25 Latest software development outsourcing statistics in 2023

Given the competitive software development landscape, more and more businesses are outsourcing. It’s critical to stay up-to-date on the latest software development outsourcing statistics. This will help us better understand the trends and opportunities in this evolving industry. 

This blog will provide the latest facts and insights businesses need to know to make informed decisions about their outsourcing strategy. We will look at regions and countries that are likely to be the big players in the industry and discover trends in the software development outsourcing practice. 

Let’s explore and stay up-to-date with these statistics!

Table of Content

What is software development outsourcing?

Software outsourcing refers to the practice of engaging a third-party company to develop and maintain software applications for a business. Many companies commonly use this strategy to cut costs, enhance efficiency, and get access to specialized skills and resources.

Outsourcing software development allows businesses to access various services, such as bespoke development, maintenance, testing, and integration. Businesses can free up internal resources and focus on their core capabilities by outsourcing these services while the outsourcing provider handles the technical parts of software development.

Software development outsourcing is a powerful tool that can leverage companies’ business goals. Businesses can achieve their objectives and unlock new opportunities by partnering with a reliable outsourcing partner. 

How many types of software development outsourcing?

There are several types of software development outsourcing that businesses can consider. But based on the location where the work is done, there are 3 main types of software development outsourcing, here are they:

• Onshore outsourcing: Onshore outsourcing means employing a third-party provider based in the same country as the hiring company. This arrangement can benefit businesses that want to engage with a provider with a comparable language and cultural background.

• Nearshore outsourcing: Nearshore outsourcing involves hiring a third-party provider located in a neighboring country or region. Hiring a third-party provider in a neighboring country or region is called nearshore outsourcing. This type of outsourcing is frequently used to gain access to reduced labor prices while maintaining proximity and cultural similarities.

• Offshore outsourcing: Offshore outsourcing is hiring a third-party service provider located in a different country, often in a region with lower labor costs. This approach is useful for businesses seeking specific skills and resources that may not be available locally.

25 software development outsourcing statistics

1. In 2022, the worldwide market size for IT professional services was worth USD 821.58 billion, and it is projected to increase at a compound annual growth rate (CAGR) of 9.1% from 2023 to 2030. – Source: Grand View Research.

2. By 2023, the value of software outsourcing is expected to reach $430 billion. – Source Statista.
3. Software outsourcing revenue is anticipated to exhibit a yearly growth rate (CAGR 2023-2027) of 7.54%. – Source: Statista.
4. The revenue is predicted to demonstrate a yearly growth rate (CAGR 2023-2028) of 10.71%, leading to a market size of US$303.90bn by 2028. – Source: Statista.
5. The worldwide market for IT outsourcing in 2020 was assessed to be worth USD 318.5 billion, and it is anticipated to achieve USD 425.19 billion by 2026, with a CAGR of 4.5% during the projection period (2021 – 2026). – Source: Globe Newswise.
6. The international outsourced QA and software testing market is projected to experience a CAGR of 11%. – Source: Technavio.
7. It is projected that spending on IT outsourcing will surpass $1.3 trillion by the end of 2023. – Source: Imaginovation.
8. The global market size for IT and software outsourcing is expected to reach approximately $1.06 trillion by 2030. – Source: Precedence Research.

Source:  Precedence Research

9. With a projected 1 million IT experts by 2030, India might take the lead as the world’s most technologically competent nation. – Source: Korn Ferry
10.  Cloud-based software outsourcing solutions will rise to USD 141.2 billion by 2027.  – Source: Market Research.
11. Outsourcing is anticipated to increase by 70% by 2023, and businesses are projected to outsource at least 36% of their software developers. – Source: Commit.
12. Even though HR leaders recognize cost savings (48%) as the primary advantage of outsourcing, CTOs view outsourcing as a crucial tool for rapidly expanding their operations (42%). – Source: Commit.
13. Over 50% of the total global outsourcing value is generated by companies that specialize in software outsourcing. – Source: Statista.
14. Employee spending on IT outsourcing is anticipated to average €120.50 in 2023. – Source: Statista.
15. Today, 81% of executives rely on third-party vendors to furnish some or all of their cybersecurity capabilities. Service providers were named by 96% of executives as the origin of data and analytics capabilities development. – Source: Deloitte Global Outsourcing Survey 2022.

