$132.9 billion — that is the number the IT outsourcing industry is expected to hit this 2020 in terms of market size. The figure is likely to be higher in reality as current circumstances are forcing everyone to do more of their work online: companies switching to remote work and businesses of all sizes migrating their operations, and products and services online.

Countless changes and updates are happening in the IT and software development world, more so when it involves the outsourcing of services. Here, we take a look at the current trends in outsourcing software development and where it is heading, so you can check if the industry and your plans are heading on the same direction.

1. Specialized outsourcing partners

When it comes to choosing the best dev shop for a project, more and more clients are turning to specialized services. The technology industry is fast-evolving, and enterprises do not always have the right IT professional with the right specialized IT skills. For example, not all software developers are experts in artificial intelligence, cybersecurity, or new languages (Go, Kotlin, Rust, Swift, etc.).  More companies are turning to outsourcing providers and even freelancers for these niche skills.

Interestingly, these clients are okay with partnering with several providers, as long as the requirements and results are achieved. For software development agencies, this means having a team of professionals with an array of diverse skills gives you an advantage. A one-stop shop will always be favored by clients over several remote professionals or providers working together. 

2. Flexible and agile partners

As the industry continues to change, so will the expectations of clients. Aside from wanting providers with the right niche specializations, they are also looking for ones that are flexible and can easily scale up or down.

Providers will need to be more agile in case they need to adapt and scale depending on client needs, as well as when it comes to delivering results in the shortest time possible. This also includes looking for specialists that actively keep up with innovations — that is, they are eager to work with and integrate the latest technologies for clients.

Moreover, companies are looking for IT outsourcing partners who can embrace and follow their company ethics and culture. The trend is treating providers as part of the company and as an extension of the in-house team.

3. Providers as partners

Software development shops are no longer just “developers for hire”. IT consultancy and software development companies like DevsData explain that providers are now seen as strategic partners to growth and success. The client and provider work together to grow each other’s business and boost their market reputation.

Companies need to keep up with the trends, innovate, and bring something new to the market to stay ahead of the competition. Outsourcing software development and other related services ensures projects are launched and completed efficiently. 

Some companies even put software developers at the forefront of their business strategies to get ahead of the competition. That is, they are counting on the developers and the software they create to provide the product or service that will be popular for consumers. This just strengthens the view that these providers, even the outsourced ones, are seen as partners for success.

4. Value over price

Outsourcing software development and other related processes will always be about cost reduction. The current shift, however, shows that it is no longer the only deciding factor in choosing an outsource software development partner.

Clients are wanting more human-driven approaches and more value, rather than solely relying on the price tag. They are focusing more on getting high-quality results, be it in a new product or service. In these settings, the offshore companies act more as partners and system integrators, rather than just as providers of IT solutions. 

As companies turn to services and solutions focused on customer experience, so, too, are the projects between clients and providers.

5. New contract models

Clients and providers are also switching to the mindset of measuring success through results, and as such, more and more contracts will become outcome-based.

The arrangements will be focusing on quality of results, which will include things like expected performance levels instead of output levels. IT outsourcing will be more collaborative, with both client and provider sharing the risks and rewards. This challenges providers to step up their game and really focus on delivering results that not only follow the project brief, but delivers end results as well. This arrangement only means positive things for both sides.

6. AI and IoT integration

Artificial intelligence and the Internet of Things are the logical next frontier for the software industry, both for users and companies. Especially with the COVID-19 crisis, online shopping and other activities have been more in demand. This, among other factors, is just another reason for businesses to embrace a better user experience across all their platforms.

Customers want more personalized customer journeys in their online shipping experience. For businesses, this means they need to invest more into creating a platform that provides a positive experience and ultimately converts a visitor to a customer. This means websites, apps, and other solutions need to be integrated with AI and IoT capabilities. For these, outsourcing the development work is seen as the most practical option.

AI-powered chatbots, virtual assistants, intelligent product recommendations, and other smart solutions will all help with ensuring a positive shopping experience for consumers. On the business side, AI and IoT capabilities can be leveraged for improved marketing strategies, supply chain automation, data analytics, fulfillment and logistics, and many more processes.

Where we are headed

Of course, there are more trends emerging every day in the software development and IT industry. The key takeaway is: for any company that does not want to lag behind, a digital transformation is crucial.

And when it comes to software development, outsourcing is no longer just the low-cost option. In most cases, it is also the most practical and rewarding one.