Business Insider reported that more than 60% of the Fortune 500 companies have started to rethink their partnerships with software developers over the last year. The Belitsoft custom software development company points out that the main reason for this is the involvement of AI. VentureBeat wrote about how quickly AI-augmented outsourcing is growing, stating that contracts for generative AI capabilities have grown by 300% year over year. Forbes published a study that found companies that involved AI-enhanced outsourcing partners were able to get their products to market 40% faster than those that used traditional in-house teams or standard outsourcing models.
Simultaneously, TechCrunch pointed to the rise of outsourcing boutiques – highly focused companies offering expertise in post-quantum cryptography, AI optimization, or sustainable software development. These boutiques were said to be charging high prices, sometimes 50-100% more than regular offshore providers, but they were getting more business than ever before. Wired looked into the human side of this change and investigated how developer roles were changing. They focused on how outsourcing companies were retraining thousands of engineers to work with AI systems instead of replacing them.
The Octoverse Report from GitHub says that a new developer joins GitHub every second. This is because AI is making TypeScript the most popular programming language. The report also talked about how generative AI is becoming ordinary engineering, which is changing the way developers work together and how they work. Entrepreneur magazine called this the great reskilling imperative for outsourcing providers because more and more clients want partners who are fluent in AI-assisted development methods.
The Data-Driven Focus
Gartner’s Strategic Roadmap for Software Engineering states that by the end of 2026, more than 80% of enterprise software engineering companies will be using AI-enhanced development tools in their work. This is more than ten percent higher than it was three years ago. Gartner analysts say that the question is no longer whether to use AI in development, but how to use it in a way that makes sense throughout the software lifecycle.
A thorough McKinsey Global Survey on the future of software development supports this finding. It found that 72% of organizations are actively looking for outsourcing partners with proven AI-augmentation capabilities, and 65% say that security post-quantum readiness is an important factor in choosing a partner. The same study indicates that having access to specialized AI talent and better security features is now more important than saving money, which used to be the main reason for outsourcing.
The Global Outsourcing Survey from Deloitte shows that this change has an interesting financial side. Overall, spending on outsourcing services went up by about 15% from one year to the next. However, spending on highly specialized AI and security-focused outsourcing services increased by more than 200%. Deloitte notes that there is now a two-tier outsourcing market: one for routine development tasks where automation keeps costs low, and another for high-complexity, AI-enhanced development where specialized knowledge is highly valued.
Statista may have the most detailed data. The global market for AI-based software development services is expected to be worth $85 billion by the end of this year, which is more than 30% of the entire market for outsourcing apps. This is a significant shift in how the industry uses its resources, and it illustrates that outsourcing companies need to modify what they do very rapidly. The Harvard Business Review article “The AI-First Software Organization” notes that this isn’t only a change in technology; it’s also a big change in how software development partnerships around the world create and preserve value.
The AI Revolution in Development Workflows
The integration of AI into development workflows, a topic exhaustively documented in GitHub’s Octoverse Report, has become the primary catalyst for the transformation of application development outsourcing. The report’s conclusion that generative AI is becoming a standard in engineering illustrates that things that used to be new and exciting are now becoming more prevalent. One leader in the industry said that this has meant that outsourcing companies have had to completely change the way they develop their products.
This year, the best outsourcing companies do not just use AI; they have also come up with brand-new ways to offer services that use AI. According to the GitHub Blog, this idea is based on the belief that AI-powered tools will make engineering for sustainability almost easy in the future. In the real world, this means that outsourcing partners are using AI to automate not just writing code, but also testing, writing documentation, scanning for vulnerabilities, and improving performance.
According to TechRepublic’s State of Enterprise IT report, the best outsourcing teams are getting 2.5 to 3.5 times more work done in some areas, like feature development and code migration, by using AI in a smart way. We can now stop using labor arbitrage models and start using value-based pricing, which pays providers more for results than for effort. This is because of the productivity revolution.
We cannot stress enough how important the human side of this change is. A GitHub Blog post says that advanced AI users are changing the roles of software developers from code writers to strategic orchestrators by delegating, verifying, and entering a new era of AI-fluent engineering. This has led to huge retraining efforts for outsourcing companies. For example, top Indian outsourcing companies have reportedly put more than $1 billion into AI fluency programs because they know that their future doesn’t depend on having the most developers, but on having the most effective AI-augmented developers.
Security as a Strategic Necessity
If AI capability is the new frontier in outsourcing value proposition, security has gone from being a requirement for compliance to a key strategic differentiator. The world of software security is going through its own revolution, thanks to both new threats and new technologies. The GitHub Blog notes that the industry now needs post-quantum security for SSH access, which is a way to protect Git data while it’s being transferred from future quantum computing threats. This forward-thinking approach shows how the best outsourcing companies are getting ready for the future by not only solving today’s problems but also planning for tomorrow’s.
