Software development has become one of the world's most essential and high-impact industries, with billions of dollars spent yearly on software development projects. As the industry is continuously growing, companies are looking at outsourcing software development as an affordable alternative to hiring full-time employees, allowing them to hire top talent regardless of location or job availability and still save money on taxes.
Software development outsourcing allows businesses to improve their products or services by having professionals from other companies work on a designated project or product. For the past five years, the global IT market has been rising from $88.9 billion to the projected 98 billion in 2024.
The following article sheds light on essential software development outsourcing stats to better understand the concept.
Top Software Development Outsourcing Stats
1. Gender Representation in IT Sector
Based on the data from Wise, women account for about 16% of the workforce in the IT sector worldwide, which is precisely the same percentage of women studying software engineering. The information is a bit unclear here, but considering the data estimated by EngineeringUK, it seems likely that this trend may shift a bit in the next decade.
Young women around 16 to 19 years old are more likely to pursue STEM careers, although young men still constitute a significant majority of the workforce.
Judging from the report by EngineeringUK, the gap between young men and women interested in pursuing engineering careers is around 21 to 24%. However, being interested does not necessarily mean they will follow those careers in the future.
We can therefore conclude that a gender gap may not be bridged shortly in software engineering, as more men are pursuing software engineering than women.
2. Benefit of Cost Reduction
The 2020 study by Deloitte reports that 70% of companies outsourcing software development projects choose to outsource for cost reduction to save money. Studies have shown in the past that cost reduction has been considered one of the fundamental reasons for outsourcing in IT companies.
One of the best things you can do in this digital age to keep your costs down on a software project is to outsource it overseas. The fact is especially relevant if you outsource to a developing country; this is why countries like India have gained immense popularity in recent years.
Nonetheless, India is not the only location where you may be able to find offshore developers. It makes sense for US-based software development companies to outsource their IT projects to nearby developing countries, such as Mexico, Argentina, Chile, and Columbia.
3. Growing Demand-Supply Gap
The US Bureau of Labor predicts that between 2020 and 2030, demand for QA specialists, software developers, and testers will rise by 22%, making them the fastest-growing professions in the nation. According to the expected growth rate, there will be 409,500 more employment opportunities in these three professions in the US by 2030 than there were as of 2020 (1,847,900 jobs).
The US Bureau of Labor predicts that between 2020 and 2030, demand for QA specialists, software developers, and testers will rise by 22%, making them the fastest-growing professions in the nation.
According to the expected growth rate, there will be 409,500 more employment opportunities in these three professions in the US by 2030 than there were as of 2020 (1,847,900 jobs).
Meanwhile, only around 3,600 degrees in computer software engineering are awarded by the best educational institutions in the US. The lower degree count in the US creates a significant gap between the demand and supply of software developers.
There aren't enough people, therefore the IT talent crisis is already here and will only grow worse. There isn't enough domestic human resources to meet that demand, with more than 189,000 positions opening each year.
The terrible statistics on software developer employment demonstrate the severe gap, leaving outsourcing as the only workable solution to meet the rising demand. If the trend continues, outsourcing will remain a popular solution for most companies in this area.
4. Employment Opportunities
Millions of job opportunities are created worldwide as a result of outsourcing. The US alone outsources a huge number of jobs in the IT domain abroad, giving developing nations a massive economic boost.
Considering LATAM countries as one of the best instances: outsourcing generates over 1,000,000 employment throughout the area, giving local professionals some significant opportunity to make money. Despite having a much lower rate per hour than US-based developers, LATAM developers can still make really good money by working with American clients.
The same is applicable to developers in Central and Eastern Europe and Asia.
Although income in these regions is lower than in the US, qualified IT experts can make above-average money while remaining a cost-effective option for US clients. The trend not only improves the wealth of the developers but also enhances the economic growth in developing countries worldwide.
5. Businesses Go Agile
According to Harvard Business Review, while most companies are aware of the benefits of Agile, few of them are still failing to apply the Agile approach in their operations. The companies having effectively incorporated Agile have witnessed a rise in revenue of up to 60%.
Therefore, as per the survey, only 18% of the companies are confirmed to be Agility Masters, which portrays the difficulty level of implementing agile practices.
In addition to the higher revenue, agility masters are 2.3 times more likely to take risks and 4.1 times more likely to design a homogeneous approach for the project.
Additionally, they are 2.9 times more likely to have teams of specialists expert at using the modern trends and resources.
Agile companies are more likely to work with outsourced developers, so teams of such skilled experts typically come from other countries.
In general, Agility Masters are more comfortable in using unconventional approaches and taking risks for software development projects. Thus, the growth of agile businesses will heavily depend on outsourced IT and development teams.
Although, in the modern day, indeed agile companies are still few, this percentage is likely to increase as more businesses start to explore the potential of agile business models.
Types of Software Development Outsourcing?
Outsourcing their software development can be advantageous for businesses of all sizes as long as they hire the right firms to handle their projects. By learning more about the different types of software development outsourcing available, you can choose the most beneficial option to meet your needs and save money over time. Here are three of the most common types you should know about.
1. Offshore Software Development Outsourcing
Suppose you're looking for a cost-effective way to improve the quality of your software without requiring in-house expertise and adding fixed costs. Here, you may want to consider offshore software development outsourcing. As an alternative to purchasing expensive licenses for commercial programs or hiring more employees in-house, outsourcing can provide a solution that can be scaled as your business grows.
Offshore services offer short lead times, fast turnaround times, and low labor rates. Offshore providers also tend to have better foreign language skills than local providers.
2. Nearshore Software Development Outsourcing
Nearshore refers to development outsourcing near the shores of your country. Nearshore vendors often have a lower cost base than in-house developers, which is usually reflected in their quotes. The time zone difference between a nearshore vendor and your office may also be advantageous if you have employees in different parts of the world.
Why is Software Development Outsourcing a Good Choice?
Software development outsourcing is a good choice for many businesses, whether startups or established companies. Outsourcing software development provides your company rapid access to a talent pool of highly skilled and experienced professionals in the IT domain.
Hiring a developer from a software outsourcing company also allows you to work with someone else’s team and stay on top of industry trends that could help your business grow.
Additionally, their adaptable engagement strategy makes it quick and easy to start the project immediately.
The valuable findings include:
- Software development outsourcing is gaining immense popularity
- The prime reason for businesses to opt for outsourcing is cost reduction
- The amount of jobs being outsourced from the US is rising
- More companies will adopt an agile methodology