IT Outsourcing: Models, Benefits & Everything You Should Know


83% of companies plan to maintain or increase their spending on IT outsourcing partners in 2023. To help you join the cool club, let’s learn what IT outsourcing is, its different models, and the benefits of partnering with an IT outsourcing vendor.

It Outsourcing Models, Benefits & Everything You Should Know it outsourcing

Definition of IT Outsourcing

IT outsourcing is when an organization moves part of the software development process outside the company infrastructure to save costs. In this case, the task is handed out to an outside team while the company has control and observes the tasks being completed.

Different Models of IT Outsourcing

1. Offshore Sourcing

Offshore outsourcing is when you outsource your development process to a distant location. There are quite a few reasons for offshore sourcing, the main ones being:

  • Access To A Larger Talent Pool
  • Favorable Economic Condition
  • Lower Labor Costs
  • Time Zones

If there are time zone differences, it can be very handy for organizations to ensure uninterrupted customer support since someone will be active throughout the day.

2. Onshore Sourcing

Onshore sourcing is when the company processes are delegated to different companies within the country. The most common choices of these always have lower labor and operational costs.

Another reason that can motivate an organization to leverage onshore sourcing is the lack of talent. The skill shortage among internal team members can drive the company to look for similar talents elsewhere for better results.

3. Nearshore Sourcing

Nearshoring outsourcing is highly similar to offshore outsourcing. Still, there is a very important difference: the processes are outsourced to locations closer to your home region, and the time difference is an hour or two at the most.

4. Multisourcing

Multisourcing is the idea that an organization outsources its work to multiple vendors. This way, the organization reduces and diversifies the risk of working with a third-party vendor for any project.

To make the concept of time difference easier for you, we’ve picked the top 10 outsourcing locations to list their time differences.

CountryNew York (East Cost)California (West Coast)
Argentina2 Hours Ahead5 Hours Ahead
Brazil3 Hours Ahead6 Hours Ahead
Bulgaria7 Hours Ahead10 Hours Ahead
Costa Rica1 Hours Behind2 Hours Ahead
India10 Hours 30 Minutes Ahead13 Hours 30 Minutes Ahead
Mexico1 Hours Behind2 Hours Ahead
Philippines13 Hours Ahead16 Hours Ahead
Poland6 Hours Ahead9 Hours Ahead
Romania7 Hours Ahead10 Hours Ahead
Ukraine7 Hours Ahead10 Hours Ahead

Now that we know the basics let’s get to know the most popular IT outsourcing methods that most organizations utilize for their operational activities.

1. Project-Based Model

In a project-based model, you hire a team to do a part of the pre-defined work in a project. The outsourced team has a project manager who takes full responsibility for work completion, as well as the performance of the project itself.

It’s a good idea to opt for the project-based model if the project requirement does not change anytime soon.

2. Dedicated Team Model

A dedicated team benefits an organization if they seek long-term collaboration, and the project will require constant work. Going for the dedicated team model makes more sense here since a dedicated team is more focused on the project than a regular in-house team.

All you have to do is choose the right vendor, get your team, and get to work.

3. Outstaff Model

Outstaffing is when you only need specific people with specialized talents or higher experience to complete specific objectives, so you bring in those people only.

Sometimes even the expertise of a whole team is not enough, and you have to bring someone in who knows what they’re doing and holds an extra edge in terms of additional experience.

4. Staff Augmentation Model

Staff augmentation is for filling in the gaps in your team by hiring specialists for the duration of your projects. You can either hire said specialists for the short or long term. The staff augmentation model can save you the time and cost of hiring a fresh batch of full-time employees.

The vendor handles the complete procedure and will provide additional expertise while you manage your regular business activities.

5. Offshore Development Center (ODC)

When an organization locates its dedicated resources in a different region or country to gain access to larger talent pools is considered an Offshore Development Center.

This way, the organization can gain access to the workforce and expertise with low labor costs while having complete supervision over the project itself.

You can open a development center of your own, but it comes with the additional risk of hiring a ton of people you don’t know anything about in a location you don’t know anything about.

