Key Software Development Outsourcing Statistics and Trends for 2024

Software development outsourcing, a strategic approach to delegating software creation tasks to external providers, has emerged as a pivotal element in the global IT ecosystem. The IT outsourcing market has reached $617.69 billion, with projections indicating a 5% annual growth until 2027, primarily driven by enterprise software development requirements.

This expanding trend encompasses diverse domains, including artificial intelligence, cybersecurity, and cross-platform applications. Organizations can achieve substantial cost reductions through outsourcing while accessing a global talent pool of 28.7 million developers. Notably, a majority of IT leaders opt for outsourcing to accelerate innovation and optimize expenses. Research indicates that outsourcing can expedite product launches significantly. Cybersecurity remains the paramount technological challenge for executives, fueling outsourcing demands in this sector.

The vitality of the outsourcing ecosystem stems from its ability to address skill shortages, enhance scalability, and foster digital transformation. Companies leveraging external expertise gain a competitive advantage in rapidly evolving markets, accessing specialized knowledge without the overhead of in-house teams. As the software development landscape evolves, outsourcing adapts to emerging technologies like blockchain, Internet of Things (IoT), and edge computing. This adaptability ensures businesses can remain at the forefront of technological advancements without significant internal restructuring.

This analysis will explore key statistics, outsourcing catalysts, domain-specific insights, and future industry trajectories. Readers will gain a comprehensive understanding of the software development outsourcing landscape in 2024, equipping them with valuable insights for strategic decision-making in this dynamic field.

Top Software Development Outsourcing Statistics 2024

Here are some of the most significant software outsourcing statistics to consider in 2024:

• Global Software Outsourcing Market Size: The IT outsourcing market reached a staggering $617.69 billion and continues to expand. By 2027, it’s expected to grow at a compound annual growth rate (CAGR) of 5%, with a significant portion of this growth driven by software development outsourcing as companies seek specialized technical skills and cost-effective solutions.
• Enterprise Software Dominates Demand:7% of outsourced software projects focus on enterprise applications, such as ERP systems, data analytics, and CRM platforms, according to software development statistics from the overall software market. These projects support businesses in managing operations more efficiently and meeting their digital transformation goals.
• Global Developer Workforce: The software outsourcing industry taps into an expansive talent pool, there are now 28.7 million software developers worldwide, with high concentrations in outsourcing hubs like India, Eastern Europe and Southeast Asia. This global developer base allows software outsourcing partners to access skilled talent across multiple time zones, enhancing collaboration in the development process.
• Cost Efficiency: Outsourcing software development offers significant financial benefits. Companies can save up to $6,474 per month (an average of 85% savings) by outsourcing their IT needs, highlighting the market volume potential. These cost savings enable businesses to reinvest in other strategic areas, further driving innovation and growth.
• Financial Sector Leads in Outsourcing: A full 72% of the financial services sector is adapting to outsourcing trends to enhance efficiency outsources software and app development, driven by the need for secure, scalable, and compliant digital solutions. As the demand for fintech solutions and mobile banking rises, outsourcing enables financial institutions to meet these demands swiftly and cost-effectively.
• IT Leaders Favor Outsourcing: Globally, 64% of IT leaders choose to outsource their software development needs, allowing their organizations to innovate quickly without the burden of in-house recruitment and training. This is especially crucial for specialized development areas such as AI, cybersecurity, and mobile app development, which represent significant market share in the outsourcing market worldwide.

These statistics highlight why software development outsourcing remains a compelling choice for organizations seeking to innovate and grow.

The Reason Behind the Boom in Software Development Outsourcing

The software development outsourcing market is booming due to several critical factors:

CTO Perspective

CTOs play a crucial role in the decision to outsource software development. They often prioritize scalability, security, and access to cutting-edge technology when selecting outsourcing partners. The following insights provide a CTO’s perspective on software outsourcing:

• Focus on Scalability: A CTO typically needs to scale development teams quickly without compromising quality. By outsourcing, companies can expand or reduce team sizes as needed.
• Project Management and Security: Data security and intellectual property (IP) protection are top priorities. Many CTOs demand compliance with standards such as ISO 27001 certification is essential for service providers in the global IT outsourcing landscape. and GDPR from outsourcing providers to ensure data protection.
• Technical Expertise and Innovation: Access to specialized skills (e.g., AI/ML, blockchain) enables CTOs to implement innovative solutions within the overall software development landscape. According to industry research, 62% of tech executives plan to increase their outsourcing budget to meet new technical challenges.

HR Manager Perspective

HR managers view software development outsourcing as a solution to recruitment and staffing challenges. Here are key factors from an HR perspective:

• Reduced Recruitment Costs: By outsourcing, companies save on the costs of recruiting, onboarding, and training new employees.
• Flexible Staffing Models: Models like global IT outsourcing are becoming increasingly popular. Staff augmentation allows HR managers to add or remove team members based on project needs. 53% of companies use staff augmentation for temporary projects, reflecting the growing market trend in global outsourcing.
• Addressing Talent Shortages: Outsourcing helps HR managers access a global talent pool, ensuring they meet demand in specialized fields like cybersecurity and cloud computing.

In-Depth Software Development Outsourcing Statistics by Domain

In 2024, several software development domains are in high demand within the outsourcing market, which is projected to reach new heights.

This demand reflects the broader industry trend toward software outsourcing companies. platform independence, automation, and enhanced security.

AI and Machine Learning (ML) Development

The demand for AI and ML-based software development services continues to rise, as indicated by the statista market forecast. This demand is driven by applications in data analytics, predictive modeling, and automation, which are essential services outsourcing trends in the software applications domain. Some key statistics highlight the total market size of the software outsourcing industry.

