Software Development Outsourcing Hub

Exploring the Latest Software Development Outsourcing Statistics

September 6, 2023

The software development outsourcing market has evolved drastically in the last decade. Just consider that IT global spending reached a whopping $4.6 trillion this year. 

In addition to growth, the IT outsourcing landscape has shifted in exciting ways. New horizons such as remote work, AI and green software have transformed the industry. 

To stay competitive in our digital age, you must understand the IT outsourcing market. Here are key software development outsourcing statistics so your business has 360° vision.

What Is Software Outsourcing? 

Software outsourcing involves hiring a third-party provider to handle your IT needs. Your partner will work closely with you throughout all product phases. This includes discovery, design, development, deployment and post-launch support.

Outsourcing has become a popular option, especially due to the developer shortage crisis. Choosing to outsource lets your business access top talent with no strings attached. It also unlocks cost savings, flexibility and more. 

Let’s dive into the software development outsourcing statistics defining the market today. 

Global Software Outsourcing Statistics

How big is the global software outsourcing market?

It’s clear that outsourcing plays a major role in the total IT services market. Experts predict software outsourcing will continue to grow worldwide in upcoming years. 

  • By 2025, IT outsourcing is predicted to account for 25% of the total IT services market. 
  • By 2028, IT outsourcing will reach an impressive $777.70 billion in revenue. 

The growth of the software outsourcing market is also reflected in business decisions. Keep in mind that:

  • 92% of G2000 companies are leveraging IT outsourcing. 
  • 90% of small businesses plan to outsource business functions. 
  • IT outsourcing at start-ups is expected to rise 70% between 2022-2023. 

What countries are providing the most IT outsourcing?

(Source: World Bank’s ICT Service Exports

According to the World Bank, Ireland ($206.35 billion) and India ($144.8 billion) are top-ranked for ICT exports.

Other countries with leading ICT outsourcing numbers include:

Be aware that these ICT values include both computer and communications services. Other reports that isolate IT services suggest that Japan is also a leading provider

What countries are software outsourcing leaders?

(Source: 2021 Kearney Global Services Location Index)

Of course, the value of IT outsourcing isn’t just in the numbers, but also in the quality of services. Kearney ranks the top 5 IT outsourcers as India, China, Malaysia, Indonesia and Brazil

As remote work has become the norm, smaller tech hubs are also gaining traction. Typically these locations have stable governments and budding IT ecosystems. This includes:

  • Eastern European countries such as Estonia, Poland, Bulgaria, Georgia and Latvia. 
  • Asian countries such as Vietnam, Philippines and Thailand.
  • Latin American countries such as Mexico and Colombia.

Where are the most programmers located?

(Source: Statista)

By 2024, there will be 28.7 million software developers available for hire worldwide. Specifically, the top 5 producers of IT talent include:

  • China (7 million)
  • India (5.8 million)
  • U.S. (4.4 million)
  • Japan (1.2 million)
  • Brazil (500,000)

In the coming years, we’ll likely see an uptick of IT talent from other high-growth regions. These may include countries in Eastern Europe, Asia and Latin America. 

Where are the most talented developers located?

(Source: Pentalog’s 2022 World Ranking Report)

Over the years, there have been many studies on the most skilled developers around the world. Though largely subjective, the most recent reports come from Pentalog and Coursera. 

Overall, Coursera’s insights suggest that:

  • 76% of countries ranked with “cutting-edge skills” are located in Europe.
  • Latin America and the Caribbean are #1 in Technology and Data Science skill scores.

Statistics for Technical Skills & Areas

What are the most in-demand technical skills?

(Source: Statista)

Businesses are especially keen to hire for skills that lead to the best digital products. The most in-demand areas include:

Specifically, there's a high demand for AI, big data, business intelligence, IoT and so on. This speaks to the greater trend of digital transformation. 91% of organizations are prioritizing digital efforts, while 80% are undertaking AI-specific initiatives.

2023 HackerRank Developer Skills Report)

Other studies on in-demand skills include more specific technical areas. For example, the most popular HackerRank skills tests were:

What are the most in-demand software areas?

(Source: Deloitte’s 2022 Global Outsourcing Survey)

Of course, businesses are looking to IT outsourcing partners to cover specific gaps. 

The #1 software area is cybersecurity, with 81% of businesses using outsourcing for it. This makes sense considering that 83% of organizations suffer 1+ data breach per year.

A few other highlights from these top software areas include:

  • 78% are outsourcing “next-gen tech.” Again, companies are looking for that competitive edge via innovation. 
  • 75% are outsourcing “data and analytics.” Studies show data scientists and analysts are the fast-growing IT professions (5.5%)

What are the most in-demand programming languages?

Turing’s 2022 Most In-Demand Tech Skills Report)

Organizations are seeking IT partners with the hottest programming language skills. The top 5 requested by businesses include React, Node.js, Python, AWS and JavaScript. 

StackOverflow Developer Survey 2023)

Developer surveys from industry leaders such as StackOverflow reflect similar demands. The top 5 here included JavaScript, HTML/CSS, Python, SQL and TypeScript. 

