What Are the Types of Outsourcing Models? Which Suits You?


Different Types of Outsourcing Models To Suit Your Business Needs types of outsourcing models

While outsourcing is the general term used worldwide to delegate workload to a third-party vendor, outsourcing is a wide field of expertise that can be divided into various outsourcing models.

Today, we’re looking at all kinds of possible outsourcing models that can help you determine the right outsourcing model you need for your business.

Location Based Outsourcing

Onshore Outsourcing

Onshore outsourcing is the model where you outsource different company aspects and objectives to an agency within the same country.

This model is most effective for companies that are limited within one country and saves them the additional hassle of dealing with language barriers.

Offshore Outsourcing

Offshore outsourcing is the standard outsourcing we all know, where you outsource business operations to different countries that are geographically much further than yours.

Offshore outsourcing is a lucrative option for countries with high labor costs to work with people from countries with a lower cost of living. This way, the quality remains constant while cutting down additional expenses.

Nearshore Outsourcing

Nearshore outsourcing is where you partner with vendors in neighboring countries and within the same timezone.

Though the language barrier can still be an issue with neighboring countries, the reduced cost and timezone similarity are still a big plus.

Multisource Outsourcing

Also known as multisourcing, this model extends the partnership to different location points.

Multisourcing is considered to be the best model for larger businesses since it provides more options to choose from. You can always choose the strong suit of each agency and outsource that specific range of tasks to that agency.

Onsite Outsourcing

Onsite outsourcing is when your outsourced team reports onsite and works with your internal teams directly. Onsite outsourcing is a spinoff of onshore outsourcing since the outsourced team members have to be within the country to be present on your site.

Onsite outsourcing grants you team members who operate similarly to an internal team.

Relationship Based Models

Staff Augmentation Model

Staff augmentation is a mirrored version of onsite outsourcing. Staff augmentation is when you extend your team by signing contracts to onboard team members. These team members then perform onsite alongside your internal employees. Staff augmentation can be remote as well.

Managed Team Model

In the managed team model, also known as the dedicated team model, the client business and the outsourcing vendor distribute tasks among themselves and designate tasks for each. In this case, the client gets more control over the team to ensure the desired outcome.

Project-Based Outsourcing

Another name for this model is “Full Process Outsourcing”. In this model, instead of outsourcing certain tasks, you outsource your entire project to a vendor only to complete that specific project.

The client gets to choose from a wide range of professionals that the vendor can offer, and the team works on the project till the completion of the contract.

Outsourcing Pricing Models

Fixed Price Model

Fixed Price (FP) model is one of the oldest outsourcing pricing approaches. This model imposes a standard rate, which the vendor charges depending on the client’s preferences. The vendor receives full payment once the project is complete.

The model is a high-risk method of engagement, so the vendor agency will always ask for additional flexibility in settling the payment.

Time & Materials Contract

Time and materials (T&M) Contracts are preferred among IT projects and outsourcing agencies. Here, bidding occurs, and the vendor provides a proposal based on the client’s requirements.

The model also mandates the team from the vendor agency to perform all operations in-house or with a client’s direct supervision.

Incentive Based Model

It’s all in the name. The client offers additional payment on top of the original rates both parties agreed upon if the development team exceeds the goals and success metrics mentioned in the agreement. This is a great model to boost the morale of the team.

Shared Risk-Reward Model

It’s like an incentive-based model, but the partnering vendor doesn’t only share the good bits. The shared risk-reward model aims to improve the project by sharing financial risk between the vendor and the client. But it ultimately reduces risks for new processes, models, or technology.

Process-Specific Outsourcing Models

Professional Outsourcing

Professional outsourcing is when you hire a certain professional to complete a task. In some cases, a professional gets hired by a business to complete or overlook a complete project. It’s a great option to bring additional expertise and a fresh outlook to your team.

Operational Outsourcing

As the name suggests, the operational outsourcing model lets you outsource certain business operations in your company to a vendor.

Suppose you have one existing service but want to offer another service and don’t have enough resources for that. In that case, you can fill in the blanks for the new service with operational outsourcing.

Logistics Outsourcing

Logistics outsourcing is when you hire an external vendor to manage and coordinate the transportation, preservation, and distribution of goods. Businesses that don’t have enough in-house expertise to handle the matter often leverage this outsourcing model.

Manufacturing Outsourcing

In this model, you hire a manufacturer for your business to produce different products instead of making them in-house. Many businesses in the retail and e-commerce industry often use this outsourcing model to make labor and material costs more affordable.

Why Choose Impala Intech As an Outsourcing Partner?

Impala Intech is a software development agency trusted by many, and our development team possesses knowledge of various tech stacks and business domains.

The skills of our developers comprise various subject matters, and the experience from working on previous projects allows the team to bring insights and skills to your team.

Convinced? Partner with Impala Intech today and take your business to the next level!


Can a Single Project Be Split Across Different Outsourcing Models?

You can allocate different project components to different models based on their requirements.

How Can Companies Manage Quality in Different Outsourcing Models?

Implementing clear quality standards, regular reviews, and open communication helps ensure consistent quality across models.

Does the Company’s Size Influence the Choice of Outsourcing Model?

Smaller companies might lean towards onshore or nearshore models due to resource constraints and communication preferences.

Can the Hybrid Model Help Overcome Time Zone Challenges?

The hybrid model can mitigate time zone challenges by strategically allocating tasks based on time zone compatibility.

What Role Does Cultural Alignment Play in Choosing an Outsourcing Model?

Cultural alignment can impact communication styles, understanding, and collaboration ease, making it an important consideration.