Application Development Outsourcing on the Rise

October, 2021

Over the past two years, the outsourcing of the application development function has grown a noticeable amount in our annual IT Outsourcing Statistics study, after a period of slow or no growth.

Why the uptick? For starters, there is much going on in the application development universe. The demand for applications is constantly increasing due to digital transformation, changing business needs, and other factors, and qualified application developers are in limited supply, especially for newer development technologies. The increase in mobile applications, as well as the increased use of artificial intelligence, machine learning, and big data, puts a premium not only on finding experienced developers but also making sure their skill sets continue to evolve. This is a recipe for the growing demand for application development service providers that can fill these high-demand requirements.

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 rose in 2020, hitting 60%. The expense and difficulty of finding qualified application developers is likely a factor in this trend.

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

However, some headwinds could slow down this outsourcing surge. The trends include public cloud infrastructure, software as a service (SaaS), platform as a service (PaaS), and the no-code/low-code movement.

SaaS providers have introduced a plethora of applications to meet specific business needs, whereas in earlier years custom development might have been the natural choice. Platform-as-a-service (PaaS) providers also give in-house application developers easier ways to build and deploy new systems, making those developers, and in some cases, power users, more productive. This mitigates one source of demand for application development service providers.

“Application development can be a tricky outsourcing category to get right,” said Tom Dunlap, director of research for Computer Economics, a service of Avasant Research, based in Los Angeles. “Application developers are expensive and, in many cases, are rightly seen as options to outsource. But our moderate service-satisfaction numbers show there is a risk associated with this type of outsourcing.”

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 conclude with 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-subscribers directly from our website (click for pricing).