Which sectors rely the most on software development outsourcing?

(Source: 2023 ManPower Group Report)

Essentially, all industries are facing increasing digital demands from their customers. The fields with the greatest IT talent shortage include:

  • Communication services (79%)
  • Energy & utilities (79%)
  • Health care & life sciences (78%)
  • Information technology (78%)

(Source: SourceSeek’s Global Software Marketplace Insights)

However, these numbers fluctuate depending on the region. For example, Eastern Europe’s #1 industry is finance/banking (25.3%), with healthcare (17.3%) not far behind.

(Source: Krusche & Company

The type of software project can also be a factor. For the app development industry, the #1 industry served is financial services at 72%. Next, you’ll see retail (60%) and manufacturing (59%) projects.

Benefits & Challenges Software Outsourcing Statistics

Why is software outsourcing beneficial?

(Source: Statista)

In the past, businesses chose IT outsourcing primarily to save costs. While price is still a key factor, the #1 priority today is getting access to top talent (46%). 

What’s more, software development outsourcing can help your company:

  • Focus on your core business (35%)
  • Empower scalability (33%)
  • Enjoy resource flexibility (29%)
  • Boost innovation (10%)

Small businesses who outsource have similar concerns. For them, flexibility (21%) and efficiency (19%) take the lead in benefits. 

(Source: UpCity’s 2022 Small Business Outsourcing Report)

Of course, these benefits are just the tip of the iceberg. You can learn more about the full range of outsourcing advantages in our guide here. Some other serious benefits include:

  • 91% enjoy “satisfactory” outsourcing relationships. 
  • 78% experience successful outcomes when outsourcing. 
  • 55% achieve a faster time-to-market through outsourcing.

What are the greatest challenges of outsourcing?

(Source: SmallBizClub)

IT outsourcing has become a reliable, high-quality option for businesses. Yet, there are certain challenges to be aware of. 

At 57%, miscommunication is the primary reason for outsourcing failure. This speaks to the importance of building a trust-driven relationship with your partner. After all, 75% of CEOs have stated that partnerships are “critical” to their businesses. 

(Source: Deloitte Global Outsourcing Survey 2022)

It’s no wonder that businesses are seeking key traits in their outsourcing partners. Qualities such as transparency (54%) and trustworthiness (41%) rank at the top of their lists. 

Statistics on IT Outsourcing Growth & Trends

Will the software outsourcing sector continue to grow?

The software outsourcing sector is booming. Spending in the sector grew 22% between 2022 and 2023. 

These numbers are only set to grow in upcoming years. The annual growth rate for IT outsourcing is estimated at 11.07% (between 2023-2028). What’s more, some experts predict the IT outsourcing market will reach $1.06 trillion by 2030.

Is there a tech talent shortage?

(Source: 2023 ManPower Group Report)

The developer shortage crisis is a real phenomenon affecting businesses worldwide. 77% of companies are struggling to find the tech talent they need – a record high. In particular, Taiwan (90%), Germany (86%) and Hong Kong (85%) are facing difficulties. 

Most importantly, this tech skills gap is only expected to widen. The current shortage is predicted to rise to 85.2 million developers by 2030

How has remote work influenced outsourcing?

(Source: 2023 ManPower Group Report)

The remote work revolution has made businesses everywhere feel more comfortable with outsourcing. 

Today, 55% of companies are willing to hire outside their borders. As a result of new strides in remote hiring, more teams are hybrid today. In fact, 62% of immediate teams are distributed across multiple time zones. 

Is software outsourcing expensive?

(Source: 2022 Global Software Outsourcing Trends and Rates Guide)

The cost of software development outsourcing varies. It depends on the scope and specifics of your project, as well as your chosen partner. 

On the whole, however, IT outsourcing offers opportunities for cost savings. Accelerate estimates that the total cost of an offshore developer is $41-81/hour. That’s about half the price of a U.S. developer.

This makes sense considering the many categories you can cut when choosing outsourcing. For example, you don’t have to pay for recruitment, salary/benefits, training, equipment, etc. 

At the end of the day, hiring an in-house developer is a huge investment, often involving 2.7x the base salary. Outsourcing lets you hand off these costs to a partner instead.

Software Outsourcing Statistics by Global Region

(Source: Precedence Research)

Let’s now analyze software development outsourcing statistics by region. Forecasts predict that the engineering outsourcing market will enjoy 20.3% annual growth. 

North America software outsourcing statistics

(Source: Grand View Research)

The North American IT outsourcing market is currently the largest in the world. Revenue this year is predicted to reach $182.70 billion. Other key forecasts include:

  • It’s predicted to enjoy a 10.71% growth rate from 2023 to 2028. 
  • Revenue is estimated to spike to somewhere between $303.90 billion and $937.67 billion by 2028. 
  • The average spend per employee is estimated at $731.30 for 2023.

