IT outsourcing industry analysis

Abto Software
4 min readJun 3, 2021


The IT revolution in the 1990s enhanced the development and spreading of IT outsourcing services. That was (and still is) a huge help for companies to deal with a talent shortage and increasing IT spendings. The industry keeps growing. It is predicted, that revenue of the global IT outsourcing will reach $430bn by 2025.

How big is the IT services outsourcing market?

As well as business process outsourcing, the IT outsourcing solutions market keeps growing. The demand for outsourced IT professionals is fueled by the increasing need for data security, process automation, and AI solutions. More and more businesses are looking for IT consultants and experts in narrow tech areas. As a result, the IT outsourcing services market reached $318.5 billion in 2020. Expected growth is $425.19 billion by 2026 with a compound annual growth rate (CAGR) of 4.5%.

Why the IT outsourcing industry keeps growing:

1. Multiple types of software build many times. Different types of industries require similar applications with light changes, customizations, and localizations. That, in turn, leads to increasing dement of IT outsourcing services.

2. Software and apps becoming more complex. Competitiveness in the market needs fresh ideas and scalable solutions. The complexity of the projects increasing every day.

3. Limited lifetime of code. Technology is changing at the same speed. New programming languages appear on the market to replace outdated solutions. For example, once extremely popular Visual Basic is out of support and needs to be replaced by modern C# .NET.

Of course, such a huge dement of IT outsourcing solutions require an increasing number of IT workers. According to the Worldwide Developer Population and Demographics Study, the number of software developers will increase by impressing 75% during the next ten years.

Why outsource your IT?

The most standard answer to the question “Why outsource your IT?” is to save cost. At least, it was the main goal of businesses on the first steps of the outsourcing industry. Today the situation is changed. The talent shortage became the main problem for companies all over the world. Outsourcing opens the door to a global talent pool and wider expertise. Which, in turn, allow businesses to increase their efficiency and profitability.

According to Clutch’s report, only 12% of companies use IT outsourcing solutions to save operating cost. At the same time, 24% of businesses aim is to increase efficiency, and 18% want to expand available expertise.

The same research shows that business outsources more willingly processes that require specific skills. It can be explained by the same reasons: professional services are more expensive and more difficult in recruitment. But also mistakes in these areas can lead to serious business problems. For example, problems in accounting influence all other operations within a business. Errors in software can lead to information leaks, security weaknesses, or data losses. So, for many, it is a good idea to outsource important tasks to teams of professionals.

What are the IT outsourcing models?

There are three the most common IT outsourcing models that can be chosen based on business needs:

1. Staff augmentation. The perfect answer for the talent shortage problem. Works for businesses that already have an in-house IT department but need to strengthen it with skilled professionals.

2. Dedicated team. That is an IT outsourcing solution for businesses that need long-term software development. Along with getting a professional IT department, the company will save on recruitment, management, and office expenses.

3. Project-based team. Suitable for 3–6–9 months development, when business needs to get quick result for short-term projects.

Originally published at on June 3, 2021.



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