Different Pricing Models For IT Outsourcing

Cost Plus

In the cost-plus pricing model, you must pay the team’s monthly salary, including a fixed fee for the vendor. The vendor’s pay includes:

  • Fees
  • Office Infrastructure
  • Payroll
  • Support Staff
  • Workstations

Time & Materials

The client only covers the developer’s hours working on the project in this payment method. It’s become the most popular method over the years since it gives the client complete flexibility over the work process and allows them to readjust accordingly.

Fixed Price

This pricing model requires The vendor to complete the client’s project within a fixed time and budget. The client has to make a one-time payment and cannot change any requirements or specifications unless they pay an additional fee.

It’s a single-sum agreement that the vendor consents to, and the vendor is responsible for seeing the project to completion.

Rate Card

The rate card model allows the client to cover the monthly rates for the developers. The bill of monthly rates comes from the vendors, and you have to pay the bills accordingly to continue the project’s progress.

Benefits of IT Outsourcing

You Get Access To The Best Technology

The software market is evolving so rapidly that even yesterday’s trend can become today’s abandonware. Information technology is highly volatile and can quickly render IT skills obsolete.

But when you’re leveraging any of the outsourcing models, you have nothing to worry about since you are always getting access to the most updated technology with someone experienced behind the wheel.

Saves In Terms of Costing

Companies constantly downsize their employees when they fail to survive competition in the market. But instead of causing losses to employees, the companies should go for any outsourcing method possible to make the most of lower labor costs.

It can also save the company resources since vendors often provide additional resources while the team comes in with additional expertise to operate said resources.

Offers More Flexibility

Flexibility is the trump card to get anything done faster and with more creativity. Modern work demographics are much more different than traditional work methods, and flexibility enables every individual of any outsourcing team to bring their best to the table.

The flexibility applies to the organization itself too. To survive the fluxes of the current market, an organization must be flexible with its operations as well. Vendors can tap into a wide array of potential talents to bring more flexibility to business operations, which internal IT may lack.

Job Security For Regular Employees

Well-reputed organizations don’t like to employ people for a short duration to preserve their reputation in the market. So they frequently bring in an additional workforce with the help of different IT outsourcing models. It ensures job stability for regular employees and increases the bond between an individual employee and the business itself.

Future of IT Outsourcing

Though automation is slowly taking over different departments through digital transformation, one must always remember that no computer will ever replace a human being. People leveraging AI and increasing their expertise are moving forward, and they are the ones who are in the highest demand when it comes to outsourcing.

IT outsourcing has evolved a lot over the years. Since 93% of organizations have already implemented cloud computing and different cloud services, they are sure to leverage IT outsourcing to look for professionals who can help them run the operations using the technology and application maintenance.

To Wrap It All Up

IT outsourcing can grant you easy access to exceptional talents to help you hold your ground in a highly competitive market. The process is much easier than you may think, and a successful outsourcing relationship can diversify your workflow to give you a competitive advantage over others in the market.

Are you looking for the right IT outsourcing partner company? Impala Intech is happy to help with our professional expertise anytime you need us to!


What Is the Biggest Benefit of It Outsourcing?

The biggest benefit of IT outsourcing is your operations’ flexibility. You can upscale or downscale your team anytime to suit your requirements.

How Can I Ensure Data Security When Outsourcing My It Procedures?

There should be a detailed NDA (Non-Disclosure Agreement) between you and the vendor so that no information about the project gets leaked outside of the organization.

How Do External Service Providers Help Me Reduce Costs?

IT outsourcing models always have payment models that only charge you for their work on your project. It saves you a lot of additional costing to focus more on vital business processes. Outsourcing providers also don’t apply hidden costs in their business approach.

Aren’t Nearshore and Offshore Sourcing the Same Thing?

They are quite similar, but there’s a big difference: nearshore sourcing is done from a location closer to your home, and the time differences are much lower compared to offshore-sourced teams.

Can I Outsource Only Part of My IT Operations?

Yes, you can use the project-based model to outsource part of your IT operations.