Types of IT Outsourcing Models to Grow Your Startup and How to Pick the Best One

IT outsourcing is no longer the exception, rather, it is the norm.

You’ve clearly considered outsourcing too, or you wouldn’t be here reading this blog.

Now, once you’ve decided that outsourcing is the right way to go for your project, you need to familiarise yourself with the different types of outsourcing in order to make an informed decision about the type that best fits your needs.

In this blog, we will cover the basic questions you might have about outsourcing:

• • • What exactly is outsourcing?
    • Is outsourcing really a good idea?
    • When should you outsource your project?
    • What are the different types of IT outsourcing models?
    • What type of outsourcing would be ideal for your business?

What is IT Outsourcing?

Outsourcing is the practice of delegating your work to an entity outside your core team. In IT outsourcing, you engage external entities to work on and deliver digital products for your business.

You can choose to outsource for a number of reasons including lack of skilled resources, trimming budgets, and necessity of skilled expertise.

Project outsourcing involves a lot of coordination and communication between different management teams, so be sure to outsource your work only to reliable entities.

When Should You Consider Outsourcing?

So, when do you need to outsource?

You should consider outsourcing when you do not have the required in-house expertise, or when you’re running low on resources.

Or, perhaps your project is a one-time requirement and it would be wasteful to put together and train a whole team for a singular requirement that is not likely to occur again. What do you do? Outsource, of course!

It is a great way to get high quality services from a global pool of talent. And it’s cost effective, to boot!

What Are the Types of IT Outsourcing Models?

The types of outsourcing models can be broadly divided into two categories:

• • • Location-Based Types of Outsourcing
    • Relationship-Based IT Outsourcing Models

The names are pretty self explanatory, so let’s analyse both these models in detail.

Location-Based Types of Outsourcing

In location-based types of outsourcing, the main deciding factor is how far away your outsourcing team will reside from you. It can be further classified into three:

1.Onshore Outsourcing

When your outsourced team resides in the same country as yours, it is called onshore outsourcing.

Your developers may reside in another region of your country, but there won’t be a noticeable difference in the time zones. Your team will also be able to communicate well with an onshore team as there won’t be any cultural differences or language barriers.

2. Nearshore Outsourcing

If you hire a nearshore outsourcing development team, it means that you are outsourcing your work to countries that are in your geographical vicinity.

In such cases, the time zones won’t differ by more than a few hours. Compared to onshore outsourcing, nearshore outsourcing may be more cost-effective. You might, however, face language barriers in communication, depending on your locality.

3. Offshore Outsourcing

When you outsource your project development work to an entity that lives in another country that is not your immediate neighbour, it is called offshore outsourcing.

Depending on the country you choose, offshore outsourcing can be quite affordable. If you get a good project manager and even an efficient translator in some cases, you can ensure smooth communication between your in-house team and your outsourced team. Read the Startup’s Guide to Managing Offshore Development Teams.

Do not get confused between offshore outsourcing and offshoring. While offshore outsourcing means you delegate your work to another entity in another country, offshoring means you build your own developer team in another country. To know their differences, you can read Outsourcing Vs. Offshoring.

Also Read: Why Businesses Hire Indian Companies For Software Development?

Relationship-Based IT Outsourcing Models

1. Staff Augmentation Model

Let’s assume you need a specialist to enhance one of your product’s more complex features. This is a one-time requirement and it doesn’t make sense to go through an exhaustive recruitment process to hire someone temporarily, right?

Don’t bother. You can simply contact an outsourcing agency and they will assign an expert professional to you for the tenure that you require. The specialist will work with you as part of your team. This is called the staff augmentation model.

2. Dedicated Team Model

In a dedicated team model, you get to hire an entire team of developers through an outsourcing agency to work on tasks that you do not want to assign to your internal team.

The difference here is that the outsourced team will be working on independent projects and will not need to collaborate with your in-house staff. They will stay connected to you through a project manager or someone in a similar role.

3. Project-Based Model

If you choose a project-based model of relationship-based outsourcing, you won’t have to be involved in the project development process except during the handing over and delivery times.

It is conventionally the most popular model of outsourcing and has been proven effective for projects where stakeholder involvement is low. The main disadvantage of this model is that you won’t get autonomy over the project’s development.

To ensure smooth communication, you’ll need to set the tone and frequency of conversation with the project manager assigned to you by the outsourcing agency.

Which Outsourcing Model Should You Choose for Your Business?

This is one question we can’t answer for you. In fact, no one can give you a cut and dried answer to this question. We can, however, guide you to the right answer.

Consider the following and you’ll soon arrive at which type of outsourcing model will be apt for your business:

What Are Your Project Requirements?

Before you consider outsourcing, you need to understand your exact project requirements. Knowing your project requirements like the back of your hand will also help you avoid confusion as the project outsourcing and development progresses.

Some questions to be answered are:

• • • What do you hope to accomplish on project completion?
    • What is the scope of your project?
    • What are the core features you want for your final product?
    • Have you set your project milestones?
    • What are the deadlines you have in mind?

Once you get a clearer picture of your project requirements, you will be able to analyse what type of outsourcing works best for you. Once you have found it, you should hire the right team for your product development success. It will also help you avoid costly mistakes in product development.

What Type of Pricing Model Do You Wish to Adopt?

You need to fix a budget first and give some thought to the type of pricing model you want to adopt for the outsourcing services you require.

Would you prefer a fixed price model, a value-based pricing model, or perhaps a competitive pricing model?

Once your budget is fixed, you can narrow down your search to the professional outsourcing agencies that fall in your budget range.

What is Your Outsourced Project’s Dependency on Your Core Team?

Project management is no mean task, especially when it comes to software development projects.

All your teams must come together under one umbrella to work towards the end goal. There must be proper coordination and communication between team members.

If your outsourcing partner and your core team both have a stake in the development process of your project, then it is imperative that everyone’s work hours align. In such a case, you should try to avoid offshore outsourcing, as the time zones will make proper coordination a chore.

On the other hand, if your core team has nothing to do with your outsourced project except perhaps the regular progress tracking, your scope of outsourcing partners increases.

Once you have determined your core team’s role in the project, you will get a clearer idea of what type of outsourcing model will align with your project needs.

What Type of a Relationship Do You Want with Your Outsourcing Entity?

Outsourcing entities hold excellent customer service in high regard, as client satisfaction determines their next source of bread and butter.

You need to set the level of interaction you want with your outsourcing entity.

Do you want to assign your project work and wait till it’s completed before initiating contact? Or do you want to be completely involved with your project development?

The type of relationship you wish to maintain with your outsourcing entity will also help you decide on the type of outsourcing that will prove most feasible for your project management.

Conclusion

It is easy to find reliable IT outsourcing services providers like NeoITO, with access to a global talent pool for you to choose from.

But, first, you need to understand the type of outsourcing that is most beneficial to your company goals. Once you decide on the IT outsourcing services that you believe will help your project succeed, give us a call and we’ll take it from there!

So, do you need a reputed tech partner who will guide you through your product development from start to finish?

Great! When do you want to start working with us? Let’s Talk!