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 favoured 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

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.