The tech outsourcing trend: Where do tech companies go for hot talent, and why do they need it?

Over the last three decades, the global trend in outsourcing – the practice of contracting out certain business functions to third-party providers – has grown to cover a wide range of services – from content marketing to accounting, payroll, and IT support. With demand beginning to outstrip supply, it’s not surprising that tech companies are taking it to new heights with increasing levels of outsourced software development.

Access to flexible overseas talent from top outsourcing countries such as Egypt, Jordan, The Philippines, Poland, and Argentina means that the UAE-based companies can quickly assemble remote agile teams to maximise returns whilst de-risking development and side-stepping competitive local hiring processes.

How outsourcing has developed, and why it’s important for the region

The global market for IT outsourcing today is worth over US $90 billion. And although that figure includes all outsourced IT, from business processes to infrastructure, companies in the tech space are increasingly looking further afield to access software talent whilst lowering costs, freeing up in-house personnel for core business activities, and giving them the flexibility to scale product development whilst minimising risk.

As things stand, outsourcing for software development alone is expected to grow by 70% between 2022 and 2023, according to the findings of a recent industry survey. Startups will benefit from the fact that the global tech talent pool is accessible to all.

Outsourcing has historically been used to cover back-office functions like payroll, accounting, and IT support to lower costs, but more and more companies now see it as a means of getting the talent they need to support them across their business. And software development is increasingly one of those outsourced functions.

Egypt and Jordan have long been popular outsourcing destinations for UAE SMEs, and Ukraine was an important outsourcing hub until 2022, with an IT market worth around US $7 billion. Poland, Argentina, Mexico, and The Philippines have now emerged as leading providers of tech outsourcing, alongside well-established locations like India.

Latin America is popular with US tech firms keen to work across similar time zones, but with companies now radically rethinking how they hire talent and assemble remote teams, the time difference is becoming less of an issue. As large corporations continue to undergo and accelerate digital transformations, they compete with tech startups and established tech firms for software talent. As a result, we’re now looking at a global talent supply chain in which location is secondary to the economic realities of local and regional demand for technical talent.

Is high demand affecting the UAE, and do tech startups in Dubai really need to outsource? It’s certainly true that the UAE in general, and Dubai in particular, has encouraged and fostered a strong tech entrepreneurship ecosystem. In fact, the UAE accounts for some 40% of the region’s biggest exits. In many ways, that’s hardly surprising – the country’s open business environment allows 100% foreign ownership in 45 free zones, and its 350,000 SMEs account for around 40% of Dubai’s GDP and employ over 40% of its workforce.

In addition, the government has worked hard to stimulate SMEs and the private sector. Government development funds and agencies such as Dubai SME, Dubai Future Accelerators and the Khalifa Fund for Enterprise Developers continue to support SMEs in all phases of their development.

But the UAE’s tech entrepreneurship ecosystem is, by one narrow definition, a victim of its own success. Dubai’s workforce relies on expat workers, many of them well educated and well qualified. These workers are attracted by high-quality jobs in multinational corporations and established local enterprises. So, despite the favourable tech ecosystem, it can often be difficult for startups to compete against established businesses for talent at a cost that’s affordable and risk-free.

In short, tech entrepreneurs face competition for talent not just in the tech space but across all areas of business currently undergoing rapid and accelerated digital transformations. To develop and grow, tech entrepreneurs are realising that they need to tap into the global supply chain of tech talent to mitigate the effects of a demand-and-supply problem.

The benefits of outsourcing for tech companies in Dubai, UAE and wider GCC

Whilst tech entrepreneurs still have some concerns about outsourcing software development, priorities between different business functions also differ. A recent outsourcing survey reveals that chief technology officers (CTOs) see the ability to scale fast and hire top talent whilst saving time as the main priorities when outsourcing. Around half of HR managers cite cost as their primary driver.

It’s worth looking at the various outsourcing benefits in more detail.

Reduced costs

According to outsourcing industry analysis, cost cutting is the biggest driver of outsourcing arrangements, with nearly 60% of surveyed businesses citing costs as the primary consideration. Put simply, the cost of hiring remote developers and teams is significantly lower – businesses only pay for their services, without ancillary costs of employee perks, business premises overheads and IT costs.

This setup makes startups more agile, because they can avoid the long processes associated with full-time hires. Research shows that across 25 countries, the interview process takes more than three weeks on average, stretching to 34 days in Dubai.

Decreased project risk

New software development is a risky undertaking. The costs of failure can be high, and the startup world is littered with proof that there’s no tried and tested formula for a successful product.

Even if a company’s market research shows a high chance of success, the risk of expensive failure –with full-time tech developers and their overheads requiring big upfront outlays of cash – can be mitigated by outsourcing development to experienced remote talent with a proven track record in delivery.

And remember, when you hire remote tech talent, it’s usually project-specific, which means that companies can narrowly focus on the services they need and not worry about the wider company fit or the diverse skillsets that startups usually demand of full-time hires.

Flexibility to scale quickly

When a startup needs extra resources or specific expertise, outsourcing gives tech entrepreneurs much-needed flexibility and speed for scaling fast. They can pivot quickly if needed, assembling remote teams to address any changes in product development in good time. In addition, the cost-effectiveness, simplicity, and speed of outsourcing mean projects can be up and running much more quickly because startups can side-step long and expensive recruitment and training processes.

Access to world-class talent

An enduring consequence of the Covid-19 pandemic is that all companies, from large corporations to small startups, can effectively assemble remote agile teams for core business activities and specific projects with little or no loss of productivity. In fact, a 2022 analysis of tech staffing shows that 75% of respondents see even more productivity among their remote teams than before.

Outsourcing allows startups to mitigate the talent demand crunch whilst making sure that their projects are taken forward by the very best developers in their field, whether on a project or product basis, or as part of an ongoing development team. And whilst local UAE and GCC markets may form the core of many new tech startups, the flexibility that outsourcing enables means growth is no longer limited by the restrictions of expensive, local, full-time talent. In short, the world can come to you for less.

A global ecosystem for local solutions

With global demand for tech talent now outstripping supply, the opportunities for tech startups are significant. Connecting with world-class talent with specific expertise according to the needs of a particular project lowers costs, de-risks product development, and side-steps the time, energy, and cash expense of competing in local talent markets.

For tech entrepreneurs in Dubai and across the UAE, outsourcing is an attractive way to build development teams in shorter timeframes and with fewer resources. For many tech startups, whilst the long-term benefits of a highly developed and supportive tech entrepreneurship ecosystem at home should not be ignored, outsourcing software development on a project-by-project basis might just provide the ideal pathway to early traction and success.