2024 – Software Outsourcing Market Size By Country

Software has never been more important for business. Whether you’re a small startup or a globe-spanning multinational, finding or developing the right software has become essential for success. Often this means developing custom software to meet your specific security, scalability, feature, and other needs. Custom software development can be expensive and difficult, especially when your […]

by Dilyan Dimitrov

May 14, 2024

12 min read

software outsourcing

Software has never been more important for business. Whether you’re a small startup or a globe-spanning multinational, finding or developing the right software has become essential for success. Often this means developing custom software to meet your specific security, scalability, feature, and other needs.

Custom software development can be expensive and difficult, especially when your organization doesn’t have the talent for it. But with so many types of outsourcing and dozens of countries to consider, how can you choose?

Here, we’re breaking down the software outsourcing basics you need to know and looking at the market sizes in major countries. So whether you’re looking for nearshoring or offshoring you can compare options and find what works best.

What is software outsourcing?

At its core, software outsourcing is the process of hiring an external team to develop a piece of custom software. This might be to save on costs. Or, in other cases, it may simply not make sense to hire a full team internally. If your organization only needs to build one piece of software, hiring a team of full-time developers just doesn’t make sense.

But software outsourcing can be further broken down into several basic categories. Onshore outsourcing involves working with a partner in the same country. Nearshore generally involves partners in physically and culturally close countries. Lastly, offshore outsourcing brings the software development work to countries that are farther away.

In most cases, as you move from onshore to nearshore and offshore, costs rise. Quality can also rise, though there’s a tremendous amount of variation in quality offered with each category.

What is the outsourcing strategy of software?

The strategy for software outsourcing involves working with a partner to both access the talent you need and reduce costs. The result is a win-win as the outsourcing company is able to specialize in delivering software to businesses like yours. Meanwhile, your company can devote more resources to its own specializations.

But within that basic framework are nearly infinite ways to approach such a partnership. For example, do you want to work with the V-model or Agile? Do you want to develop a Minimum Viable Product (MVP) to test some ideas before building the final software? Do you want to structure the relationship to incentivize on-time delivery, pay by the hour, or pay in a lump sum?

All that is to say, the outsourcing strategy of software is really all about customization and optimization to meet your unique needs. That’s why the most important element of a software development outsourcing strategy is always going to be understanding your own needs. That understanding should always serve as the foundation for your approach.

How big is the outsourcing market?

The global IT outsourcing market, which includes software development, is valued at around 565.6 billion USD as of 2023. However, beyond that staggering size, what’s most important is the Compound Annual Growth Rate (CAGR) of 9.3%.

Within that broader market, software outsourcing itself is estimated to have a CAGR of 11.5%, making it a main driver of this overall growth.

That means the outsourcing market as a whole is massive and growing quickly. As a result, research points to an overall increase of nearly 300% during the decade from 2021 to 2031. This growth is in part driven by the fact that remote work is more popular than ever. This means integrating an outsource partner is easier.

The growth is also tied to the reality that software developers specializing in outsourcing are getting better and better at serving their customers. Technology makes it easier to collaborate, new ways of working are making the development process more efficient, etc. Because these factors are only set to continue, the predictions are that the overall software development outsourcing market will continue to grow.

IT Outsourcing Statistics in 2024

With such a large overall market size, it’s not surprising that nearly a third of all IT services are being outsourced

Within the US, 24% of small businesses and 66% of total businesses outsource some of their IT requirements. This indicates that IT outsourcing is more popular among larger businesses. That fact is likely tied to the reality that larger businesses tend to have a greater need for custom software and IT support for their more complex operational needs. 

Indeed, 92% of the world’s largest 2,000 companies use IT outsourcing. Clearly as you look at larger and larger companies, the probability they use IT outsourcing increases dramatically.

According to Deloitte, one of the greatest drivers of this shift to IT outsourcing has been cloud computing. 90% of companies they surveyed listed cloud computing as a key enabler. 

How many companies outsource software development?

As the statistics listed above indicate, that number varies dramatically based on size. Yet, this sounds counterintuitive because large companies would also be more likely to have the internal resources needed for software development. So what explains this discrepancy?

In short, nearly all companies of any size require software to operate today. But as companies grow it becomes more likely that off-the-shelf solutions no longer meet their needs. Yet while enormous multinationals could in theory hire their own software development teams, this isn’t common. 

The reason goes back to the specialization mentioned previously. With so many high-quality custom software outsourcing firms out there, large organizations are spoiled for choice. Even if they could in theory develop the software they need in-house, the ease with which they can outsource that work without sacrificing quality helps explain why the practice is so common. In such cases, companies will often turn to end-to-end custom software development partners

So there isn’t a single answer for the question of how many companies outsource their software development. Instead, answering this question relies on understanding the important trends, how company size affects the choice, and other considerations.

