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3 Types of Outsourcing in IT: Which One is Better to Choose?

3 Types of Outsourcing in IT: Which One is Better to Choose?

Outsourcing services have become an integral part of boosting IT companies in the modern business world. These services can bring numerous advantages to your business if the model is chosen and used correctly. In this article, we single out different types of outsourcing so you can decide which one is the most suitable for you. If you are considering signing a contract with an outsourcing team for your business, you will find helpful information on this page.

What Is Outsourcing, and Why Is it so Popular?

In a nutshell, the idea of outsourcing is to have products or services delivered by a third party. In software development, companies hire outside teams for various processes such as designing, QA and testing, and managing the projects. It has become a significant trend in the last few years and almost a necessity to grow business. In fact, the global outsourcing market revenue reached $92.5 billion in 2019.

The advantages of outsourcing include minimizing operating costs, reducing the amount of time-consuming and secondary tasks, getting things done by experts, and boosting company speed.

When comparing in-house development vs. outsourcing, the benefits sound very attractive for software development company owners. It is one of the most widely used software development tendencies. The company saves costs by hiring remote employees with more expertise and experience than in-house staff. This way, you also save time and effort on training employees. The work is done by experts using top-notch technologies that may not be available within your company, so it boosts the effectiveness and optimizes the company’s time and costs. However, it only works well if the type of outsourcing you select fulfills your requirements. To choose the most suitable model, let’s get acquainted with the key types of IT outsourcing. There are two main approaches to selecting an outsourcing partner: based on location and relationship.

Types of Location-based Outsourcing Services

According to the location, there are the following types of outsourcing.

Onsite

Onsite type outsourcing involves bringing experts into the company’s office to work for a specific time (a few weeks or months).

Onshore

Onshore means hiring a service provider from the same country but a different corporation.

Nearshore

Nearshoring includes working with a partner from a neighboring country (the same time zone).

Offshore

Offshoring means hiring remote partners from far-off countries (different time zones).

Multisource

Turning to multisource outsourcing means using different location-based outsourcing types at the same time. This model is usually the most suitable for large companies that are trying to find the best service providers all over the globe.

Main Types of Outsourcing Services

Now that you know about the different kinds of location-based outsourcing, here are the main types of outsourcing in IT and their particularities. Let’s get acquainted with them.

Staff Augmentation Outsourcing

Turning to the staff augmentation model involves hiring outsourcing partners to deal with your internal processes for a certain period. You own all the projects from beginning to end. This model includes the highest level of employee control and has the most enhanced work speed. This option is the most suitable for companies who already have in-house development teams but lack expertise in a particular sphere.

Project-based Outsourcing

If you need to complete a particular project but don’t want to hire the internal staff specifically for completing it, project-based outsourcing is a perfect option for you. Hiring a remote worker or team for a project has many benefits, such as saving money and enhancing quality. Speed is also significantly higher as the project is only one team’s responsibility. They are ready to work on your project 24/7, and provide you with a great chance to outrun your competitors in such a rapidly developing sphere as IT.

Managed Outsourcing

Managed outsourcing is an intermediate solution that combines the two types of outsourcing models mentioned above. Your remote employees work independently from your in-house staff, and a special person is responsible for the interactions between the remote team and a client – a project manager. He makes reports on the remote team activity and conducts regular meetings with the in-house staff. The uniqueness of this model is that both you and your partner share the potential risks and responsibilities.

What Difficulties May Occur while Hiring Remote Employees?

To present our readers with a complete picture, we need to mention some disadvantages of outsourcing. Two main things make the outsourcing process less convenient.

Time Difference

Time differences mainly pertain to those who are employing remote teams offshore. You need to understand that your urgent task can’t be started immediately if you are in the US and your employees are somewhere in Eastern Europe or Asia. Before hiring remote staff, define a plan of action in case of such urgent situations. Maybe you need to hire someone else as a backup plan.

Communication Barriers

The language barrier can be a problem with organizational issues. To better understand each other, define a strict communication plan while performing some tasks and follow it. Contact your remote employees for updates regularly to avoid late deadlines.

Wrap Up

Nowadays, everybody does outsourcing. We hope this article sheds some light on the types of outsourcing in software development. No matter which type and model you pick, make sure your service provider is experienced and reputable. Good luck with your outsourcing!


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by Dirk DeBie // Contributor to Businessing Magazine.

Opinions expressed by contributors are their own.