IT Outsourcing Guide: Definition, Types & Models, And Why Do It

IT outsourcing is a fast-growing part of the industry and a valuable solution for different companies. Both big companies and young startups leverage the benefits of outsourcing to their businesses. This approach helps you cut costs or lead to greater competitive advantage. In addition, a Deloitte survey says that COVID-19 has banished the idea that physical co-location of resources is necessary to develop a trusting relationship in the workplace. All these suggest that the needle will be tilting more towards outsourcing. So, here’s your detailed guide to IT outsourcing to help you understand what it is and why you need it.    

What Is IT Outsourcing?

IT outsourcing means that a company moves a part of the software development outside of the in-house structure to save costs and control all the processes. You basically hand over task implementation to the partner and keep an eye on things. IT outsourcing can be implemented both ways: outsides or within the country. There are 3 main types of outsourcing that refer to where the service is provided:   3 Types of IT Outsourcing 

1. Onshore
2. Nearshore
3. Offshore

1. Onshore. It is a process of hiring professionals that are located in your city or nearby. It's a good option to keep everything under control within reasonable cost.
2. Nearshore. It is outsourcing in neighboring countries with the same time zone. By choosing this option, it's easier for you to communicate with developers yet, this option isn’t always profitable.
3. Offshore. It is outsourcing to another country. This type allows you to save up the most.

According to Clutch, 8 in 10 small businesses plan to outsource business functions in 2021. They also highlight that the main purposes for IT outsourcing are:

• Cut costs;
• Grow the company;
• Work with multi-functional experts;

For entrepreneurs, especially startup founders, IT outsourcing can be the key to propelling their business forward faster and save more money than they could with a small in-house team. Big companies like Google, Apple, Facebook also outsource some part of their work as it accesses them to professionals with different expertise.    

Best IT Outsourcing Regions

As we already found, cost reduction drives companies to use the IT outsourcing business model the most. The main reason for that is that outsourced IT services may cost less in different countries. Let's check how hourly rates vary in different regions.

That price isn't the only factor you should consider while choosing the place for IT outsourcing. We advise you to find the balance between the proficiency level, time zone, communication level, and prices. ‍

3 Common IT Outsourcing Models

Before you sign a contract with an information technology outsourcing company, you should choose a cooperation model. While types of IT outsourcing appeal to the geographical location only, the outsourcing business model defines the way you collaborate and the final goals of such a collaboration. Here are 3 most common IT outsourcing models and their pros&cons.

Project-Based Model

How it works: The client hires a team to implement the part of work that is already planned and defined. The project manager from the outsourced team carries full responsibility for the quality and performance of the project. When to use: The project-based IT outsourcing model is suitable for not complicated projects that have predictable and well-studied functionality.

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Dedicated Team Model

How it works: The client hires a team that will create a project for them, and they will work only on that project. Unlike the project-based model, a dedicated team is more engaged in your project. In this model, an outsourced team becomes your technical and product advisor. So it can offer ideas and suggest alternative solutions.

When to use: Dedicated team, IT outsourcing model, suits best for early-stage startups that are expected to grow, complex long-term projects, which have the potential to expand, and projects with many vague requirements. If you want to validate your idea, find a product-market fit or build an MVP to test the market, the dedicated team is the way to go. We at Uptech focus on a dedicated team model. Our recent case for real estate app Yaza is a great example of how a full-cycle product development studio works. The client came with an idea to create a utility tool for navigating experiences found in the real world. Instead of a simple implementation of the concept, we went further. Our product management team validated the initial idea, found product-market fit, and increased the audience. The design team used an iterative approach which improved the usability of the solution. All in all, we succeeded in releasing the up-to-day product with the best UI solutions.    

Outstaff Model

How it works: It's a type of outsourcing in IT when you don't need a full-fledged development team and hire separate specialists. Sometimes the project requires finding a couple of additional professionals, and you're free to hire outstaff workers to cover that scope of work. When to use: Outstaff IT outsourcing model suits best for short-term projects as there's a risk your outstaff members may turn over within a long period.

Why You Should Use IT Outsourcing

Now that you know what IT outsourcing is, its models, and types, it's time to clarify why you need to outsource and whether you really need it. Let's go over a few situations that suggest when to opt for IT outsourcing.

You Are A Domain Expert With Idea

If you're an industry expert with the idea that solves a real problem, IT outsourcing is your choice. In this case, your main goal is to enter the market and test the solution fast. An outsourced team will help you validate the idea, build an MVP to check the hypothesis, and implement changes in your product according to market needs. It saves you money, time and lets you reach the goal.

You Have An Early-Stage Startup

It's a common case that young startups spend money faster than they get a solid team and a ready-to-market product. The Failory found that financial problems are the 3rd reason why startup fails. So it makes more sense to reduce costs by hiring an outsourced team of professionals while your business lives on investor's money. You may employ a full-cycle product development studio covering all the blind spots and bringing your product to life.

You Need Technical Support

Even if you already have a ready solution, but it demands some technical improvements – frameworks for backend components, new language, integrations with enterprise app, UX&UI design – it makes more sense to find an experienced partner. There are many functions that IT outsourcing can cover, and again it saves you the time you'd otherwise spend on looking for qualified staff.

Summary

In this article, we have attempted to dispel the myth that information technology outsourcing is low-profile deliverables and last-resort decisions. We figured out that even big tech companies outsource with ample benefits. Also, IT outsourcing is a great option for early-stage startups to save time & money.          

Source: IT Outsourcing Guide: Definition, Types&Models, and Why to Use (uptech.team)