2024 Outsourcing Market Size By Country

Now that we’ve taken a more general look at IT and software development outsourcing, let’s look at how that market breaks down for specific countries.


With its history as a tech hub dating all the way back to the days of communism, Bulgaria still punches far above its weight in IT outsourcing. Estimates for the size of Bulgaria’s IT outsourcing market in 2024 put it at around $144.7m USD. IT services revenue overall a CAGR of around 8% over the coming years, reaching half a billion US by 2028.

This may not sound very large, but compared to Bulgaria’s population of only around 6 and a half million people, IT outsourcing is a major industry. The market is concentrated in the capital city of Sofia with its many dedicated tech hubs, a highly educated workforce, easy accessibility to the rest of Europe, and excellent digital infrastructure.


As one of the major IT outsourcing destinations in the region, The Philippines boasts an impressive market size of $686m USD. Combine that with a 13.5% CAGR and the country is clearly positioned to improve its offerings in the coming years.

This growth has been driven by excellent English and Spanish language skills, low costs, and extensive investments in education and infrastructure. In particular, sharing a timezone with much of Australia has helped The Philippines specialize in providing IT outsourcing services to that country. But even for customers farther afield, many Filipino companies are providing quality software development services today.


Poland stands as a powerhouse of European IT outsourcing with a market size estimated to reach just over $3bn USD in 2024. That dominant position is only set to grow with a CAGR of 12.12% over the coming years. From its position closer to Western Europe and within the EU, Poland is able to easily serve many key markets.

It’s true that labor costs in Poland are higher than in many countries on this list. However, the country has overcome that handicap with a focus on quality services and scale. With over 400k people employed in the IT sector, Poland can offer scaled IT outsourcing services at a quality few other locations can match.


Long the country most people associate with IT outsourcing, India’s sheer size and capabilities are nearly unmatched in the world. The IT outsourcing market alone is estimated at around $10.51bn USD in 2024. While that large size may lead many to assume growth rates would be smaller, they would be mistaken. The current CAGR estimates for the industry stand at an eye-watering 17.58%.

What has enabled India to become so dominant? In short, it boils down to low costs and scale. With very low labor costs and the second largest population in the world (soon to be first), India is in a league of its own. That said, the country has struggled to move its IT outsourcing services beyond low-cost offerings. But the country is still in a strong position globally.


Within the western hemisphere, Mexico holds the title as the 2nd largest IT outsourcing hub. Even worldwide it holds the third position. Currently, the estimated size of the 2024 IT outsourcing market is around $5.06bn USD. However, alongside that large size is a more modest CAGR of just 6.89%.

What accounts for Mexico’s success in this field? One major advantage is its close proximity to the US and Canada, making it easy to operate nearshore IT outsourcing from the country. But Mexico also provides extensive IT outsourcing services to the rest of Latin America. By serving customers in a range of wealthy, middle, and low-income countries, Mexico’s IT outsourcing industry is diverse and dynamic.


The only country to outclass Mexico within the western hemisphere is Brazil. Boasting an IT outsourcing market size of $6.13bn USD in 2024, the country is a real success story. A major advantage it has within its region is a robust CAGR of 12.5%.

Like Mexico, geography has played a major role in this success. With much of Brazil existing in time zones between the US and Europe, it’s easy for companies there to serve both markets. Another major advantage is scale with around 750,000 tech professionals. Lastly, language skills in Spanish, Portuguese, and English help Brazilian companies serve a wide range of global customers. 


While the current war has created immense uncertainty in the country, Ukraine has somehow managed to remain a major global IT outsourcing hub. The estimated value of this sector in 2024 is a staggering $3.7bn USD. Although estimates are difficult in the current climate, CAGR is believed to be around 10.37% as well.

The IT industry in Ukraine has been remarkably resilient to the challenges of conflict. Around 16% of specialists relocated, but most have remained. Meanwhile, a shocking 96% of its customers have remained. This has helped the industry stay afloat and even grow in circumstances unimaginable in the other countries on this list.


In close competition with neighboring Bulgaria and Poland, Romania boasts an IT outsourcing market size of around $415.2m. This is paired with a modest CAGR of 8.74%. Here, over 440 software development companies employ over 200k IT specialists.

But while Romania’s overall market size remains smaller than others on this list, the country is investing heavily in IT outsourcing. Special tax rates for software developers alongside heavy investments in infrastructure and education are helping the country remain competitive.


It should come as no surprise that China, long known as the global leader for manufacturing outsourcing, is also a leader in IT outsourcing. With the single highest total market size on this list, around $28.76bn USD in 2024, China has a lot of weight to throw around. That said, it also has one of the lowest CAGRs on this list at just 7.76%.

