Five Software Outsourcing Trends to Watch in 2022
The flexibility of software outsourcing greatly benefited companies that scrambled to readjust to new normals during the pandemic. Global outsourcing generates strong opinions both against and in favor but has been growing rapidly for years. In 2019 alone, the global outsourcing market generated more than US$92 billion. As competition increases, companies are searching for more cost-effective solutions for IT and software development. Experts predict the market will grow to US$98 billion by 2024.
Check out our picks for the top five 2022 software development outsourcing trends.
- The Tech Skills Shortage Continues to Grow
At the same time that demand for technology increases in every aspect of global trade and everyday life, there is also a fast-growing talent shortage in tech. While the problem isn’t new, it is accelerating more quickly as the development cycles of emerging technologies speed up. This acceleration and the mismatch between supply and demand mean that the tech skills problem is double-barrelled. Existing tech workers may need significant reskilling, and available workers are in high demand. The Great Resignation added additional pressure to an already-strained market, as workers sought better salaries and benefits and reevaluated their priorities.
The tech skills shortage is so critical that many see it as a significant hindrance to the growth and adoption of emerging technologies. According to a Gartner survey, four percent of IT executives in 2020 believed the tech skills shortage would significantly impact emerging technologies. By 2021, that number had skyrocketed to 64 percent.
The Impact of the War in Ukraine
A growing number of IT jobs have been outsourced to Eastern Europe and, in particular, Ukraine. By 2021, 4 percent of Ukraine’s GDP came from the IT industry. Despite the displacement of millions of Ukrainians, many in the IT and tech sectors have continued working. Some have fled to other parts of Ukraine or out of the country altogether, while others continue working amidst the shelling and bombardment. However, the future of IT outsourcing in Ukraine is uncertain and fragile as hostilities continue unabated.
- Acceleration of Digital Transformation
Digital transformation is likely to trend well beyond 2022 as organizations recognize the need to streamline operations to remain competitive and operate efficiently. However, the tech skills shortage is hindering transformation initiatives for many companies. Nearly two-thirds of IT executives are looking to outsource the expertise needed for digital transformation.
Cost reduction is a top driver for outsourcing digital transformation, but there are other critical reasons for outsourcing. Investing in new and advanced technologies means searching for artificial intelligence (AI), cloud computing, and automation specialists.
Outsourcing for digital transformation will continue to expand in 2022 and beyond for several reasons, including:
- Risk mitigation: Specialists tackle industry-specific problems regularly and are familiar with them.
- A larger talent pool: already-overburdened IT departments can share the enormous workload of digital transformation via outsourcing.
- Scalability: as companies tackle each aspect of digital transformation, they can expand or contract the team as needed.
- Security: outsourcing also relieves the burden on IT to have the right resources in place by bringing in specialized, professional services.
- Outsourcing for a Dynamic Cyber Defense
Ransomware incidents are growing in both scope and number. Hackers caused significant disruption and temporarily shut down the Colonial Pipeline in 2021, and widespread data breaches have impacted millions. Congress has attempted to combat the growing threat by increasing the penalties for cybercriminals. The White House addressed the threats to critical infrastructure during two summits in 2021 with top tech CEOs and representatives from over 40 countries.
From these meetings came pledges of funding to invest in zero-trust programs, which require all users to undergo continuous validation and authentication for security configuration and expand training and certification of new talent. Since 2021, the White House has issued statements, and President Biden signed an executive order to modernize defenses.
However, there aren’t enough trained IT workers to handle the growing cybersecurity threat. In 2022, many organizations are rethinking their modern security operations centers and exploring a diversified, global network for greater resiliency.
- The New Reality of Remote Work
The pandemic accelerated an already growing growth in the remote work sector, and post-pandemic, remote work continues to trend upward. Software outsourcing and remote work go hand in hand. While only 16 percent of companies globally are fully remote, experts predict that number will rise as outsourcing continues to trend. Whether companies are tapping into specialized talent from around the globe or IT workers from Ukraine are logging in on the go, remote work provides organizations with targeted and timely solutions for software development.
Turning to outsourced software development in the new world of remote work makes perfect sense. Remote workers are more productive, and companies see lower turnover rates. Outsourcing to remote workers means companies can have more flexibility and tap into 24/7 software development, implementation, patching, and cybersecurity.
- Next-Level Partnership Management
Co-sourcing has gained traction as companies sought to create networks with outside vendors for analytical and strategic support. But with the need for more complex software development initiatives, the stakes are higher than ever, and client-partner relationships are evolving.
2022 will see this evolution develop in several ways:
- Detailed due diligence: For many companies, the margin of error is slimmer than ever before. To tighten risk management, a greater focus on due diligence to reconcile assumptions with current conditions is vital.
- Timely partner selection: Unfortunately, thorough partner vetting takes time that many organizations cannot afford. Some organizations are turning to networks of pre-vetted partners to ensure greater success.
- Careful contracting: In 2022, the importance of service level agreements (SLAs) in outsourcing software development partners will be front and center. The risks are too significant to allow for ineffective or weak contracts with partners, so updating or strengthening SLAs is vital.
- Innovative project control: Outsourcing project development can allow a more focused and cost-effective approach. Get timely expertise within the budget without overburdening the IT department.
The Expansion of Outsourcing in 2022 and Beyond
The pandemic accelerated software development trends that were already in place. Outsourcing has allowed organizations to find room in their margins by reducing overhead and squeezing greater efficiency out of processes during an extended time of uncertainty. In 2022, these trends will continue post-pandemic as companies turn to outsourcing to solve key challenges. Businesses with dynamic, adaptable IT models are better positioned to overcome lingering uncertainties and meet new challenges head-on.