In 2024, the software outsourcing landscape will undergo significant changes, driven by economic factors, technological advancements, and shifting market dynamics.
The Accelerance 2024 Global Software Outsourcing Rates and Trends Guide offers a unique snapshot of what lies ahead, based on an extensive survey of our international network of software development partner firms.
We’ve not only assembled hard data on what junior, intermediate, and senior developer rates are likely to look like in key outsourcing destinations this year but taken the pulse of software firm executives to find out what they expect to influence outsourcing in 2024.
Key trends include:
Modest developer rate increases: Developers are expected to raise their rates by 6-10% in regions like Europe, Asia, and Latin America, while rates in Asia may increase by 6-15% due to high demand, according to the latest Accelerance survey of software development partners.
Slow going in Eastern Europe: Eastern European countries, including Ukraine, Poland, Latvia, Romania, and Hungary, are seen as too risky for important projects, given the ongoing volatility due to the war in Ukraine. There’s been a decline in outsourcing to the region in the last two years though many firms based there are still servicing their clients with business continuity provisions in place.
Growth in Latin America and Asia: Workforce growth expectations are high in Latin America and Asia, as the two outsourcing destinations take up the slack from Eastern Europe and benefit from their investment in skilled workforce development. South and Southeast Asia in particular have benefited from a search for more affordable developer rates after several years of sizable rate increases.
AI integration accelerates: AI will be more extensively drawn on by customers, but a lack of skilled engineers in AI and related fields like data analytics will be a constraint. That’s why most Accelerance partners are planning to invest significantly in skills development in 2024, with AI top of the list when it comes to upskilling. Use of TuringBots is predicted to improve software development lifecycle productivity by 15% to 20%.
Healthy global IT spending: Gartner forecasts 8% growth for global IT spending in 2024, with pent-up demand pushing budgeted spending into 2024. Generative AI spending won’t bump up overall IT spending significantly, with the traditional areas of infrastructure, applications, modernization programs and cybersecurity driving spending. Gartner notes that “change fatigue” will prove an ongoing challenge for IT managers.
Agile and DevOps to the fore: Agile and DevOps development methodologies are more important than ever, with companies seeking both fast and flexible development. This goes equally for AI-driven applications where speed to market is a crucial factor.
Lingering inflation a cost factor: Global headline inflation is expected to fall to 5.8 percent in 2024 and 4.4 percent in 2025 according to the International Monetary Fund, with the 2025 forecast having been revised down. Interest rates will gradually fall in many markets but we won’t see a return to the low interest environment of the pre-Covid years. That means continuing borrowing cost pressure, and limited access to capital in parts of the world for firms seeking investment to expand.
Budgets remain under pressure: While pent up demand stemming from a soft IT market in 2023 will see the project pipeline open up this year, the reality remains that certain industries and national economies are still under financial pressure. Over 55% of survey respondents in the Accelerance partner network say they have observed their customers cutting budget, slowing spending or looking for more cost effective solutions.
Skills demand will be met: Skilled and experienced software engineers remain in high demand despite ongoing trimming of headcount in the tech industry. Securing capability in emerging technologies such as generative AI will be a challenge for software outsourcing firms. But operating as they do in regions that have prioritized STEM education and skills development, 90% of Accelerance partners express confidence that they will be able to attract and retain the talent they need in 2024.
Right-sizing in the VC market: Software outsourcing firms are often called on to help high growth, venture capital-funded startups to advance their product development. Accelerance partners indicate that caution from VC firms will continue to impact on budget allocation for software development at early stage firms, but not at the majorly reduced levels seen in 2023.
These trends indicate that software outsourcing will continue to be a strategic choice for organizations in 2024, with a focus on cost-effectiveness, flexibility, and innovation driving outsourcing decisions.
As always, finding the right software outsourcing partner and bedding in an effective working relationship for the get go is essential to outsourcing success. This is what Accelerance has specialized in achieving for over 20 years, matching thousands of customers with cost effective and capable outsourcing partners all over the world.
The Accelerance Global Software Outsourcing Rates and Trends Guide will give you the market intelligence you need as you weigh up the decision to outsource. Our Accelerance outsourcing experts can help you take the next steps. Get in touch to find out about our tried and tested approach to establishing high performance software outsourcing partnerships.