As labor costs rise, China is grappling with the challenge of shifting from a low-cost provider to a middle to high-cost provider. For now, this has translated into some growing pains alongside the country’s overall economic challenges. However, the sheer number of qualified IT professionals still makes China an attractive option for all types of software outsourcing.


Argentina stands as a relatively small but important IT outsourcing hub in South America. Its local IT outsourcing market is projected to reach $417.2m USD in 2024 at a modest CAGR of 9.17%. But while those numbers are nowhere near those of Brazil or Mexico, Argentina has still carved out an important niche for itself as the third big player in Latin America.

With a large number of STEM graduates, and the best ranking for English language IT services in the region, Argentina is largely held back by economic uncertainty. But looking into the future, the prospect of a more stable currency and more favorable tax policies hold great promise for the local IT outsourcing industry.

2024 Global Outsourcing Trends

While we’ve discussed some important trends in specific outsourcing markets, it’s important to consider global outsourcing trends as well.

Increased Focus on Data Analysis

More and more organizations are waking up to the tremendous value data provides. But harnessing that power requires far more than just gathering all the data you can. It’s important to be strategic about what data you collect and how you analyze it.

That means that organizations want the software they use to be capable of gathering, analyzing, and using data to drive better decision making. There may also be privacy and other regulatory considerations around how data is gathered and used. The complexity of this challenge is another reason so many organizations are choosing to outsource custom software development.

Greater Personalization

Across industries, one of the most powerful overarching trends is one of personalization. Customers are increasingly demanding more personalized options and services. The result is that companies which are able to deliver such personalization grow far faster than those that aren’t.

But attempting to build a personalized experience at scale manually is a nearly impossible task. Thus, organizations are increasingly looking to their software in order to harness data, algorithms, and better software to create powerful personalized experiences. But this requires software capable of remembering who you are via a personal account. The software can then analyze data about you to make powerful personalized recommendations.

Greater Customer Interaction

Another element of the broader personalization trend is a shift to more direct interaction. Often, this comes in the form of AI-driven chatbots. These chatbots can answer simple customer queries and gather useful data about the contents of those queries. Armed with this data, customer success, sales, marketing, and other functions can improve their offerings and level of personalization.

Automation Powered by AI

While AI plays a major role in data analysis, chatbots, and personalization, another crucial area for the technology is automation. Here, AI is being used to streamline processes by taking formerly manual tasks like data entry and automating them.

The result is faster processes with greater accuracy. Having greater access to that higher quality data then plays into other aspects of business. Everyone from sales to logistics specialists can enhance the ways they use data to make better decisions in all kinds of areas. 

In this way, AI-powered automation isn’t just about saving time and money. It’s about empowering employees to specialize more, spending a greater portion of their time on activities that produce more value for the organization. 

Growing Importance of Security

Data privacy and protection from malicious actors are both increasingly important today. Data leaks can easily bring serious legal and reputational costs. The theft of proprietary data or technology likewise can translate into massive losses for organizations that have invested heavily in such assets.

It’s hardly surprising that security is a major driver for organizations investing in custom software. While off-the-shelf options can bring quality security, their scale makes them a target for malicious actors. Combining bespoke software solutions with exceptionally high security standards brings a greater level of security and protection.

Focus on Higher Quality Partnerships

The increasing importance of software for nearly everything modern businesses do, means the quality of that software is vital. This has been driving a shift in how software outsourcing partnerships are structured and function. Whereas in the past, these may have been fairly hands-off, today that approach is widely seen as inadequate.

Instead, organizations want strong partnerships, closer integration, and developers who can understand their business challenges. These partnerships are better able to deliver the precise kind of software needed to really move the needle for those businesses. There’s also a preference for longer-term partnerships, so choosing the right developer is more important than ever.

Shift in Outsourcing Locations

While Asian countries like The Philippines, India, and China have long dominated this market, that dominance is changing. The other trends on this list are pushing more and more companies towards nearshore outsourcing destinations in Europe and Latin America instead.

Many of these countries are now focusing on developing quality and proximity as their competitive advantages. For example, custom software development in Bulgaria may not compete with options in India on price. But doing business with an experienced partner within the EU brings enormous benefits. 

So when you’re searching for the right kind of software outsourcing partner, be sure to balance considerations of cost, experience, quality, and expertise. The right partnership comes from finding an ideal balance between these factors.

A reader who loves writing, a marketer who loves tech, a nerd who loves sports. Dilyan, our resident writer, half-jokes that his days are filled with everything you can think of - except free time. He joined our team several years into his copywriting career - and he seems to feel at home here. Because, as he puts it, “there’s always cake at the office”.  If he doesn’t have his nose buried in a book, you can typically find Dilyan writing his latest piece, tinkering with his PC, or off swimming/cycling somewhere.