There are many different models for IT outsourcing and choosing the best one for your business must depend on your specific needs. This article is about IT outsourcing models, types, key drivers and benefits. Let’s explore to know more.
What to Know About IT Outsourcing?
IT outsourcing means a company hires an external software development company or dedicated software developers to carry out all the tasks of a software development project. Previously, it was a savior for companies who had difficulties setting up an in-house development team or wanted to find a cheaper source of labor with high skills. But today, the aims of IT outsourcing are to build a long-term partnership, align business strategy and goals, as well as share the risks.
Primary drivers of IT outsourcing
There are several reasons why businesses choose to outsource their work.
Access to specialized skills. The third-party IT providers give you highly qualified specialists in every particular field. They have technical knowledge and experience in software development.
Optimize business processes. Professionals in the outsourcing industry will help company functions better once it outsources some of the important work.
Faster software development and deployment. While building an in-house team requires long hiring and training processes, using outsourcing eliminates these processes, which helps save time and speed up the software development.
A beneficial business strategy. IT outsourcing as a business strategy to cut down operational costs and get the best people with the right expertise and experience from across the globe.
Enable concentration on core business. If an IT solution is not your business’s top priority, hiring a third-party can free it up to focus more on other aspects, such as product development, customer service, business matching and so on.
The need to expand. Outsourcing helps you cut down costs on hiring, training, marketing and other things without affecting your company’s operations or strategic services. This allows your company to continue growing and expanding. Especially, working with a global software development outsourcing team gives you access to the global talent pool and helps grow your network.
Advantages of outsourcing software development
Software development outsourcing brings many benefits to your business. These include:
- Minimize costs, such as operational costs, salaries, taxes, health insurance and social welfare.
- Save time and speed up your software development project with higher quality.
- Access to talented developers and advanced technologies.
- Flexible working hours and flexibility in the working process.
- Expand the team globally and upscale fast.
Types of IT Outsourcing Models
Before diving deep into the best models for IT outsourcing, we need to clarify its different types to know which is better to use.
There are four ways for companies to outsource their projects to a team or vendor across the globe. They include onshoring, offshoring, nearshoring and multi-sourcing.
Onshore outsourcing, also known as homeshoring or home-sourcing, involves hiring a third-party IT team to handle services. It is located in the same country or region. This option is advantageous because it eliminates linguistic and cultural barriers, making communication and collaboration much easier, ensuring outsourcing success.
Offshore outsourcing is the act of client companies working with software companies in other countries. This type of IT outsourcing is not a good fit for companies that demand real-time communication. For companies interested in flexible work schedules and arrangements, however, offshoring is probably the best one. Plus, it reduces labor costs and provides a virtual work environment thanks to online communication channels like Zoom, Skype and Email.
Nearshore outsourcing means hiring the development teams in nearby countries. For instance, a company located in Eastern Europe outsourcing to a third-party in Western Europe, that’s considered nearshore. If a company is based in Eastern Europe and hires a developer team in Mexico, that would be considered offshore.
Multiple sourcing is the process of hiring more than one software provider in the same or different countries to fulfill demand. For example, a client company hires a Vendor A to work on network functions, Vendor B to work on desktop functions and Vendor C to work on data center functions.
4 Best Models for IT Outsourcing/ Software Development Outsourcing
Some of the best IT outsourcing models include:
1. Staff augmentation model
Among the best models for IT outsourcing, staff augmentation cannot go unmentioned. It means a company has an in-house development team but decides to hire additional tech resources for their needs. These can be temporary or permanent roles, depending on a company’s requirements and labor skills.
This software development outsourcing model is suitable in the following cases:
- Your in-house software development team is missing a few members.
- Your company is looking for a professional project manager to monitor all team members as well as daily progress on his/her projects.
- If you have limited resources for your project, you should hire a specific type of developer.
2. Dedicated team model
This IT outsourcing model is ideal for companies that need external professionals to work on long-term and complex projects. The outsourcing team will be in charge of the quality of work. A dedicated team is the best option for companies that need outsourcers with specialized knowledge, experience and expertise in a specific field.
3. Project-based outsourcing model
Project-based outsourcing is also one of the best models for IT outsourcing/ software development outsourcing. In this model, the external IT service providers manage the entire project to meet your requirements. You delegate the full responsibility to the providers and they will deliver the final product to you.
4. Offshore development center model
This model of IT outsourcing means an offshore software development team located in another country. Simply speaking, it is a subsidiary of a company operating overseas, with a larger talent pool, but lower costs. Startups, IT product companies and those companies that want to establish a presence in another country should choose the offshore development center model.