource. 


  1. Application management

 When you assign activities of this type to an IT Outsourcing company, you relax the management and operation of the ongoing system. Although this feature is very important, it is gradually losing popularity because some companies use SaaS (Program as a Service) for this purpose. 


  1. Network operations

 Network related operations include data network operations, continuous network monitoring, resolving potential network problems, and installing, repairing and maintaining network equipment.  

 Companies focus on managing the network efficiently and reducing the burden on the infrastructure. This often helps them not only reduce costs, but also improve system flexibility and performance. 


  1. Web operations

 This is another function that is largely cited by organizations around the world. Here, the customer’s software development company is responsible for hosting, managing and / or maintaining a website, web application, or e-commerce solution. 


  1. System implementation and integration

 Creating a custom software system takes a lot of time and effort. This often includes integration with existing client applications and ensuring seamless interaction between them. 

 Let’s say you want to create a CRM solution to track leads, contacts, payments, sales, and marketing activities. In order not to invest resources in performing task planning functions, connect CRM to the task management system used in your organization. 



 With the increasing demand for first-class digital products, the IT outsourcing industry is growing rapidly. Clients are looking for reliable software development partners who can provide not only technical support, but also highly specialized skills and knowledge. 

If you need advice, or want a solution for your IT needs, please contact ITStacks. 

Here at ITStacks, we provide solutions that companies can use to automate internal processes, improve customer service, increase system performance, enable information security, increase sales and reduce operating, labor and infrastructure costs. 

To make the most of the many advantages of our IT outsourcing specialty, ask our experts for your free audit today. 

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