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Software Development Outsourcing Becomes Even More Relevant During The COVID-19 Crisis

2020-07-23 by Cynthia Madison

The COVID-19 crisis has put businesses in an unprecedented situation where they have to act quick or suffer grave economic consequences. As entire countries went under lockdown and non-essential businesses had to close down their physical locations, commerce and other services moved online. Organizations that had already started digital transformation processes had to speed up the transition, while those who relied on obsolete processes had to adapt on the spot and jump-start digital transformation. In a time when online shopping and work-from-home became the trends of the moment, businesses learned to think outside the box: small boutiques became online stores, local cafes started accepting app orders, event planners turned to live streaming, and conservative CFOs discovered that work-from-home is not the money and productivity killer they imagined

Had the COVID-19 crisis occurred a decade earlier, perhaps this degree of digitization wouldn’t have been possible, but, thanks to the latest innovations in IT products and services, tech adoption has never been higher. But, apart from the growth of the IT sector as a whole, the COVID-19 pandemic has also triggered the growth of the software development outsourcing sector. 

Outsourcing, of course, isn’t new. The industry was already worth $92.5 billion in 2019 and software development was the most commonly outsourced IT function. However, with the novel coronavirus, software development outsourcing became even bigger. 

New report reveals software outsourcing is on the rise 

A new report conducted by NTT among 1,250 executives in 29 countries shows that software development will accentuate and that, in the following 18 months, 45% of companies will outsource rather than insource. 

So, apart from the faster adoption rate of digital services, what else about the COVID-19 crisis made software outsourcing so in-demand?

Lower costs 

The pandemic has put a huge financial strain on businesses. Apart from essential sectors such as groceries, healthcare, and personal hygiene, which reported higher profits, most businesses struggled financially. Unsure of what would happen next, people held off non-essential purchases for a while, and preferred to save money instead. As a result, these businesses had to cut costs wherever they could. In the most unfortunate cases, they had to lay off personnel and even close down some branches altogether. However, even the businesses that didn’t face immediate money issues were skeptical of investing. Expanding to another city? Postponed. Hiring new people? Perhaps it’s better if we waited. Launching a new service? Let’s see if we can do it cheaper.

The United States was already the world’s biggest outsourcer before the pandemic. So, when the world’s biggest outsourcer reported the most Coronavirus cases, cost-cutting measures were bound to be taken. 

In the US, the average hourly rate of a software developer is $60, while in Asia, someone with the same skills and experience charges $40. In Eastern Europe, the fee is even lower. Therefore, US-based companies that still needed quality IT services didn’t think twice about outsourcing them to other countries. After all, hiring an in-house software developer or creating a separate department is a sizable investment, and most businesses don’t know if they can afford it in these financially uncertain times. 

More time for critical processes

Clients have high expectations of businesses these days, which means that businesses need to spend less time on maintenance and support and more time on innovation, problem-solving, and client relationships. This again is an area where outsourcing was useful, because executives can free up their schedules by forwarding maintenance and support to remote partners. Then, they can use the remaining time to strategize, find ways of coping with the crisis, or think of new ways to get closer to their clients. 

Quality solutions, delivered faster 

Not only did the COVID-19 crisis force business owners to think of innovative solutions, but also to implement them fast. However, for most businesses, that’s simply not feasible. You can’t think of an idea, recruit personnel, train it, then deliver the product within two months. Again, this is an area where outsourcing was very useful, because businesses no longer had to waste time on employee onboarding and they could proceed straight to development. 

Then there was the problem of maintenance and quality assurance. Businesses that already had an online store before the pandemic discovered that they had to implement new features or scale the existing ones to accommodate the sudden influx of visitors. When outsourcing software services, this is done relatively easy, and you don’t have to worry about dealing with this in-house. 

Outsourcing fixed the tech talent gap and recruiting slowdown 

Let’s take the ideal scenario of a profitable enterprise that wasn’t disrupted by the pandemic and could still afford to invest in IT personnel. Though rare, such cases existed, especially in fields such as tech and finance, but things didn’t go that smoothly for them either. Why? Because even if companies are financially sound and have enough money to hire new people, the Coronavirus has changed recruitment and led to a tech talent gap. Demand exceeded supply before the pandemic, so it was only natural for the trend to accentuate. Many people stopped applying to jobs, either because they assumed most companies stopped hiring, or because they didn’t want to make career changes during these uncertain times. Foreign applicants who planned on coming to the US also had to cancel their plans because air travel was restricted or it was more difficult for them to obtain visas. Therefore, even those companies that were keen on insourcing decided to outsource instead (at least for the time being) because this way they could have access to talent faster. 

Due to COVID-19, one of the biggest trends in software development became even bigger. Although the context wasn’t the most fortunate, many businesses, including those that were opposed to the idea in the first place, discovered that outsourcing offers many benefits and said that they wanted to continue outsourcing post-pandemic.

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