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How Retail Companies Can Benefit from IT Outsourcing in 2023

The fast-paced advancement of digital and automation technologies has brought about various innovations in different industries, including retail. Retail technology integrates digitalization and innovation in retail and e-commerce processes, from inventory management and order fulfillment to checkout and in-store service. The utilization of retail technology is vital in improving customer experience.

According to Mordor Intelligence, the retail digital transformation industry worldwide was worth $143.55 billion in 2020, and it is projected to increase to $388.51 billion by 2026, exhibiting an anticipated CAGR of 18.2% between 2021 and 2026. The emergence of digital technologies for information gathering storage, analysis, and dissemination has resulted in a new phase of digital transformation in the retail sector.

Traditional and online businesses are currently investing in numerous retail technology aspects. For instance, brick-and-mortar retailers implement artificial intelligence tools like self-checkout systems and smart mirrors. At the same time, e-commerce enterprises use cloud-based software for effective inventory management and customer relationship management (CRM) tools to manage their customer base to maintain a seamless retail experience across multiple platforms.

This article explores how retail companies can benefit from IT outsourcing in 2023, as they seek to integrate and implement retail innovation.


Reasons why retail companies outsource software development

Retail companies must remain adaptable, creative, and efficient to compete in today’s competitive business market. They do this, for example, by outsourcing software development services. Retail businesses can gain access to specialized expertise in this way, cut costs, accelerate development, scale their efforts, and concentrate on their core abilities.

Cost Savings

Retail companies can save money on labor costs by outsourcing software development. Hiring an internal team of developers might be expensive, especially if the business requires specialized knowledge or abilities. Retail companies can save money by outsourcing instead of paying for employee recruitment, onboarding, training, and maintenance. Furthermore, outsourcing to nations with lower labor costs might result in considerable financial savings.


Retail businesses that need to scale their operations rapidly and effectively may also outsource software development. Retailers must be able to quickly scale up their IT infrastructure to handle an increase in volume when demand spikes. Retailers can access a pool of qualified developers working on demand to satisfy the organization’s needs by outsourcing software development.

Expertise and Innovation

Retail companies can access specialized skills and cutting-edge technology by outsourcing software development. Companies specializing in developing custom software frequently have experience dealing with a wide range of technologies and can offer access to knowledge that might not be available internally. For instance, IoT, AI, and robotics can be challenging to develop internally, but outsourcing can give access to specialists already experienced with these technologies.

Better Focus on Core Business

By outsourcing their software development, retail organizations may free up internal resources to concentrate on their core businesses. Retailers can focus on their primary skills, such as product development, marketing, and customer service, by outsourcing non-essential services.

Trends in retail outsourcing

The move toward digital transformation in the retail sector over the past few years has provided momentum for new trends in retail outsourcing. These are a few noteworthy developments that retail businesses need to be aware of.

Analytics based on Cloud CCTV Footage

Retailers are increasingly utilizing cloud-based video analytics to enhance customer experience and optimize shop management. These analytics tools examine CCTV footage and offer insights into customer behavior, retail traffic, and inventory management using artificial intelligence and machine learning algorithms. By outsourcing video analytics to custom software development companies, retailers can obtain cutting-edge technologies without requiring in-house knowledge.

For instance, a leading European retailer sought a video surveillance solution that would integrate activity-based visualization and analytics, queue detection, facial recognition, and people counting. To achieve these goals, we at developed a cutting-edge system that increased customer insights by 90%, accelerated response rate by 50%, and achieved the accuracy of customer patterns by 60%.

Retail companies may improve their video surveillance methods by implementing AI-driven behavioral analytics tools.

Retail robots

Robotics in the retail sector is another trend that is only starting to take off. Many different duties, such as inventory management, restocking, and customer service, can be carried out by retail robots.

ERIS that started as a proof of concept project in our R&D and was later transformed into a full-blown robot by our robotic scale-up Adapta Robotics is one example of a retail robot.

Now one of the the industry’s leading retail robots, ERIS promptly and precisely handles issues with price tags and on-shelf availability. It uses high-resolution cameras and depth sensors to assess shelf prices and barcode locations while integrating with the store’s architecture. ERIS uses AI algorithms to spot irregularities, estimate shelf availability, and send stock warnings. Its human operator can immediately address issues by printing and replacing incorrect labels or refilling the shelves.

