How will the IT outsourcing landscape look like in 2021? What to expect as a result of the COVID-19 pandemic? 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 the unprecedented times of 2021.
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. With its unforeseen challenges, the pandemic has been a critical input in reshaping the expected future of the whole technology industry. Despite, or perhaps because of the COVID-19, the percentage of their budget IT departments spend on outsourcing continued to rise from 12.7% in 2019 to 13.6% in 2020. It is due to the fact that the majority of businesses embraced the inevitability of digital transformation to stay competitive and viable. And outsourcing trends let companies revolutionize how they perceive the 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 2021.
How IT Outsourcing Landscape Is Changing
In 2021, companies focus on reducing vulnerability to fluctuations in the global economy, remaining agile and flexible without losing product quality. As a result, relations between businesses and software vendors are changing into a strong partnership with better collaboration.
1. A Growing Demand for Narrowly Specialized Software Companies
The pace of technological progress is so swift, and the scope of digitalization is so vast that it becomes hard for in-house IT departments to keep up with all the innovation and new applications of existing technologies appearing day-to-day possessing all the needed skills.
That’s why more and more businesses start looking for more specialized software development companies. Such experts specializing in some narrow sphere can bring maximum value into 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 UpsilonIT, we have a subject-matter expertise in logistics and medtech that we have built up over the years of software development. All the companies that come to us with their complex business challenges receive a unique software solution based on their domain and specific requirements.
2. 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 2021, 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 frame and be agile to deliver results faster.
Acceptance of a company’s business ethics and its adoption is another thing that will be for businesses. They are waiting for the offshore companies to integrate seamlessly into their company and become a part of their current in-house team.
Third and last, modern companies 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. In our Guide to Vendor Evaluation and Scoring in Software Outsourcing, we suggested a list of criteria that will help companies effectively evaluate their potential software development partner in accordance with the project requirements and, as a result, choose the most suitable one.
3. Building Better Collaborative and Strategic Partnerships
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.
The difference between outsourcing core and non-core tasks will be less evident as vendor-customer relationships will be more reliable and trustworthy. 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.
4.Eastern Europe is Becoming a Leading IT Outsourcing Hub
Eastern Europe will become a more attractive destination for IT outsourcing. India and China will still be the leading outsourcing countries where the largest share of global outsourcing revenue is generated. However, Ukraine, Poland, Belarus, and Romania will be their direct competitors with high-quality performance, commitment, and affordable prices.
Among the countries above, Belarus offers the most attractive conditions for IT outsourcing. The Belarusian IT sector comprises 60.5% of outsourcing companies and occupies 3rd place in its economy. The Belarusian IT sector has received governmental support as one of the top-priority economic sectors for future development. The establishment of the Belarusian Hi-Tech Park (HTP) in 2005 stimulated IT sector development and provided a unique business environment for IT companies, such as low tax regulation. That means that the process of outsourcing for foreign companies in Belarus has been simplified.
The country has a deep talent pool exceeding 77,000 programmers, and over 16,000 new specialists enter the sector every year after graduation from universities. So it allows specialists to learn and apply the latest technologies in their work with still moderate prices for their services.
5. An Emphasis on Quality over Quantity
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.
Due to a shortage of people with the skills required for in-house development, InfoQ highlights that product quality is now a more important driver for outsourcing than cost reduction. Concentrating on high-quality and optimal results is the trend that will label outsourcing as profitable and efficient in 2021.
Technology Trends in IT Outsourcing
Statista forecasts that over 2.14 billion people will be purchasing goods and services online by 2021. That means the emergence of new trends and a significant technology transformation in various domains.
6. AI, Machine Learning, and Chatbots
Slow response time and security risks can be a red flag for those who want to partner with outsourcing companies. AI promises to solve this issue by automating routine tasks where the most mistakes appear and allowing people to concentrate on the main business goals. Automation and quick execution will enable companies to stay competitive in the market. AI’s machine learning empowers automation, allowing software apps to learn instead of blindly following commands. Software vendors that 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 in outsourcing. 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 productivity and customer service along with outstanding employment opportunities.
7. Cloud Computing & Cloud Platforms
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. According to the Gartner revenue forecast, the cloud market will be $289.1 billion worth in 2021. 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 will turn to outsource for effective cloud platforms. They will actively partner with vendors who offer software cloud-based services or will help to transfer their existing infrastructure to the cloud. Along with the need for cloud computing, there is the need for security services to avoid all kinds of threats. By finding a trustworthy partner, companies will perform their tasks and have someone responsible for cloud security.
8. Robotics Process Automation
Robotics process automation is now trending due to business automation. Many daily tasks will benefit from implementing RPA tech. For instance, supply chain management, payment processing, 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. 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, robotics process automation software will generate revenue of nearly $2 billion in 2021.
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 in the past required the perceptual and judgment capabilities of humans.
9. Progressive Web Apps
The demand for a better user experience is growing as well as the need for progressive web apps. The main difference from ordinary mobile applications is that they move back and forth between mobile and web apps. PWA are designed to create a mobile application-like experience at websites. Moreover, they are easy to develop and maintain.
PWA seems to be an ideal variant for businesses that don’t want to develop a mobile version of a website and Internet users that prefer mobile apps because of their convenience. Both sides will win from PWA because their development is much faster, and they have the same effect as a mobile application. That’s why many companies will seek outsourcing vendors to employ PWA to achieve their business goals and satisfy the rising demands of their clients.
10. Blockchain Technology
As per Statista, global blockchain spendings are expected to reach over almost 18 billion U.S. dollars by 2024. 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.
While the demand for the knowledge of blockchain technology is rising, the need for highly specialized professionals increases accordingly. However, adequate blockchain professionals are not available, 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.
When a business decides to grow, it may be crucial for it to consider software development outsourcing. Companies that don’t want to be left in the basket have already started learning and adopting the latest development trends. Although, it can be challenging for in-house developers to keep up with the pace of emerging technologies and implement every digital innovation because of the limited human resources. That’s why many companies choose to outsource software development.
We, at UpsilonIT, invest heavily in upskilling our employees to steer in the right direction with cutting-edge transformative solutions and data-driven insights. Our team is flexible and adaptable in terms of both innovation and cooperation. We easily integrate into our clients’ companies 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 2021 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 our business development specialists.