UK Software Development Outsourcing: 2026 Statistics

Why do UK companies choose software development outsourcing?

Hiring developers right now? Absolute challenge. Our experts constantly talk to CTOs who’ve had roles open for eight months with zero qualified candidates. The talent just isn’t there — or when it is, candidates want salaries that would make your finance team cry.

That’s the real reason software development outsourcing took off here — they needed proficient programmers who could write code and they needed them last quarter.

Our in-depth research as one of the UK software development companies kept surfacing the same reasons persistently:

• Time pressure wins every argument. A Polish or Indian team can start in weeks. Internal hiring takes months. When deadlines matter, that’s the whole conversation.
• Budgets stretch further abroad. Industry salary data puts the gap at 40-60% depending on region. But flexibility matters just as much — you’re not stuck paying people during slow periods.
• Some skills barely exist locally. Try finding a mainframe specialist in Manchester. Or a blockchain developer who’ll take a six-month contract. Outsourcing is often the only option.
• Eggs in multiple baskets. Spreading work across vendors means no single departure tanks your roadmap.

Software development outsourcing stopped being a fallback option years ago. For most UK tech companies we studied, it’s just how things get done now.

Outsourcing software development: UK market landscape 2026

The UK IT outsourcing market hit around £19.6 billion in 2024 (note that almost every number here and below is converted from dollars!). Most projections have it growing somewhere between 7% and 9% annually through the end of the decade, potentially reaching £41.6 billion by 2033.

That growth is not happening because executives suddenly discovered outsourcing exists but because the domestic talent situation has become genuinely untenable.

According to Hyve Managed Hosting’s IT and Tech Skills Gap Report 2024, 81% of UK businesses have been negatively impacted by a shortage of skilled IT and tech professionals. The survey of 500 British decision-makers found that cybersecurity (43%) and cloud computing (34%) are the most in-demand skills.

So what are businesses actually doing about it? Three things, mostly — looking at new geographies, rethinking team structures, scrambling to find anyone who can build AI systems.

Shift toward CEE and LATAM talent

If you’d asked a UK CTO ten years ago where they outsource development work, the answer was almost always India. That’s shifted dramatically. Central and Eastern Europe from Poland to Ukraine and the Czech Republic has become the default nearshore destination for British firms. Still, the demand for a software company in the UK remains high.

Across the custom software development outsourcing Poland leads the pack with somewhere between 525,000 and 650,000 IT professionals, depending on which estimate you trust. Romania and the Czech Republic round out the top tier with 95,000 and 220,000 tech workers respectively.

What’s the reason for the change? Time zones are not trivial concepts. Warsaw and Prague are just one hour ahead of London. That means your Polish development team is online during your entire workday — compare that to Bangalore, where you’re looking at a 4.5-hour difference.

PA Consulting’s UK IT Sourcing Study found something interesting when asking organisations, “Why outsource?” Public sector bodies were significantly more likely than other sectors to cite talent access as their primary driver, outpacing financial services firms by roughly a third.

Both sectors prioritised talent access well above the cross-industry average. Meanwhile, cost reduction — historically the dominant reason for outsourcing — had fallen to third place overall.

Latin America is picking up some UK business too, though it’s still primarily a US-facing market. Mexico has over 800,000 developers, Brazil — around 630,000. The Auxis/SSON research shows 90% of global business services leaders either operate in LATAM already or plan to within three years.

Rise of hybrid outsourcing models

Nobody does pure outsourcing anymore. That’s not an exaggeration. Deloitte’s 2024 Global Outsourcing Survey, covering over 500 executives, found that 80% plan to maintain or increase their investment in third-party outsourcing.

Separately, 78% of organisations now operate Global In-house Centers (GICs) — showing that most companies run hybrid models rather than choosing one approach exclusively.

The staff augmentation model has declined to 29% of arrangements according to Deloitte. Instead, 67% of executives now use outcome-based relationships — paying for delivered features rather than hours worked.

