What Are the Different Types of IT Outsourcing Models and How Do I Choose the Right One?
IT outsourcing is one of the most cost-effective strategies to stay competitive in the corporate world, especially in the tech sector.
Keeping a diverse in-house team and utilising resources within the organisation can significantly increase the product's total cost of ownership and slow down its time to market in times of rapid technological development — it takes time and money to regularly upgrade your team's skills, and even in this case, your company may still lack necessary competencies.
These difficulties are addressed by IT outsourcing, which allows you to increase your expertise by utilising external resources.
If you're thinking about outsourcing to accomplish your long-term plans, you should be aware of the various types of IT outsourcing models.
IT outsourcing models are classified into numerous categories based on their location, relationship, and cost.
Outsourcing models based on location
The location of your outsourcing partners is the emphasis of this approach.
- Outsourcing on-site. This concept entails allowing third-party service providers into your physical space.
- On-shore outsourcing is a term that refers to outsourcing that takes place on It means you work with your external team in the same state or country as you. The fundamental benefit of this technique is that there are little cultural or linguistic obstacles.
- Nearshore outsourcing is a term that refers to outsourcing that takes place A corporation uses this technique to recruit third-party vendors who are based in adjacent countries and share the same time zone.
- Outsourcing to a foreign country. This sort of outsourcing covers sites that are further away. A corporation in USA , for example, engages a Ukrainian outsourcing team.
Outsourcing based on relationships
The manner of collaboration between outsourcing partners is defined by this paradigm.
- Addition of personnel. It's comparable to on-site outsourcing, where a corporation rents additional resources for a limited time. A company's resource capacity is also augmented by external skills as part of staff augmentation. It could occur on-site or remotely.
- Model of a managed team. Both the internal organization's staff and external vendors participate in the same projects in this approach, with each party taking responsibility for a certain procedure.
- Model based on projects. The entire project is delegated to a third-party service provider under this sort of outsourcing.
Pricing models for outsourcing
IT outsourcing pricing models come in a variety of shapes and sizes.
- Model with a set price. It's regarded as a rather antiquated method of forming an outsourced partnership. In this situation, a third-party vendor establishes a regular tariff and collects payments on a monthly basis. The vendor should supply the host's organisation with complete details about the project scope/technical assignment in order to implement this model effectively.
- Model of time and materials. It is most commonly found in IT projects. A client pays just for the time and resources invested on a project under this arrangement.
- Model based on incentives. If the product's performance greatly surpasses the initially defined metrics, this strategy entails further payments.
In the IT world, the practise of outsourcing IT tasks to third-party providers is common. It allows IT companies to minimise product costs while maintaining high quality. On the market, there are a variety of outsourcing methods that benefit both sides.