Application Development Most Widely Outsourced Function

January, 2010

Application development is the most popular IT function to turn over to third-party service providers today, as it has been for several years. About 33% of organizations outsourced some application development work last year, edging out data center operations and data network operations, which are outsourced in whole or in part by about 28% of all IT organizations.

This Research Byte is taken from our full study, Application Development Outsourcing Status and Trends.

Application development outsourcing retained its top position in 2009, despite a substantial decline from the prior year. Figure 1 shows that a little more than half of all organizations outsourced application development work in 2007 and 2008, compared to only 33% in 2009.

App Fig1 - Application Development Most Widely Outsourced Function

Such a precipitous drop indicates the overriding factor driving the downturn was the deepening recession, which caused many organizations to curtail spending on new initiatives and delay ongoing projects where possible. As application development is project-based, application development outsourcing activity is far more subject to swings in the economic cycle than outsourcing of data center, help desk, or other IT functions. Outsourcing activity declined across the board last year, but no single function declined more than application development.

As IT organizations renew capital spending, IT managers will again be faced with the decisions of whether to hire or outsource. The full version of this study will help IT managers understand how many organizations outsource application development, how much of the workload is typically outsourced, the percentage of organizations suffering cost overruns, the number of organizations turning to offshore service providers for application development, and the trend in offshore outsourcing.

This Research Byte is a brief overview of our report on this subject, Application Development Outsourcing Status and Trends. 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).

Do you also need information on other outsourced functions? Our major study, IT Outsourcing Statistics: 2009-2010, presents data on the frequency, level, and economic experience of outsourcing for 11 IT functions.