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Outsourcing Trends: The Past Decade in Review

Outsourcing Trends: The Past Decade In Review

Over the past ten years, organizations have increasingly realized the value that technology brings to their processes, resulting in a growing demand for outsourced software development partners that can help reach business objectives.

Today’s software development ecosystem is rife with established providers that are constantly innovating, coupled with a growing number of start-ups that offer new propositions for third-party software development as new technologies continue to emerge.

The following trends played a huge part in the growth of the software outsourcing sector over the last decade and will continue to shape the industry over the next ten years.

Growing Nearshore Software Development Industry

Offshore software development outsourcing has long been a way to cut costs and find talent, but the model is, to this day, held back by time zone differences, language barriers, and cultural misalignment that make the experience difficult to maintain.

In the last ten years, nearshore development outsourcing rose to the occasion as the most viable alternative, quickly becoming a popular trend among U.S. organizations. Nearshoring involves partnering with development companies in nearby countries, eliminating time zone misalignment that damages the agile nature of modern software development. Companies with a solid nearshore strategy also found that they could bridge cultural and language barriers, resulting in stronger development teams.

While Asia and Eastern Europe became household names for offshore software outsourcing, Latin America took the nearshoring crown, with countries such as Colombia, Mexico, and Costa Rica devoting resources into training enough talent to support the growing demand for software development. Today, Colombia is leading the pack in this regard. For several years now, the government has been putting policies in place to strategically develop the country’s digital economy.

[Need help sorting through the pages of nearshore software development providers? Check out our guide!]

Nearshoring involves partnering with development companies in nearby countries, eliminating time zone misalignment that damages the agile nature of modern software development.

Added Value Ranks Higher Than Low Costs

Cost reduction, particularly when it comes to engineering talent, has always been an influence on how and where organizations decide to outsource software development. For years, businesses would focus on finding the cheapest alternative to domestic developers, leading many U.S. customers to vendors in Asian countries.

During the last decade, this mindset began to shift, as end-users started to demand more from their service providers. Customer experience quickly became vital to a product’s success or failure as consumer technology proliferated around the world, resulting in a new prioritization of quality and performance, as well as the added value that partners could bring to the table.

Companies began looking for outsourced development partners that could drive innovation and support business objectives, resulting in long-term partnerships and shared successes. The shift in priorities favored nearshore vendors, who went beyond simply developing tools and worked to help their partners reduce operational costs, enable new business operations, or give them a competitive edge.

Multi-sourcing Drives Competition and Ingenuity

Outsourcing Trends: The Past Decade in Review photo 1

Since 2010, more and more organizations have realized the value of spreading their development projects across multiple providers, a practice known as multi-sourcing.

Most companies approach multi-sourcing by entering into agreements with a few providers at once, then determining the best partner for the job each time a new development or maintenance project emerges. This provider portfolio approach broadens an organization’s access to resources, as each supplier may boast unique tools and methods that suit particular goals. For instance, one company might only provide staff augmentation services, while another offers end-to-end services and continued application lifecycle management (more on that in a moment).

Some companies still find it challenging to deal with several vendors on a single project, especially when outsourcing to domestic suppliers in tandem with offshore companies.

Those who have mastered the approach opt for a mix of nearshore and onshore teams, choosing to work with service providers of different sizes for the specializations or state-of-the-art infrastructure and procedures each one can bring.

The multi-sourcing practice is here to stay and has already helped providers play to their strengths, fostering competition in the industry and leading to more competitive prices and added-value services for customers.

[Relevant Reading | The Importance of UX and How to Benefit from It]

Popularity Soars for Data Analytics

Across all industries, the importance of analyzing data to improve organizational efficiency is well-known, so companies spent some of the last decade working with their technology partners on developing and implementing robust analytics platforms.

Entrusting data analytics to a third party provides several advantages, particularly when it comes to cost. Hiring full-time data scientists or analysts can be expensive, and it takes a lot of time for them to add value to the organization. Data analytics service providers offer highly specialized services according to their customers’ business needs, as well as meeting international standards. Organizations found that this level of accountability gave them more time to examine the processed data and make more informed decisions for the business.

Demand for Application Lifecycle Management

Due to the progression of the software outsourcing industry, outsourcing partnerships in the last decade evolved from one-time development projects into long-term, value-driven partnerships thanks to the demand for application lifecycle management (ALM).

As its name indicates, ALM is the practice of managing an application from conception to delivery and even through to maintenance. Robust ALM integrates project and requirements management, development, testing, quality assurance, delivery, and customer support, helping companies monitor product readiness, automate development processes, and ensure lifecycle traceability.

Some of the top software development outsourcing companies have learned to take ALM to the next level, providing implementation, training, and maintenance services that meet regulatory requirements and come with continuous upgrades.

Moving ahead into the next decade, organizations have a lot to learn from the last ten years. The main takeaway is to partner with software development outsourcing companies that can provide high levels of added value through innovation-driven partnerships, competitive rates, and world-class talent. We’d love to talk to you about that opportunity.

What software development outsourcing trends did you experience? Let us know in the comments what you’ve seen in the last decade.

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