Harvey Nash’s Digital Leadership Report for 2025 surveyed over 2,000 technology leaders including 924 in the UK. They found that nearly 40% expect their outsourcing usage to increase in the coming year. Only 34% said the same about directly employed headcount.

However, the twist is that software development outsourcing in the UK is reviewed on a regular basis. Should it lapse, your whole vendor relationship might go through a night of legal uncertainty.

But here’s the nuance that gets missed in the consideration of. Insourcing hasn’t stopped. Deloitte found that 70% of organisations have selectively brought portions of previously outsourced work back in-house over the past five years.

The reasons they cite are quality control (68%), building strategic capabilities internally (64%), and spend optimisation (56%). So it’s not a one-way street — companies are constantly adjusting the mix.

Some documented examples help illustrate this. Barclays partnered with DevOps teams in Romania for cloud infrastructure work.

Growing need for AI and DevOps skills

This is where things get genuinely difficult for UK companies. The Nash Squared Digital Leadership Report documented that AI jumped from the 5th most scarce tech skill to first place in just 18 months.

52% of tech leaders in England now report AI skills shortages. That’s up from 20% the year before, according to Tech Monitor which indicates a 114% increase in single year.

The UK government’s AI sector study shows why demand is so intense. The domestic AI sector grew to 5,862 companies in 2024, employing 86,000 people and generating nearly £24 billion in revenue. But a quarter of AI business representatives say lack of technical skills is their biggest barrier.

DevOps faces similar constraints. Industry surveys suggest 53% of companies struggle to find DevOps specialists, making it the second most acute shortage after AI. Senior DevOps engineers in London now command £65,000–£80,000 according to Morgan McKinley’s salary data.

Outsourcing used to be seen as a quick, cost-effective way to cut costs. Today, though, the rationale for brands engaging with software development outsourcing companies is simple: there are differences in wage levels, immense cultural divides, and vast differences in the availability of skilled labour in the many nations in this highly wired world.

Understanding these shifts is useful, but what do the actual numbers look like heading into 2026? The next section breaks down the specific statistics — market size, growth rates, regional breakdowns, and cost benchmarks — that our research team compiled from across the industry.

UK outsourced software development statistics for 2026

Let’s get into the actual numbers. Our specialists from Limeup have pulled together the key statistics from industry reports, market analyses, and salary surveys to give you a clear picture of where things stand. These aren’t projections experts made up — they’re figures from Statista, Mordor Intelligence, Deloitte, other sources that track this stuff professionally.

Expected market growth

The UK IT outsourcing market grows as there is more demand among businesses to hire a software developer. Different research firms use slightly different methodologies, so the exact figures vary — but the direction is consistent across all of them.

Note: The £32.2 billion includes the total UK IT services market, which encompasses consulting, infrastructure services, support, and managed services. IT outsourcing, which is valued at £19.6 billion, is only one of the market segments among the total.

Cost-saving benchmarks

Cost isn’t the primary driver anymore, but it still matters. Here’s how the numbers break down across different regions and role types. These rates come from salary surveys and industry benchmarks published in the past 12 months.

The Auxis/SSON research on LATAM outsourcing found that 50% of operations report labour savings of 20–40%, while 18% achieve savings exceeding 40%. The variation depends heavily on role seniority and how much coordination overhead you’re dealing with.

Most outsourced service categories

Not all IT functions get outsourced equally across available outsourcing software development services. The data shows clear patterns in what UK companies keep in-house versus what they hand to external partners.

Bearing this in mind, we move to the next section which digs into where things actually go challenging: regulations across legacy, cultural compatibility amidst different crews, reliability of a provider.

Challenges when UK companies outsource software development

Outsourcing has plenty of upsides but pretending it’s risk-free would be dishonest. From 10+ years of experience as an outsourcing software development company we have also seen projects implode because nobody thought through the basics before signing contracts.