However, the U.S. and Canada still face a huge developer and tech skills gap. It’s likely that North America will grow at slower rates compared to other regions worldwide. 

Europe software outsourcing statistics

The European IT outsourcing market is also quite strong. $145.50 billion revenue is anticipated for 2023. In addition, 72% of European businesses plan to outsource at the same rate or more in the next two years. 

This trend follows positive predictions for the IT outsourcing market in Europe, including:

  • The annual growth rate is expected to reach 10.58% from 2023 to 2028.
  • Experts predict an impressive revenue of $240.60 billion by 2028.
  • The average spend per employee is estimated at $360.40 for 2023.

Western Europe statistics

(Source: Statista)

Western Europe has traditionally been the center for tech professionals in the region. Germany and the U.K. lead the pack with over 800,000+ developers each. 

Besides Ireland, these two countries have the highest IT outsourcing revenues in Europe. Each has reached over $42 billion in ICT exports. 

(Source: Coursera’s Global Skills Report 2023)

In addition, European countries have topped the Coursera skill rankings for Technology. These include Switzerland, Spain, Germany, and Slovakia

Other countries such as the U.K. Germany and Portugal are also listed on Kearney’s IT destinations. 

Eastern Europe statistics

(Source: SourceSeek’s Global Software Marketplace Insights)

Eastern European countries boast of some of the most exciting IT outsourcing talent. Just consider that this year’s revenue for the region will reach $5.07 billion

Eastern European countries are well-represented on Kearney’s index. These include Estonia, Poland, Bulgaria, Georgia and Latvia. 

What’s more, Pentalog’s World Ranking lists Moldova as the top destination for IT talent. Romania, Ukraine and Poland aren’t far behind, either.

Finally, Eastern European countries are particularly known for their start-up culture. Estonia, where Netcorp is based, is a major player here. Estonia has the highest number of start-ups and venture capital per capita. It also ranks highest for government stability

Asia-Pacific software outsourcing statistics

(Source: Coursera’s Global Skills Report 2023)

Asia is also seeing excellent growth in IT outsourcing. Revenue estimated to reach $101.10 billion in 2023.

  • The annual growth rate is expected at 11.64% from 2023 to 2028. 
  • Forecasts suggest revenue will reach $175.30 billion by 2028.
  • The average spend per employee is estimated at $48.78 for 2023.

Overall, India is the top IT outsourcer in the region, with $144 billion in ICT exports. Japan and China are also considered IT leaders in revenue. 

In terms of skills, Coursera ranks Japan, Indonesia and Singapore high in Technology. At the same time, Kearney’s index includes numerous Asian countries. These include India, China, Malaysia, Indonesia, Vietnam, Philippines and Thailand

Latin America software outsourcing statistics

(Source: Statista)

Latin America also has huge potential as an IT outsourcing destination. Its major player Brazil has one of the largest talent pockets with 500,000 developers. 

Specifically, South America is one of the fastest-growing regions for software development outsourcing. This year, the market is predicted to attain $8.09 billion in revenue.

  • The annual growth rate is anticipated at 12.68% from 2023 to 2028. 
  • Revenue is set to reach $14.70 billion by 2028.
  • The average spend per employee is estimated at $38.44 for 2023.

(Source: Coursera’s Global Skills Report 2023)

Finally, Coursera lists Colombia, Mexico, Brazil and Argentina as leaders in Technology skills. Kearney’s top-ranked IT list also includes LATAM countries Brazil, Mexico and Colombia.

Trends to Look Out For in IT Outsourcing 

Software outsourcing can be a slippery slope if you don’t stay up-to-speed with the industry. As your business chooses IT outsourcing, be sure to get the latest on trends such as:

  • Prioritizing talent over cost
  • Focusing on cybersecurity 
  • Incorporating AI & RPA
  • Enhancing partnership management
  • Encouraging green software efforts
  • Exploring new outsourcing destinations
  • … and more!

Check out our in-depth trends list to learn more. By getting into the nitty-gritty, your business can maximize your IT outsourcing partnership. 

Choose Netcorp as Your Top-Tier Software Partner

Get the full picture with the software development outsourcing statistics above. Our experts have curated this list, so that your business can stay on top of the industry. 

No matter how IT outsourcing evolves, you can benefit from a first-rate partner. Navigate the software outsourcing landscape with our Netcorp team of experts. We're proud to build high-caliber products aligned with your business goals. Contact us today!

Paavo Pauklin
Executive Board Member

Paavo Pauklin is a renowned consultant and thought leader in software development outsourcing with a decade of experience. Authoring dozens of insightful blog posts and the guidebook "How to Succeed with Software Development Outsourcing," he is a frequent speaker at industry conferences. Paavo hosts two influential video podcasts: “Everybody needs developers” and “Tech explained to managers in 3 minutes.” Through his extensive training sessions with organizations such as the Finnish Association of Software Companies and Estonian IT Companies Association, he's helped numerous businesses strategize, train internal teams, and find dependable outsourcing partners. His expertise offers a reliable compass for anyone navigating the world of software outsourcing.

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