16.  Companies are spending more money on IT outsourcing: in 2022, 67% of executives indicated an increase in budget for Operate Services, 57% reported an increase in budget for Managed Services, and 32% recorded a rise in the budget for traditional outsourcing. – Source: Deloitte Global Outsourcing Survey 2022.
17.  90% of The Global 2000 companies have held ongoing ITO (Information Technology Outsourcing) contracts in the last 5 years. – Source: Forbes 
18.  In 2022, 49.6% of businesses planned to expand their outsourcing share. Merely 10.4% wanted to limit outsourcing, while 40% saw no change. – Source: Computer Economics (US & CA)
19.  In 2023, start-up software development outsourcing will increase by 70%. – Source: Business Wire
20.  Cost savings (71%), business transformation (50%) and enhancing service quality (50%) are the top three reasons for IT outsourcing (UK). – Source: PA Consulting (UK)
21. For organizations that outsource app development functions, 40% have higher costs, and 31% have lower costs when compared to in-house development. – Source: Avasant
22. According to a BCG survey, 62% of respondents intend to renegotiate their outsourcing contracts. – Source: BCG

23.  IT outsourcing spending will exceed $1.3 trillion by the end of 2023. – Source: Statista
24.  By 2025, 60% of businesses would not renew their existing BPO contracts due to outdated pricing practices. – Source: Gartner
25.  About 48% of companies are outsourcing offshore. – Source: YouGov

Software development outsourcing statistics by regions

North America software development outsourcing statistics 

Software outsourcing has grown in popularity in North America as organizations seek cost reductions and access to specialized talents that outsourcing can give. 

While the most prominent software development companies in earlier years came from Eastern Europe, India, and China, the outsourcing sector in North America has been gaining traction in recent years.

The rise of software outsourcing in Ntatus as an innovation and torth America can be ascribed to a number of factors, one of which is the region’s sechnology hotspot. North America offers a thriving ecosystem for tech startups and entrepreneurs because it is home to many of the world’s leading technology corporations.

Here are some noticeable software development statistics in North America, according to Statista, for you to take a look at:

• The average cost of an IT and software outsourcing employee is expected to reach $680.30 in 2023.
• By 2023, software outsourcing revenue in North America is expected to reach $170 billion, with an annual growth rate of 7.54% from 2023-2027.
• The United States is expected to generate the highest revenue, with an estimated $156.20 billion in 2023.
• Revenue from software outsourcing is predicted to grow at an annual rate of 7.54% (CAGR 2023-2027).
• As companies look for ways to save more than ever before, outsourcing software development is becoming an increasingly viable cost resilience strategy.

Europe software development outsourcing statistics 

Over the past years, the software outsourcing industry in Europe has experienced substantial growth. Businesses have come to recognize that outsourcing software development can enhance their profitability and enable them to deliver superior products at a faster pace.

Here are some software development outsourcing statistics in Europe, according to Statista, that you can consider:

• The United Kingdom and Germany are expected to generate the highest revenues in the European software outsourcing industry
• By 2023, the average cost of an employee through software outsourcing is projected to be $342.10. 
• The software outsourcing industry in Europe is predicted to generate $138.20 billion in revenue in 2023
• The market volume of software development outsourcing is estimated to reach $186.40 billion by 2027.
• Revenue for software outsourcing is expected to experience an annual growth rate of 7.77% from 2023 to 2027.
• Only 25% of UK businesses have never outsourced. 

Asia-Pacific software development outsourcing statistics 

The Asia-Pacific has been the epicenter of software outsourcing services for many years. India is the top destination for businesses looking to outsource their software development needs.

However, in recent times, several other countries in the region have emerged as major players in the software outsourcing space, challenging India’s dominance. These countries include China, the Philippines, Vietnam, and Indonesia, among others. 

The region is expected to experience even more competition in the coming years as more countries continue to invest in their IT infrastructure and workforce. 

For your information, we have collected some software development outsourcing statistics in Asia-Pacific from Statista:

• The software outsourcing industry is predicted to generate $95.85 billion in revenue by 2023, with an expected market volume of $136.10 billion by 2027.
• The Asia region is expected to show a substantial annual growth rate (CAGR 2023-2027) of 9.16% in software outsourcing.
•  Japan and China are expected to be the leading revenue generators in the software outsourcing.
• By 2023, the projected average cost per employee in software outsourcing is expected to be $46.26.

