Since 2000, the outsourcing industry has grown from a $45.6 billion to $92.5 billion market. The consistent growth shows that the market accepted it as a development strategy and that outsourcing is here to stay.
Many business owners prefer to build software with hired employees. They say it is easier to sign contracts with engineers committed to the long-term success of the company. However, hiring in-house takes a lot of time and effort to get right. Sometimes it does not work out. Challenges arise when you want to scale your team or are looking for a specific skill set.
Those are the times when outsourcing comes in. A good outsourcing partner often brings many advantages both financially and professionally. Companies start to outsource to solve business problems and get help with the management. Especially for startups, outsourcing is the right way to kick start and gain competitive advantages.
If you are currently considering outsourcing as your next step, read this article. It will help you answer the question of when outsourcing is the right way to go.
How outsourcing relationships are changing in 2020
Nowadays, businesses are looking for ways to reduce vulnerability to fluctuations in the global economy, remain agile, flexible while being innovative. As a result, the relationship between companies and outsourcing providers are changing.
People and process-driven
In the past, outsourcing relationships were price-oriented. The trend is now shifting towards people-driven and process-driven. Companies are looking for talented developers suited for their business needs. They emphasize the development process so Scrum and Agile will become more common.
Business is now shifting towards single-vendor outsourcing as it is easier to manage one offshoring firm. Companies aim to build long-term partnerships with highly collaborative outsourcing providers with shared risks and business alignment. What is more, business owners will start outsourcing not only the core tasks but rather all time-consuming processes.
More clients and small business owners
Looking at how outsourcing will change in the upcoming years for the service providers, it is likely that they will experience an increase in small business and startups clients. More and more companies will opt for outsourcing options making the market more saturated and competitive.
Outsourcing vendors will now be creating agile teams to achieve a faster work pace. They will integrate into the company and act like an in-house team. Companies are looking for innovation, they expect the latest technologies and solutions. That is why IT specialists are adopting a more flexible approach.
Variety of services
Previously, it was common to outsource small operational tasks primarily, but it gained enough recognition that large scale operations started being outsourced as well. In 2020, businesses utilize offshore vendors for high-end critical processes.
According to PMI over 71% of companies adopted Agile for their business and everyday operations. Businesses appreciate the flexibility of project management and now want to use it in software development. They are going to look for experienced partners that follow Agile practices and are willing to share their expertise.
Technology outsourcing trends in 2020
According to Statista, by 2021, over 2.14 billion people will be purchasing goods and services online. This means the development of new trends and technologies that will be aiding eCommerce and there will be a significant technology transformation. Starting from 2020 we can expect shifts in fields like:
AI, IoT and Robotic Processes Automation
AI-powered networks will be used to increase the quality of customer service. It will assist the eCommerce platforms by analyzing clients’ purchases and habits. AI-powered chatbots will also come out to play - they promise to substitute human counterparts in giving advice and providing guidance.
What is more, the number of businesses implementing RPA will increase. In 2020, we will see more automation for logistics management, payment processing and ERP management.
Cybersecurity and GDPR Compliance
With the growth of cybercrime, where social media plays a significant role, cybersecurity is gaining investors. Attacks are even more frequently targeted towards governments.
It is predicted that the US will have to spend $7.8 billion to be GDPR compliant and only ⅓ of tech companies put in the work to do so. Every year, it will be more and more important for businesses to meet security requirements.
Cloud Data Storage
The SaaS, IaaS and PaaS markets grow 24% each year. Companies are investing even more money in cloud development. Microsoft, Google, IBM and Amazon are all interested in quantum computing and by 2027, the market will be worth $8 billion.
When outsourcing is the right match for you?
There is no doubt that outsourcing not only gives you access to the international talent pool while saving costs and speeding up the development process. There are a few scenarios where outsourcing is the perfect solution, read on to find out if it is the right match for you in 2020.
Lack of technical knowledge or velocity
Outsourcing will be the right match for you if you lack technical knowledge or the local talent pool cannot provide you with experts. Sometimes projects require specific skillsets that can be hard to find on-site.
Velocity or flexibility is often the issue as well. Choosing to outsource means to get a flexible team of available engineers.
Outsourcing is a great way to avoid so-called micromanagement. Project managers often are supervising unimportant details while possibly ignoring the relevant ones. This is not only time consuming, but also tiring. As an executive, you can probably introduce more value to higher-level tasks. It will help you focus on business aspects like marketing, fundraising or sales.
In outsourcing, experts address all the IT decisions, so you can focus on taking the business to the next level while gaining a competitive advantage.
Choosing to outsource software development services rather than hiring an in-house team will significantly reduce development costs. This way you avoid salaries, bonuses, benefits and other hidden costs required for retaining happy employees.
Some of the SDHs have R&D departments exploring new technologies that can introduce cost savings and bring business value that your competitors will get years later.
By working with a software development house you ensure consistent innovation. Outsourcing companies need to remain competitive on the market, so they constantly explore new. Thanks to multiple projects they’ve worked on they have a more significant knowledge tank. A right outsourcing provider is always up to date with the latest solutions and technologies so you can be sure you are keeping up with the market.
SDHs offer experts in a wide range of technologies. This way, with one contract you access a variety of specialists. Reputable software development houses hire people with excellent training and established knowledge standards. They create growth paths for their employees together with mentoring programmes and skill evaluations.
Outsourcing gives you the ability to outsource not only developers but also C-level specialists like CTOs. This provides you with advantages like gaining an unbiased view from a top-level professional. You will gain a new perspective and set up an appropriate workflow and Agile principles.
2020 is the beginning of many new outsourcing trends in software development. Especially now, during a world pandemic, it proved to be the way to go. It allowed companies to change velocity as an immediate answer to market changes.
2020 also proved that remote work is possible even where it was thought to be the hardest to achieve. More and more startups choose to run their businesses by outsourcing most of the processes as it is not only cost-effective but also lower risk.
Apart from that, we can clearly see companies shifting their interest towards people rather than pricing, looking for strategic alliances and switching to an Agile approach.
Artificial Intelligence will gain even more recognition in the development world and it is going to aid eCommerce as well as customer support.
If you are looking for an outsourcing partner that will guide you through 2020 and into the future, contact Selleo. Our experienced Agile teams will help you build an innovative product that will transform your business.