App Development Outsourcing Increasing But for How Long?

February, 2024

The outsourcing of the application development function has grown in the past five years, increasing from 56% in 2019 to 64% in 2023. However, this is an outsourcing category that should be monitored, because there are countervailing trends such as public cloud infrastructure, SaaS, low-code/no-code, and even AI, which may result in decreased demand for developers in the near future.

So why the uptick? The demand for applications is constantly increasing due to digital transformation, changing business needs, and the surge in generative AI. The increase in mobile applications, AI, ML, and big data puts a premium not only on finding experienced developers but also on ensuring that their skill sets continue to evolve. Furthermore, hiring and maintaining in-house developers can be costly, and qualified application developers are in limited supply.

As shown in Figure 2 from our full report, Application Development Outsourcing Trends and Customer Experience, the percentage of IT organizations that outsource at least some of their application development continues to rise, hitting 64% in 2023. The expense and difficulty of finding qualified application developers to work in-house and the availability of helpful in-house tools are likely factors in this trend.

Outsourcing Frequency Application Developement 1030x687 - App Development Outsourcing Increasing But for How Long?

Outsourcing this function provides access to a wider talent pool, including industry-specific and application-specific expertise. It allows IT organizations to fully capitalize on rapidly evolving technologies with minimal financial risk. And, importantly, it permits organizations to ramp up or scale back application development efforts without impacting in-house developers assigned to core systems.

SaaS providers have introduced a plethora of applications to meet specific business needs, whereas earlier, custom development might have been a natural choice. Platform-as-a-service providers also offer in-house application developers easier ways to build and deploy new systems, making those developers, and in some cases, power users, more productive. This might eliminate one source of demand for application development service providers, but its frequency appears to remain high for now.

“Outsourcing is helping businesses to keep up with evolving technology,” said Waynelle John, research analyst for Avasant Research, based in Los Angeles. “IT departments feel compelled to stay abreast of changes like AI, automation, and digital transformation, but they may need help to do so.”

Our full report examines adoption trends and customer experience with application development outsourcing. We report on the percentage of organizations outsourcing it (frequency), the average amount of work outsourced (level), and the change in the amount of work being outsourced (trend). We also present data on the cost and service experience and how these trends differ by organization size and sector. We also provide guidelines to consider when outsourcing application development.

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