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Outsourcing changes 2016

IT Outsourcing changes in 2016

The information technology industry is changing every year. Which is more than expected given that  the global estimated value of the IT Outsourcing industry for this year is more than $440 billion.  This post is a continuation from last week when we discussed recent outsourcing trends. We will now focus on key IT outsourcing changes in 2016 and what we expect to happen on the market till the end of this year.

Team compositions

Several years ago it was a common practice to outsource to different companies each specializing in specific technology. One of the major changes we see this year is that most clients prefer single dedicated teams. This means that less people want to hire for example a different company for web development, mobile applications and testing. Instead a whole team is formed from a single provider. This significantly reduces the operating time and costs. In addition it boosts the productivity and efficiency of the team. Furthermore, to avoid changes halfway through projects, both sides prefer to form long-term teams.

Another trend in 2016 is the outsourcing of project management capabilities. It is becoming increasingly popular to outsource the project management role to development companies. This is especially common among startups. Because of this software service providers are forming full project teams including all necessary roles to fulfill the requirements in the best possible way. Thus in 2016 development companies which can offer a wider range of services are more competitive and clients prefer working with them.

Eastsource Outsourcing changes - internet of things

Technological outsourcing changes

The wide-spread availability of initiatives to make the Internet a safer place have a noticeable effect on the outsourcing industry. Clients are more than ever concerned with security which is a positive change. Big corporations have already defined roles such as Chief Security Officer. For outsourcing providers this means they have to be even more careful with the solutions they develop and comply with best security practices. One of the most interesting security initiatives is “Let’s Encrypt”. It comes from the nonprofit organization Internet Security Research Group (ISRG). They offer free security certificates to domain owners. Companies no longer need to pay for expensive SSL certificates. The initiative is supported by big tech giants like Facebook, Cisco, Mozzila, etc.

Another one of the outsourcing changes we see in 2016 is the increasing popularity of technological innovations. The Internet of Things (IoT), Machine to Machine communication (M2M) and Virtual Reality (VR) are quickly taking the main focus of the industry. The growing number of companies operating on these markets results in higher demand for such services. Estimated global revenues for 2016 from IoT and M2M are to reach $1.5 billion. The lack of knowledge in these newly developed fields leads to outsourcing companies trying hard to recruit such specialists.

Eastsource Political and economic outsourcing changes

Reasons to outsource

The high demands and pressures on the IT labor markets in US and Western Europe have led to more companies considering outsourcing instead of insourcing. According to a study performed by KPMG in 2015, access to rare skills is a key factor in taking the decision to outsource. The increased software development quality from outsourcing companies is another reason for this phenomenon. This means the reduced development costs are no longer the sole purpose of outsourcing.

Political and economic conditions are also playing a role in outsourcing changes. The increasing stability of Eastern countries of the European Union allows for productive exchange of services among member states. It is also easier than ever to sign a contract and do business with outsourcing providers from Eastern Europe. Another example are government investments in the IT industry in developing countries. Various educational programs dedicated to increasing the number of IT professionals in the region help with the growing demands outsourcing companies. For example the IT market growth in Belarus is expected to be more than 17% for the next two years. The main reason for that is the popularity of the country as an outsourcing destination.

At Eastsource we form partnerships with market leading outsourcing providers from Eastern Europe. We commit to best practices and quality and make sure we understand and consult our clients in accordance to recent industry developments and trends. Are you in need of outsourcing consultancy for your software projects?  Do not hesitate to contact us.

10 outsourcing trends to watch in 2016
Outsourcing Software Development Trends for 2016
KPMG 2015 IT Outsourcing Study

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