Customer Data Management

Retail companies need to evaluate customer data successfully as they gather more and more information about their customers to better segment their markets and create more individualized marketing strategies. Using machine learning and artificial intelligence, custom software development firms can offer advanced analytics solutions that segment clients based on their behavior, preferences, and demographics. Retailers can gain a competitive advantage by giving their customers individualized experiences by outsourcing customer data management.

Using machine/deep learning algorithms, AI-enhanced data analytics enhances customer targeting, increases conversions, and enables customized marketing campaigns. This method removes human bias and finds unnoticed trends and patterns for better outcomes. Additional advantages include indefinite scalability and automatic section upgrades. Businesses must invest in specialized, custom AI solutions to translate qualitative remarks into quantitative data and incorporate many sources of client input to achieve this strategy.


Retail businesses are more vulnerable to cyberattacks, and outsourcing cybersecurity to firms that create custom software can add a layer of defense. Network security, threat intelligence, and incident response are just a few of the comprehensive cybersecurity solutions that custom software development businesses may offer. By outsourcing cybersecurity, retailers may concentrate on their primary business without worrying about security and data breaches.

Risks and challenges of retail tech outsourcing

Lack of control over the process and management

A typical business approach to lower expenses, increase efficiency, and concentrate on key skills is outsourcing. Outsourcing, though, has risks.

Lack of management and process control is one of the critical issues with outsourcing. Transparency between the organizations regarding the components of the management structure that must be kept is necessary to address this. Additionally, there may be considerable flexibility if we concentrate on results and measurements rather than how they are attained. The external team can be held accountable by establishing a communication frequency.

Communication and cultural issues

Cultural and communication problems provide a considerable additional risk. Communication is viewed by over 90% of organizations as a significant issue when outsourcing software projects. Language hurdles and cultural disparities may make it worse. A transparent communication system and ensuring the remote team has excellent English skills will be very beneficial and provide seamless collaboration. Potential misconceptions can also be avoided by setting clear expectations and confirming understanding.

Quality Control

Even though outsourcing might result in cost savings and increased productivity, there is always a chance that the project’s quality could deteriorate if the retailer does not select an appropriate outsourcing partner. It is essential to thoroughly screen prospective partners and ensure they have the knowledge and resources to do high-quality work to reduce this risk. This can be achieved by thoroughly investigating possible partners, reviewing their references and portfolio, and requesting case studies and examples of such projects they have previously executed.

Retailers can also express their specifications and expectations to their outsourcing partners clearly and concisely. By doing this, you can ensure that everyone is working toward the same goals and that the end product lives up to retailers’ expectations. Retailers can also utilize project management software and set up regular check-ins with their outsourcing partners to track progress and ensure the project is on track.

Security and Privacy Concerns

Concerns about security and privacy must also be taken into account by companies when outsourcing. Retailers must ensure safety and protection, mainly if the data involves sensitive customer information. This is especially crucial given recent high-profile data breaches that have negatively affected the retail sector.

Businesses can take several precautions to reduce the risk of security and privacy breaches. They can confirm that their outsourcing partner has robust security measures, including firewalls, encryption, and multi-factor authentication. Companies may also need non-disclosure agreements and restrict access to only those who need it to set precise methods and rules for managing sensitive data.

Additionally, companies can carry out recurring security audits and penetration tests to spot vulnerabilities and confirm that the security precautions taken by their outsourcing partner are adequate. This can assist retailers in protecting their data and staying ahead of any attacks.

Wrapping up

Retailers will benefit a lot from IT outsourcing in 2023 and beyond. Retailers may get the newest technology, know-how, and innovation without investing in an in-house staff by outsourcing their IT needs to a custom software development business. Choosing an outsourcing partner and managing the relationship is crucial to minimize potential risks and guarantee that the retailer’s technological needs are addressed.

Technology will be essential to companies’ success as the retail sector develops. Retailers may position themselves for success and maintain their competitiveness in a market that is becoming more digital by embracing software development outsourcing.

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