Software Outsourcing Trends in 2023: Agility, Adaptability, and Cybersecurity

Offshore Development
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Software Outsourcing Trends in 2023: Agility, Adaptability, and Cybersecurity

Being an IT leader is never easy, but the last few years have been especially tough. As we look ahead, it’s helpful to adopt a more proactive perspective. Some trends are continuing, some are intensifying, and some are brand new. Nevertheless, a future-proof approach must take all of these into account.

With ALLSTARSIT’s global network of 100+ firms in over 40 countries, our trusted advisors have a direct line into software outsourcing business trends. Here are our four top picks of key outsourcing trends shaping software development outsourcing in 2023.

Four Key Outsourcing Trends

Cost Agility is Critical

Outsourcing has returned to its flexible, cost-saving roots. According to Deloitte Consulting, this trend originated around the pandemic and has been going strong ever since. That’s why, in a recent BCG study, 89% of companies said they want to strengthen their relationships with their IT service providers.

IT leaders are now looking for ways to cut expenses and also for agility in resourcing costs and levels. Outsourcing gives them the necessary control in times of business uncertainty.

According to the Deloitte Global Outsourcing Survey 2022, 32% of executives suggest a budget increase for traditional outsourcing, while 57% of them agree that the primary driver of traditional outsourcing is cost reduction, typically via staff augmentation for transactional business and IT activities.

This year’s survey shows a sharp rise in companies prioritizing cost reduction. With a global recession caused by the pandemic, this outsourcing trend will only continue to accelerate.

Reasons for Outsourcing

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Developer Scarcity Paradox

While layoffs at well-known tech giants are making the news every day, “software developer” remains one of the most demanded jobs in the world, with one of the highest turnover rates of any job type.

Even though the tech industry is cutting back, tech-led companies are still trying to recruit qualified software developers to build apps, do migrations, and implement new technologies. At least half of CIOs say that a lack of skilled workers hinders their companies’ growth and ability to compete. So it is no surprise that 50% of executives identify talent acquisition as a top internal challenge in meeting their organization’s strategic priorities.

The software development workforce  suffers because hiring takes a long time and costs a lot of money. Poor retention isn’t helping: Only 29% of IT workers plan to stay with their current employer in the long term.

Outsourcing is a tried and tested method to overcome talent shortage. It lets you tap into a global pool of talent with the skills you need right away, on your own terms, all while saving money by working with partners in the best outsourcing hotspots in the world.

Top business challenges for software development in 2023

Hybrid Team Validation

During the pandemic, many people adapted well to the remote work environment and the new policies and procedures that this shift brought about. HR teams around the world are evolving, changing, and adapting their systems and procedures to match this stage of evolution. Companies had to adopt the business model of “hybrid” teams, which meant a mix of people working from corporate offices and remotely.

This working model sparked many debates about whether or not less structure at work would mean less productivity. Also, people started wondering if organizations would rush back to old ways of doing things once the pandemic was over.

At ALLSTARSIT, we knew the answer to those questions was “no.” Working with outsourcing models for 20 years has taught us that teams made up of onshore client staff and offshore resources can accomplish as much as, or better than, traditional teams.

Now there is evidence to support this. During the pandemic, many studies showed that hybrid work makes teams more productive.

A study by PwC showed that remote and hybrid models have resulted in productivity boosts in many workforces, with 57% of companies reporting that their organizations had exceeded their goals thanks to hybrid working.

Hybrid Teams statistics

Cybersecurity Sourcing Crisis

Executives identified cybersecurity as the most prominent external problem they face when trying to achieve their strategic goals. According to Cybersecurity Ventures, there was a record number of unfilled cybersecurity jobs in the United States in 2022: 465,000 (almost half of all cybersecurity jobs). At the same time, cyber attacks increased during the pandemic, and are getting worse.

New security technologies have been created to deal with the growing number and complexity of attacks. This makes the already short supply of people with cybersecurity skills even more critical.

Because their own resources are already being used up, many organizations find it hard to build and grow security teams that can fully protect their most critical assets.

The 2021 (ISC)2 Cybersecurity Workforce Study states that the global cybersecurity workforce needs to grow by 65% to keep up with the growing cyber threat, which will not happen soon.

Today, 81% of executives  rely on third-party vendors (i.e. software outsourcing providers) for all or part of their cybersecurity needs, according to a Deloitte Survey.

Service providers must be prepared to offer talent-integrating solutions to quickly and flexibly fill skill gaps in cyber defense staffing and get experienced, credentialed resources at affordable rates.

Top business challenges for software development in 2023


Here is an infographic including all four trends that you can share with your community:

Software outsourcing trends in 2023

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