Clients are asking for more security that looks ahead, which is a sign that this shift is taking place. Gartner’s study of trends in application security found that 45% of enterprise outsourcing contracts now have specific requirements for being ready for post-quantum computing. By 2027, this number is likely to rise to more than 70%. McKinsey’s research shows that companies are willing to pay 20 to 35 percent more for outsourcing partners who possess advanced security certifications, especially in the financial services, healthcare, and critical infrastructure domains.
The change in security affects more than just cryptography; it also affects all of the software that is made and sold. Outsourcing companies are putting in place what the GitHub Blog calls “strengthening supply chain security: Preparing for the next malware campaign” in response to high-profile attacks. This involves a number of things, such as stringent dependency management, automatic vulnerability assessment that is embedded right into CI/CD pipelines, and advanced tracking of where all code components originated from. Leading providers are increasingly offering secure development environment guarantees, where every phase of the development process occurs within verified, monitored, and controlled security parameters.
This focus on security has also changed where companies choose to outsource work. More and more people are doing nearshoring that puts a lot of focus on safety. This includes transferring sensitive development work to regions where there are already rigorous policies about securing data. Deloitte’s study demonstrates that more and more enterprises in countries that have EU adequacy rulings or other security recognitions are working on development projects that require key infrastructure, healthcare data, or financial systems. This is true even when it costs more than traditional Asian offshore locations.
Eastern European outsourcing centers, particularly Poland and Romania, have used their strong math and engineering backgrounds to become experts in AI and security. According to Statista’s market research, Eastern European companies now control about 35% of the global market for cybersecurity-focused outsourcing, even though they only account for about 15% of all outsourcing revenue. As a result of this specialization, they can charge 50% to 100% more than generalist providers in other areas.
From Vendor to Strategic Partner
The nature of the relationship between enterprises and their outsourcing providers is undergoing what Harvard Business Review has termed the “partnership evolution”. In the past, outsourcing relationships were primarily focused on strict SLAs, detailed specifications, and set deliverables. However, they need to be more open-minded and work together now that AI is here. The most obvious change is how teams work together and how they know when they have done well.
McKinsey’s research on successful IT partnerships found that leading companies are substituting conventional outsourcing metrics with what they term “innovation indicators.” Some of these are “AI adoption velocity” (the rate at which new AI features are added to development processes), “technical debt reduction rate” (made easier by AI-assisted refactoring), and “security vulnerability detection lead time” (the time between discovering a vulnerability and fixing it).
A new generation of collaboration tools that seamlessly connect in-house and outsourced teams makes this new relationship model possible. GitHub and other platforms have grown from simple code repositories to full-fledged collaboration spaces. The GitHub Blog discusses how tools are changing to keep up with complicated, distributed workflows. For instance, you can now use nested queries in GitHub Issues search. Also, GitHub Copilot now has custom agents for observability, IaC, and security, as the GitHub Blog points out. This lets outsourced teams work within very specific technical and security limits while still being free to be creative.
The Future Outlook
We can see a few different ways to go after 2026. AI, security needs, and tools for working together from different locations all work together to change the outsourcing application development from a way to save money to a way to speed up strategic capabilities. Current trends give us a few ideas about what the near future might hold.
The trend toward specialization will become stronger first. As AI tools take on more and more complicated routine development tasks, human developers – whether they work for the company or are hired externally – will focus on more difficult problems, such as coming up with new ways to build things, integrating systems that don’t work together, using AI in an ethical manner, and coming up with solutions to problems that have never been seen before. In a market that is becoming more and more like a commodity, outsourcing companies that don’t develop deep specializations will mostly compete on price. On the other hand, companies that build expertise in areas like quantum-safe cryptography, sustainable software engineering, or domain-specific AI will be able to charge significantly more.
Second, geographic redistribution will continue to occur, but with different causes. Time zones and language skills will still be important, but the most important things will be schools that teach developers how to use AI, rules that ensure development is safe, and regional AI research ecosystems that providers can utilize. The next big outsourcing hubs will likely be countries that make smart investments in technical education that meet the needs of future software development, especially at the intersection of AI, security, and domain knowledge.
Third, the measurement of outsourcing success will become increasingly sophisticated. Clients will stop using simple productivity metrics to assess outsourcing engagements. Instead, they will look at how the deals help speed up innovation, make security stronger, and make strategies more flexible. Gartner’s planning guide states that by 2027, more than 60% of large companies will use AI-powered analytics platforms made specifically for keeping an eye on and improving the performance of their extended development ecosystems, which include outsourced partners.
Finally, the ethical dimension will gain prominence. As AI becomes increasingly important in development, issues like algorithmic bias, transparency, and accountability will become more prominent. Some people refer to them as “frameworks for developing ethical AI.” These are structured ways for outsourcing companies to make sure that AI-enhanced development processes create systems that are fair, open, and responsible. Companies that put these factors first when deciding to outsource may not only get technical benefits, but also brand and regulatory benefits.
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.
