App Dev Outsourcing Roars Back, for Now

March, 2012

After taking a severe drop in 2009 amid the economic downturn, the number of organizations outsourcing at least some application development now exceeds the pre-recession level. But low cost and service ratings indicates the upswing may be short lived.

Our study, Application Development Outsourcing Trends and Customer Experience, finds that 58% of organizations outsourced some application development work in 2011, Figure 1 shows. That is above the 52% frequency rate in 2007 and well above the 33% frequency recorded in 2009.

AppDevOut RBFig1 - App Dev Outsourcing Roars Back, for Now

IT organizations have resumed outsourcing development work as they restore some capital spending and green-light strategic projects. In fact, it has surpassed prerecession levels as organizations resist expanding internal IT staff or have difficulty finding developers with the appropriate skills in areas such as mobile applications development.

It remains to be seen whether the frequency will return to the lower, prerecession rate after the economic outlook clears. By our measurements, the customer experience has been less than spectacular. The study shows many organizations find outsourcing increases costs and reduces service levels. Every application development project carries risk, but outsourcing without the proper management controls can increase those risks.

As IT organizations renew capital spending, IT managers again will be faced with considering whether to build internal development capabilities or outsource this critical function. The full report will help IT managers understand how many organizations outsource application development, how much of the workload is typically outsourced, and what the cost and service experience is for companies that outsource this function. The study also assesses outsourcing by organization sector and size and the frequency and level of offshore-outsourcing.

This Research Byte is a brief overview of our report on this subject, Application Development Outsourcing Trends and Customer Experience. The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website (click for pricing).