What Software Development Outsourcing Trends Will Matter In 2021?

Published: 28 January 2021

Digital advancement continues to shape the pace of innovation as technology is evolving rapidly and the need for efficient software development increases year on year. This increase has led to organisations increasing their use of software development outsourcing.

The year 2020 presented the technology industry with unforeseen challenges that reshaped its expected future software development outsourcing trends. This article focuses on the predicted software development outsourcing trends forecasted for 2021. 

The Software Development Outsourcing Landscape In 2020

In 2019 the global market for software development outsourcing was reported by Statista to be worth $92.5 billion. It is forecasted to grow to 103 billion U.S dollars by 2027

Organisations’ demand for software development have increased in recent years, resulting in an urgent need to improve internal capacity. They are more reliant on outsourcing development as a strategy to keep pace with competitors. The Global Industry Analytics, Inc. reported that the IT outsourcing market’s value is expected to grow by 5% on an annual basis between the years 2020 and 2024

The pandemic of this past year has reshaped the factors that drive organisational need for outsourcing, including an organisation’s roadmap for digital adoption. The year 2020 caused organisations to experience unprecedented shifts in business models, internal operations and workforce participation habits. Organisations had to move to remote working; as a result dependency on digital tools increased. 

For example, the financial sector had to rapidly adapt to meet an  increased customer demand for online features. According to a McKinsey Global Survey Of Executives, “[d]uring the pandemic, consumers have moved dramatically toward online channels, and companies and industries have responded in turn. The survey results confirm the rapid shift toward interacting with customers through digital channels.”

It was forecasted for digital transformation to advance greatly in 2020, although the speed of change was quicker than was first predicted. According to Deloitte’s Tech Trends 2019, “the global economy’s unexpected shifts placed a great amount of pressure on the CTOs and other IT leaders to speed up the adoption of digital technologies to meet newly increased customer demand.” 

Organisations surveyed by McKinsey stated that “companies have accelerated the digitisation of their customer and supply-chain interactions and of their internal operations by three to four years. And the share of digital or digitally enabled products in their portfolios has accelerated by a shocking seven years.”

Increased focus on software development outsourcing helped organisations increase the delivery of solutions that helped them maintain operations during 2020.

As organisations are increasing focus on improving strategies for outsourcing development needs, here are the four major software development outsourcing trends expected in 2021.

1. Greater emphasis on cybersecurity

Organisations are expected to focus more on cybersecurity in 2021. As the need for software development outsourcing increases, as does the need for improved enterprise data protection. Organisations are focused on protecting their data by reducing internal and external vulnerabilities to cyberattacks in order to avoid the high cost of being hacked. 

The 2017 Official Annual Cybercrime Report estimates that cybercrime will cost $6 trillion annually by 2021. In 2015, it cost $3 trillion.

2. Increased use of cloud services

Forbes senior contributor Louis Columbus had predicted that 83 per cent of enterprise workloads would move to the cloud by 2020. This trend is set to continue in 2021.

To maintain agility in response to customer demands, organisations had increased use of cloud services. Analysis by Synergy Research Group into how Covid-19 affected growth figures within the wider cloud infrastructure reported cloud services spending was three times higher than expected. According to Stepwise, a Gartner report showed that companies will spend around one trillion dollars on the development of cloud infrastructure by the end of 2021. 

3. Greater focus on product quality

Cost reduction was once the main reason an organisation would outsource software development; however, there has been a shift in recent years due to a shortage of skilled expertise available to hire for internal development needs. InfoQ reported outsourcing in the 2020 report of the National Outsourcing Association; product quality is now the main driving factor in outsourcing than cost reduction.

4. Building better collaborative partnerships

As organisations are focusing more on product quality than cost reductions, it requires more focus on improving communication and relationships with vendors. This increased shift and growth in the value of outsourcing are causing organisations to assess its interaction with vendors, which has shifted focus ever more so throughout 2020. 

In 2021 it is expected to become more of a focusing when approaching vendors to ensure product quality is met. Speaking about this shift, Medium stated:

“This new trend of collaborative partnership is much more human-oriented. It focuses on cooperation and implementation quality, the process simplification but not the price. With such a strategic vision to help the reliable partner understand well their client’s processes, you can believe in the higher quality of the final product.”

Senior managers have recognised the importance of a collaborative relationship, its impact on quality, and ensuring the right features are delivered. 

Final Thoughts

2020 placed more importance on software development and the need for organisations to rapidly adapt in order to gain competitive advantages. The industry was propelled further into the future than was initially planned, as current challenges required immediate solutions.

Software development outsourcing is helping organisations to build competitively advantageous solutions at a faster pace. The trends identified in this article that helped organisations during 2020 are set to continue to shape software development outsourcing in 2021.

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