Software development outsourcing trends in 2023

Cloud service

Cloud migration can be a complex and costly process for businesses. However, by examining the current trends in IT outsourcing, it is evident that more and more companies are planning to move from on-premises data storage to cloud-based solutions. 

The cloud market’s growth continues to be robust, with revenue expected to reach a staggering $545.8 billion in 2022. SaaS application development alone is projected to generate $113.1 billion in revenue in 2022. The markets for PaaS, SaaS, and IaaS are growing at a rate of 24% annually, and by 2024, the global cloud computing market is expected to reach $623.3 billion.

Cloud computing is becoming popular among businesses of all sizes. A recent survey revealed that 94% of enterprises already use cloud services, while 84% of businesses have a multi-cloud strategy. 

Growth of E-Commerce and Automation

Online businesses’ transformation through technology focuses on improving the convenience of online shopping. Statistics show that 2.14 billion people worldwide purchased goods and services online in 2022. Compared to 2019, where only 14.1% of retail purchases were made online, in 2022, 22% of all retail sales were made online.

Furthermore, Nasdaq forecasts that by 2040, 95% of all retail purchases will be made online. This emphasizes the growing importance of e-commerce and the need for businesses to implement innovative technology solutions that improve their online presence and consumer experience.

Automation is a key trend in software outsourcing that is helping businesses reduce costs and improve efficiency. The impact of automation is already evident in the retail industry. In 2020, global spending on retail automation technology reached $17.2 billion, expected to double by 2025, with projected spending of $35.8 billion.

Artificial Intelligence

Following the release of ChatGPT at the end of 2022, a noticeable trend in IT outsourcing arose. Large technology companies, including IBM, Samsung, and Microsoft, have invested majorly in global AI start-ups. 

These tech behemoths increasingly rely on AI-powered chatbots and robotic automation systems to provide smooth and cost-effective customer support.

According to McKinsey, ChatGPT and similar technologies will be used in a variety of business fields, including:

• Marketing and Sales: Creating specialized content for social media and technical sales, which may include text, graphics, and videos, as well as developing personalized marketing strategies. Creating chatbots and other virtual assistants to aid certain firms, such as retail companies.
• Operations: This entails creating optimal task lists to improve the efficiency of specific operations and processes.
• IT/Engineering: Creating, documenting, and reviewing code to verify that software and systems work properly.
• Risk and legal: Responding comprehensively to complicated queries, extracting useful information from extensive legal papers, and generating accurate and thorough annual reports.
• Research and development (R&D): Improve drug discovery methods by leveraging advanced disease and chemical structural information.

Why should you start outsourcing with Mageplaza?

With nearly ten years of experience and specializing in developing worldwide e-commerce websites and extensions, Mageplaza is a great choice for software development outsourcing. 

When working with us, you will get the following:

• In-depth Expertise: Mageplaza has a proven track record of delivering high-quality eCommerce solutions for both Shopify and Magento platforms. Our experts are well-versed in the platforms’ features, customization options, and best practices, and provide tailored services to meet your specific needs.

• Ongoing Technical Support: Our team is readily available to provide ongoing technical support to address any issues that may arise. We can help troubleshoot problems, perform maintenance tasks, and ensure smooth operation, allowing you to focus on growing your business.

• Competitive Pricing: Mageplaza offers competitive pricing starting from $15/h, and you can choose from different engagement models based on your specific requirements and budget.

• Advanced Security: Before starting any project, we sign NDAs and contracts to protect your privacy and security. Our team also implements high-security layers to keep your data up-to-date for your Shopify store. You can rest assured that your business and data are in good hands when working with us.

Reach out to us, and we will give you a hand in leveling up your business. You will rest assured that your projects are in good hands!

LET US KNOW YOUR REQUIREMENTS

Wrapping up

The software outsourcing industry has experienced tremendous growth in recent years, and this trend is expected to continue. More organizations are recognizing the potential cost savings of partnering with an IT firm, driving the market’s expansion.

To remain competitive and increase profitability, businesses should capitalize on the opportunities presented by the expanding software outsourcing industry. This blog provides essential software development outsourcing statistics you need to know to stay updated in the IT industry.