The backend development outsourcing market is expected to experience significant growth in 2026, driven by changes in the labor market and technological megatrends, according to Belitsoft, a custom software development company. In addition to saving costs, businesses in North America and Europe are utilizing outside providers to access specialized knowledge in data, cloud, artificial intelligence, and industry-specific fields.

Factors that Fuel Growth

Lack of Workforce and Rising Automation

There is a shortage of engineers in the fields of cloud, AI/ML, and cybersecurity, so companies often have to hire them from outside their own companies. McKinsey states that many businesses need a sourcing strategy that includes automation, insourcing, and outsourcing. In its own way, generative AI is making the world a better place. For example, 83% of CEOs say they already use AI for tasks such as writing code and automating testing, which they often assign to outside teams. Even though technology makes it easier for outside teams to complete tasks faster, this AI-powered outsourcing does not mean that you do not need qualified people.

Digitalization by Field

Customers want verticals to adopt new technology more quickly, and competition is driving them to do it. Health systems are starting to use telemedicine, insurance companies are using AI analytics, FinTechs are making new digital banks, and car companies are racing to make electric cars that can work together. Outsourcing can make things better. For instance, a recent Deloitte fintech survey found that businesses want to use outsourcing to help them grow and offer new services in addition to cloud and GenAI.

Concerns about the Supply Chain and Geopolitics

Events like the pandemic, trade wars, and conflicts make businesses not want to depend on just one region. Because of this, nearshoring and regional hubs are becoming more common. European businesses rely on partners in Eastern Europe and North Africa, but North American businesses are investing more in core projects in the US and Latin America.

Deloitte also notes that Global In-house Centers are becoming more popular again, especially in Asia. This means that businesses want to have more control. Procurement teams are especially asking for risk management and openness, which often means outsourcing to local businesses or allied nations.

How to Make Outsourcing Work Best

Track Important Trends Constantly

You cannot simply outsource once. Keep an eye out for emerging trends such as low-code platforms, generative AI tools, or shifts in the likelihood of geopolitical events. According to a recent McKinsey study, for example, AI has increased developer productivity rather than replacing programmers. If you stay up to date, you can modify the way you assign projects. For instance, you could assign the most crucial work to your own employees while using AI-powered offshore teams for other tasks.

Make Your Goals and Limits Clear

Don't hire out all of your work. Align projects with specific tasks that need help from outside sources, like moving to the cloud or building an AI model. Companies are bringing some non-core work in-house on purpose so they can have more control. They should do the same with outsourcing by focusing on clear, outcome-based deliverables.

Pick the Proper Model

You can choose between nearshore, offshore, or onshore based on your company's rules, the time zone overlap, and the skills you need. For highly regulated tasks, such as banking or health data, it may be safer to work onshore or in a place known to be secure. However, you can outsource tasks that are highly development-focused. TechRepublic notes that American businesses are increasingly using a mix of models, with some tasks being performed by domestic workers and others by international vendors.

Adopt DevOps and Agile Methodologies

Work with engineers who utilize the most up-to-date methods. Collaboration tools, cloud infrastructures, and continuous integration/continuous deployment (CI/CD) are all very important components. Gartner and Deloitte say that businesses want flexibility, so their teams need to be able to adapt and use automation tools like AI assistants like Copilot to speed up delivery.

Put Money into Working Together and Making Rules

The idea of the "extended workforce" suggests that you should maintain good vendor management even when hiring outside help. Deloitte advises that Vendor Management Offices should be able to cover the entire ecosystem, including AI workers and contractors. This means that procurement heads need to establish clear Service Level Agreements (SLAs), performance indicators, and rules for how they should communicate with each other. To protect valuable intellectual property and best practices, encourage a culture of collaboration and ensure that information is shared.

An industry study says that the best CTOs and procurement executives in 2026 will be those who can bring together teams from different countries, use AI-powered solutions, and manage a diverse talent pool.

About the Author:

Dmitry Baraishuk is a partner and Chief Innovation Officer at a software development company Belitsoft (a Noventiq company). He has been leading a department specializing in custom software development for 20 years. The department has hundreds of successful projects in AI software development, healthcare and finance IT consulting, application modernization, cloud migration, data analytics implementation, and more for startups and enterprises in the US, UK, and Canada.

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