Custom software development outsourcing: numbers don’t lie

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In an increasingly digitized world, companies are constantly searching for customized technological solutions that allow them to improve operational efficiency and offer high-quality services to their customers. In this context, custom software development outsourcing has become an attractive and strategic option for many organizations. This type of development implies the creation of applications and computer systems adapted to the needs and requirements of a particular company.

Outsourcing the development of custom software implies entrusting this task to an external team, specialized in the development of customized solutions. These providers have the experience, knowledge and resources necessary to tackle different projects and deliver quality results in a determined time and budget.

In May 2023, Equiteq, a leading M&A (mergers and acquisitions) advisory firm in the technology and consulting industry, produced a report on the market of custom software development outsourcing. In this article, we will see their conclusions.

Demand growth

According to the report, around the world there are approximately 56,000 companies engaged in custom software development. The global market for this type of development is expected to grow at a compound annual growth rate (CAGR) of 8.5%, reaching $120 billion by 2026.

The demand for software is rapidly outpacing the supply of talent, and it is believed that the latter will not be able to keep up with the former. Although global software spending could nearly double between 2021 and 2026, the number of developers worldwide is estimated to increase by less than a quarter in the same period.

The trend towards outsourcing

Did you know that 55% of identified software development companies operate with less than 50 employees? Because of this, many CIOs are increasingly turning to outsourced IT services to help fill the gap in technology-trained staff. Tasks that require more basic skills tend to be outsourced to managed service companies in order to ease the workload on staff, while critical strategic work, which needs advanced skills not available in many companies, will increasingly be carried out by external consultants.

The biggest problem

Various surveys have been carried out to identify the company’s problems and the market situation. According to 61% of those surveyed by Gartner, the problem that demands the most attention, thinking in the next 18 months, is the need for talent. Similarly, 60% of those surveyed by SWZD (Spiceworks Ziff Davis) say that the correct terms to describe how they feel about the current state of the IT job market are difficult or very difficult.

The changes to come

Following the COVID-19 pandemic, the acceleration of remote work has lowered expectations for physical presence, opening the door for higher value-added services, typically provided in-country, to be delivered from locations nearby or on the foreign.

Besides, companies are embracing a human-centric rather than office-centric working model, providing flexibility in hours and location. Also, they are rethinking the compensation strategy. It is undeniable that a very competitive job market for information technology specialists makes it difficult to attract and retain the best talent.

Conclusions about custom software development outsourcing

By relying on specialized third-party providers, organizations can take advantage of the experience and specialized knowledge of highly-trained professionals.

However, it is important to be aware of some potential challenges. Effective communication and expectations management are critical to a successful collaboration with the third-party provider. Clear agreements must be established regarding the deadlines, the budget and the expected results.

Ultimately, custom software development outsourcing can drive innovation and business growth by allowing companies to focus on their core competencies and leverage the expertise of outside professionals.

If you want to read the full Equiteq report, you can access by entering the following link.


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