• Projected Growth: The global AI and ML outsourcing market is expected to grow at a 33% CAGR, with increased demand for machine learning models in e-commerce, healthcare, and finance.
• Popular AI Applications in the latest software outsourcing landscape: Chatbots, recommendation systems, and predictive analytics are top outsourced services.

Platform-Independent App Development

As mobile use grows, businesses require apps that perform seamlessly across devices, aligning with the latest software trends in the global outsourcing market. The following trends define this domain: an increased focus on cost efficiency and the adoption of innovative software applications.

• Cross-Platform Tools: Technologies like React Native and Flutter are leading the way in the latest software development outsourcing trends. Flutter and React Native Development services are in high demand, enabling efficient development of platform-independent applications.
• Cost Efficiency: Companies report saving 30-40% on app development costs by outsourcing platform-independent projects.
  Cybersecurity Software Development

With growing cybersecurity threats, companies need to safeguard their systems, making cybersecurity one of the fastest-growing outsourced domains in the services outsourcing sector.

• Rising Demand: Cybersecurity software development outsourcing is growing at a 21% CAGR.
• Primary Focus Areas: Threat detection, data encryption, and compliance are leading areas of focus for outsourced cybersecurity projects.

Global Trends and Future of Software Development Outsourcing

The outsourcing landscape is changing, with new regions becoming popular for software development outsourcing:

• Growth in Eastern Europe and Southeast Asia: These regions are gaining traction as they offer highly skilled developers at competitive rates.
• Nearshoring Preferences: North American companies increasingly favor nearshore outsourcing in Latin America to facilitate collaboration in similar time zones.

Highlights: Groove Technology is one of the leading software outsourcing firms with a presence in Australia, UK, Asia Pacific, and Europe. Based in Vietnam, Groove Technology has a team of over 230 skilled professionals, specializing in custom software, e-commerce, data analytics, IoT, AI, etc.

Besides, the innovation trends in Software Development have also become strong in 2024.

• 25% Faster Product Launches: According to a McKinsey report, outsourcing software development can reduce the time-to-market by up to 25%. For instance, a global hotel chain leveraged outsourcing to accelerate software releases, demonstrating how outsourcing can streamline development cycles and deliver products faster.
• 81% of Executives See Cybersecurity as Their Primary Tech Challenge: Deloitte reports that cybersecurity remains the top priority for tech executives, with 3 out of 4 collaborating with external cybersecurity partners. As cyber threats evolve, outsourcing to experienced providers is becoming essential for companies aiming to strengthen security and protect sensitive data.
• IT’s Environmental Impact: By 2040, the IT sector is expected to account for 14% of the world’s carbon footprint (Netcorp). As a result, more companies are investing in “green software” practices to reduce emissions. Sustainable outsourcing not only benefits the environment but also helps companies build trust with eco-conscious customers.
• 52% of Companies Use Outsourcing for AI/ML Consulting: As AI and ML fields evolve rapidly, over half of companies outsource to fill skill gaps and access specialized expertise (Deloitte). Outsourcing in AI and ML helps businesses implement advanced technologies without the need to build in-house capabilities, making it easier to stay competitive.
• 34% of Businesses Partner for RPA: Robotic Process Automation (RPA) is gaining traction, with 34% of companies collaborating with outsourcing providers to support RPA initiatives (Deloitte). This trend is expected to grow as RPA technology becomes integral to automating repetitive tasks and improving operational efficiency.
• 75% of Executives Plan to Outsource IT Services: According to Radixweb, IT services—including infrastructure management, software development, and cybersecurity—are among the most commonly outsourced functions. With outsourcing, companies can reduce operational costs and allocate more resources toward core business functions.
• Projected 22% Growth in Developer and QA Roles by 2030: The demand for software developers, testers, and QA experts is expected to grow by resulting in a market volume that highlights the significance of the software industry. 22% by 2030, making them some of the fastest-growing roles in tech (US Bureau of Labor), particularly in the business process outsourcing sector. This surge is fueling a demand for outsourcing partners who can provide skilled talent in these areas.
• Projected Market Value of $126 Billion by 2026: The custom software development market is expected to reach $126 billion by 2026 (Global Market Insights). Businesses are increasingly seeking tailored software solutions that meet specific needs and integrate seamlessly with existing systems, driving this growth in custom software outsourcing.

These trends underscore how software development outsourcing is evolving to meet the challenges of modern business, from enhancing speed and security to advancing sustainability and accessing niche expertise. In 2024, outsourcing remains a strategic lever for companies seeking efficiency, agility, and innovation in the software industry.

Frequently Ask Questions (FAQs)

How much software development is outsourced?

Currently, the outsourcing market is projected to reach unprecedented levels, driven by demand for IT services. 64% of IT leaders worldwide outsource their software development. This high adoption rate demonstrates the demand for specialized skills, faster scalability, and cost efficiency that outsourcing provides.

What percentage of IT operations is outsourced?

About 37% of IT operations are now being managed by software outsourcing partners, reflecting a shift towards more efficient resource allocation. are managed by external providers, reflecting how businesses rely on outsourcing to handle complex IT tasks, optimize resources, and focus internal teams on core activities.

Conclusion

In 2024, software development outsourcing is a strategic approach for companies seeking cost efficiency, faster product launches, and access to specialized skills. As businesses face challenges in cybersecurity, AI/ML expertise, and scalability, outsourcing continues to play a vital role, with top industries like finance and enterprise solutions leading adoption. This article covered key trends, such as the projected growth of the IT outsourcing market, increasing partnerships for RPA, and the demand for sustainable, green software practices.

For businesses ready to harness these benefits, Groove Technology offers tailored software development solutions that prioritize quality, security, and scalability. With a proven track record and a highly skilled team, Groove Technology is your trusted partner for effective, reliable outsourcing solutions.