Various IT Outsourcing Models: How to Choose the Best One For Your Business?
By: Aga Babicz
Tags: It, Recruiting, Technology, Software Development, Outsourcing

Do you want to cooperate with an outsourcing company, but you do not know which cooperation model to choose? This article will compare the most popular outsourcing models and help you decide which one will be the best for your business.

Location-Based Types of IT Outsourcing

Outsourcing can be divided into two ways, depending on the location or form of collaboration. In the case of the first one, these are:

Onshore Software Development — the outsourcing vendor and its client, are from the same country.

— the outsourcing vendor and its client, are from the same country. Nearshore Software Development — the outsourcing vendor and its client, are from the same continent.

— the outsourcing vendor and its client, are from the same continent. Offshore Software Development — the outsourcing vendor is from a different continent than its client.

For more about these models, read the article: Onshore, Nearshore & Offshore — What Is It?

In this case, the issues you should consider are:

- cultural proximity,

- time zone,

- level of English,

- level of programming skills,

- cost.

When deciding on one of these models, you should compare the differences between specific countries. In this article: Top IT Outsourcing Destinations in 2021 and 2022. In Which Country Can You Find the Best Developers? we compared 11 most popular outsourcing destinations, where we took into account issues such as programming skills, cultural proximity, and average developer salary.

Relationship-Based Types of IT Outsourcing

Another important decision is the type of partnership with the outsourcing company.

Here you have 4 ways to choose:

It’s a critical choice, so we’ll focus on just that division and help you make the best decision for your business in this article.

1. Project-based IT outsourcing

The most classic outsourcing model is project outsourcing, where the outsourcing company is responsible for the entire project. It is its responsibility to deliver the project on time, manage and hire employees. The project team has all the needed professionals to execute your application or software.

In this model, the outsourcing company is responsible for managing risks such as rotations or other factors that cause possible delays. Notably, a project manager is assigned to the project, and he manages the entire software development process. Of course, you will be able to monitor the progress of the work on an ongoing basis, but it is the provider who decides which people to hire or which tools to use to complete the project.

Key benefits:

Saving time — you don’t have to spend time and energy recruiting, onboarding and managing the team responsible for delivering the project.

— you don’t have to spend time and energy recruiting, onboarding and managing the team responsible for delivering the project. Cost optimization — when you decide on such a cooperation model, you know exactly how much it will cost. You do not have to worry about salaries, benefits, office or administrative costs.

— when you decide on such a cooperation model, you know exactly how much it will cost. You do not have to worry about salaries, benefits, office or administrative costs. Less responsibility — the supplier manages all the risks connected with the project, and he is responsible for delivering the project on time.

When to choose a project-based outsourcing model?

Choose this solution if:

Your IT team is busy with other tasks.

You don’t need such a large IT team permanently as you would need for this project.

You don’t have your own internal IT team.

Your project requires a lot of experience and knowledge, which your company doesn’t have.

You want to focus on other tasks and pass the entire responsibility to the provider.

You need a specific thing to do (e.g. application, software, functionality), but you don’t need a whole team to maintain it in the future.

You are the founder of a startup, and you don’t yet have the knowledge and experience to do this project internally.

2. Staff Augmentation

Staff augmentation is adding external specialists for the internal team through an outsourcing company. You can choose the specific people you want to work with by reviewing the resumes offered by the vendor. It is usually temporary cooperation chosen by companies that need support in implementing larger projects. In this model, team and project management is on your side. You are also responsible for delivering the project on time.

[ Read also: What is Staff Augmentation? ]

Benefits of staff augmentation:

More control over the project — external employees are an integral part of the team and work on your terms.

external employees are an integral part of the team and work on your terms. Quick fill of staff shortages — you don’t waste time on internal recruitment

— you don’t waste time on internal recruitment Flexibility — you can scale your team up or down at any time.

— you can scale your team up or down at any time. No administrative costs — people who join your team can be hired directly by the provider.

— people who join your team can be hired directly by the provider. Increased productivity — you get programmers dedicated exclusively to your project.

When should you choose staff augmentation?

This model is the best choice if:

You have your own IT team working on a project but need temporary support to finish your work faster.

You have problems finding qualified specialists with niche skills to join your team and care about time.

You want to have an impact on what kind of people take part in your project.

You want to have control over every aspect of the project.

3. Managed team

This model involves hiring an external team of developers to perform a specific scope of work. This team does not work directly with the internal team as in the case of staff augmentation but reports its tasks to the PM, CTO or the client. Like the augmentation model, you get specialists entirely focused on your product, but they do not become part of your internal team.

It is an intermediate solution between staff augmentation and project outsourcing.

What kind of specialists can you hire in this model? The number and roles depend on your project. It may be a complete IT team, or it may be, for example, a dedicated testing team. The outsourcing provider should be able to select specialists according to your requirements.

Benefits of a managed team:

More control over the process — in this model, you communicate directly with all project members, and they report directly to you.

— in this model, you communicate directly with all project members, and they report directly to you. Better communication — members of a dedicated team usually know each other well and can work together effectively.

— members of a dedicated team usually know each other well and can work together effectively. Reduced risk — a dedicated team has experience in delivering the solution you need, so there is a greater chance of success on this project.

— a dedicated team has experience in delivering the solution you need, so there is a greater chance of success on this project. Time savings — you don’t have to waste time recruiting additional people to your team. What’s more, if you don’t have time to manage, you can assign an external PM responsible for managing the team

When should you choose a managed team?

This model is the best solution when you need to perform tasks that you don’t want to involve an internal team in, or you need specific skills that your employees don’t have and the company doesn’t want to invest in.

4. Body leasing

Body leasing is a model in which an external supplier finds an employee for you. It is the best solution for companies looking for an employee with specific skills and experience temporarily or for a particular project. You can even enlist the support of this specialist within a specific time frame — for example, on specific days of the month when your internal team needs additional support.

The person who joins your team in this model signs a contract with the outsourcing provider, so you don’t have to worry about administrative issues or providing them with full-time work assignments.

[ Read also: Body Leasing — 3 Points to Consider While Choosing This Outsourcing Model ]

Benefits of IT body leasing:

Time savings — instead of recruiting an employee for your team, you can focus on other tasks.

— instead of recruiting an employee for your team, you can focus on other tasks. Flexibility — supporting the person hired in this model is up to you. You decide when and for how long you need their support.

— supporting the person hired in this model is up to you. You decide when and for how long you need their support. Convenience — you do not have to worry about administrative issues and finding tasks for this employee to fill his full-time position.

When should you choose IT body leasing?

If you need to quickly find IT specialists with specific technological skills, but:

You don’t have time to recruit them.

You need occasional and temporary part-time support.

You are looking for a specialist with niche skills.

Are you looking for qualified IT professionals to work within one of the above models? Contact us and tell us about your needs.