The good news? Most failures follow predictable patterns knowing where things typically break down so you can plan around them.

Regulatory and IP considerations

Data rules are the first thing that should keep you up at night when you are applying for outsourcing of software development. The UK now runs its own GDPR-style framework post-Brexit, which creates complexity when your code is being written somewhere else.

CEE countries inside the EU — Poland, Romania, the Czech Republic — are relatively straightforward. The UK has an adequacy arrangement with the EU, so data can flow without jumping through hoops.

But here’s the catch: it’s not a one-time thing. It will be evaluated on a schedule, and if anything goes awry, the whole relationship with the vendors could very well go into legal limbo come tomorrow morning.

Next, there comes the dilemma regarding the ownership of Intellectual Property rights. However, it is possible to deal with these complications by collaborating with a well-known software development outsourcing company in the UK, as the local partners are familiar with and comprehend both sides of the regulatory issue.

Cultural and operational alignment

Working norms vary dramatically between countries, and those differences create friction that compounds week after week. Here are the core moments to consider:

• Feedback styles. Some cultures treat disagreeing with a client as deeply disrespectful, so developers will nod along with impossible requirements rather than push back.
• Geography. That matters more than remote work evangelists admit. According to research compiled by TurnKey Staffing, 75% of companies that outsource software development face time zone challenges, and 83% of remote workers cite time differences as a major obstacle.
• Holidays. They catch people off guard constantly. Orthodox Christmas falls in January. Different countries have different bank holidays. Attitudes toward vacation time vary wildly. If you’ve only ever worked with UK teams, you probably haven’t budgeted for this kind of scheduling complexity.

Deloitte’s global survey we linked above found that seven in ten organisations have pulled work back in-house at some point.

Vendor reliability

The outsourcing market has a low barrier to entry. That’s great for competition, less great for quality control. Plenty of agencies look impressive in pitch decks but lack the depth to actually deliver.

Stability is the very first concern. Smaller vendors in emerging markets can lose key people, get acquired, or shut down with little warning. Tech Monitor reported that developer turnover plagues the industry globally — and outsourcing firms feel this acutely because their entire value proposition depends on keeping good engineers.

The second standpoint is that demand is surging, which creates its own problems. Harvey Nash found that four in ten technology leaders plan to ramp up outsourcing. That increased demand stretches vendor capacity thin, leading to declining quality across the board as firms take on more than they can handle.

Proper vetting takes time but prevents disasters. Check references thoroughly. Ask for code samples from actual projects. Understand their retention rates. Visit their offices if budget allows. Many brands find success by partnering with an established software development company in London that has proven processes, transparent team structures.

Alternatively, working with a trusted provider is the golden ticket, so it is advisable to check some lists to find, for example, an offshore software development company in the UK that gives you the cost benefits of global talent with local accountability — someone you can actually meet, call, and hold responsible when things go sideways.

Conclusion

UK software development outsourcing is heading from £19.6 billion toward £41 billion by 2033. That growth rate tells you this isn’t a temporary fix — it’s becoming standard operating procedure for British tech teams.

The motivation has shifted dramatically. A decade ago, outsourcing was mostly a cost play. Ship work overseas, save money, move on. That logic doesn’t hold anymore. When four out of five UK businesses can’t find the tech talent they need — and AI skills gaps doubled in just twelve months — outsourcing stops being optional.

CEE keeps coming out on top for UK companies, and for practical reasons. Simultaneously, the hybrid model has become the default as almost nobody goes fully outsourced or fully in-house anymore. Smart businesses bring in external teams for execution, scaling, and niche expertise they can’t hire locally.

If outsourcing is on your radar, consider contacting Limeup. We will have a straightforward chat about what you’re building and how to make our cooperation efficient. We’ve helped over 80 UK and international companies navigate this exact terrain. Drop us a message, and let’s team up for your next project.

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