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Types of IT Outsourcing: How to Choose Your Provider Based on Your Needs

Types of IT Outsourcing

At some point, companies often find that they will need to build new IT systems, which requires more staff. But there’s no point in paying new hires for a one-time project.

This is where IT outsourcing comes into play!

By providing professionals, IT outsourcing helps companies save costs and scale their teams immediately to get projects up and running. 

So specifically, if we go by the facts and talk about the IT outsourcing industry, Statista has clearly stated that the outsourcing market has exploded.

Today, in this blog, we will provide you with the definition of IT outsourcing services, the types of IT outsourcing services, and the reason why businesses need IT outsourcing. 

Let’s keep reading to find out if outsourcing is the best option for your needs.

What Are IT Outsourcing Services?

IT outsourcing is the practice of using an external service provider to provide some or all of the IT functions required by a business.

IT outsourcing providers may take full responsibility for all IT maintenance and support, called a fully managed service, or they may offer support for the company’s internal IT team. This is sometimes called shared source IT support and is typically an approach taken by larger organizations.

An organization may use one provider for all of its IT tasks or multiple service partners to deliver various items.

Types of IT Outsourcing 

Depending on business needs and convenience, one decides to outsource. These needs may depend on long-term planning or to achieve short-term goals. The pattern of cross-border trade has offered companies to tap into a younger pool of experience and capabilities.

Businesses work with third-party vendors to make their IT functions respond quickly to changing demands. An outsourcing model is limited to three main factors, namely the location of the outsourcing company, the type of partnership they offer, and the details of the outsourcing contract.

It’s important to discover ways of outsourcing approaches to software creation from a vast list of resources we see. When companies are contemplating other companies of the same genre and the same type of offer, it is important to select one type of model among many.

A business can use one service provider for all outsourcing requirements or multiple providers to provide different items. The three main types of outsourcing models are offshore, nearshore and onshore outsourcing.

Types of IT Outsourcing 

1. Offshore Outsourcing 

Offshore outsourcing is a location that is far from the customer’s location, mostly in a different continent or geography, but is chosen as an offshore destination because it meets the business needs of streamlining the overall business process.

This outsourcing cooperation model is a help to maximize the total budget and prefers to recruit talented resources from a multinational pool of hourly wages or monthly charges.

As there is an additional advantage of time overlap during electronic meetings and Internet calls, certain business time zones play an important role in remote work. The project manager of the outsourced team takes responsibility for the quality and performance of the project.

2. Nearshore Outsourcing

Nearshore Outsourcing goes by name where the outsourcing location is the nearest geographic location that promises easier operations. The subcontracted tasks/projects would be carried out by the citizens of the country or neighboring countries.

In Nearshoring, the countries within the restricted neighborhood are chosen with a primary goal of traveling when desired and easy to fly. The culture and working method will be very similar compared to other models.

3. Onshore Outsourcing 

In this type of outsourcing, the company will work with any other software developer within the same country. Any type of commercial commitment will be between two companies located within the same geographic region.

There is a high demand for shore subcontracting because it reduces travel costs and saves time. Global companies mostly prefer this outsourcing model due to the same time zone and cost reduction.

There will be no cultural differences, the same type of vacation list, people and method of work.

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What Are the IT Outsourcing Models?

Here are the most common IT outsourcing models to choose from based on business needs:

. Staff Augmentation 

This is the ideal option to solve the talent shortage problem. As per an IT staff augmentation services provider, it works well for companies that already have an internal IT department but need to strengthen it with trained professionals.

. Dedicated Team

This is an IT outsourcing service for businesses that need software developed for a long time. Based on having a professional IT department, the company will be able to save money on hiring, administration and office expenses.

. Project-Based

This model is the most popular in IT outsourcing services, it is also known as full process outsourcing . The IT vendor is given complete control and responsibility for the project, including all stages of the process, team management, results, deliverables, and risks.

. Standardized Model

IT outsourcing companies are often looking for quick business solutions, and an introduction to a standardized model can get your project market-ready at a lower development cost in a short timeframe. 

It should be noted that custom solutions can often be more expensive than standardized services, hence later suitable for smaller businesses or startups.

Also Read: Outsourcing vs Outstaffing Models

How to Choose an IT Service Provider Based on Your needs: A Checklist

Here we are going to explain how to select an IT outsourcing provider for your project. Let’s take a quick look:

IT Service

1. Check Your Business Goals

What are your specific IT needs? What features do you need help with? IT requirements can vary from business to business, so it’s worth establishing exactly what your business needs before you start looking for a provider and narrowing down your options.

There are endless IT outsourcing companies out there, so it’s very important to find one that specializes in the specific services you’re hunting for. 

2. Identify the specialized Knowledge You Seek Access to

When looking for support solutions for IT, you may want to take advantage of specialized knowledge that you don’t have in-house. After all, that’s one of the main reasons companies start looking for an offshore outsourcing provider in the first place.

Look at each provider’s area of expertise and make sure they align with your specific requirements. Can they help you finish a difficult project? Do they have experience in idea transformation into reality? Find the answers to these questions before continuing.

3. Think About the Savings You Want to Make

Software development can be expensive, so it’s no surprise that many companies outsource IT to achieve cost savings. When looking for an IT outsourcing service provider, consider how you want to reduce expenses and achieve total profitability.

Always compare the costs with what they would be if you chose to hire in-house staff. If you accumulate downtime and other inefficiencies, that could offset any cost savings you were hoping to achieve.

4. Do Your Research

IT service outsourcing requires in-depth research to be successful. This consists of case studies, reading reviews, and testimonials. You should also take the time to talk to other businesses that have used the services of the provider you are considering.

Identifying the best talented developers to help you grow your business can be challenging, but the IT industry is developing rapidly and it’s becoming easier to find the right vendor.

5. Look at Industry Experience

If you need help with specialized roles like mobile apps, intelligent automation, or any other super-specialized technical role, you should check not only for core competencies but also for industry experience.

This is especially critical if you are in a regulated industry or have specific compliance requirements. Verify that the provider you choose has the experience and knowledge to meet your needs with the fully managed service being provided.

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6. Consider Previous Projects and Portfolios

When looking at a vendor’s portfolio, consider both the quality and quantity of their past projects. Checking previous projects and portfolios gives you a good idea of what to expect if you choose to work with a specific software engineering team.

If you decide to work with a particular software engineering team, this will provide you with a solid understanding of what to anticipate.

Has the provider already managed to deliver high-quality projects and collaborate with multiple clients, or haven’t you even seen their mobile apps or custom solutions for others in your industry? If the latter is true, you might not want to outsource your IT project to that provider.

7. Read the Fine Print

Saving time often leads to more mistakes, so take a moment to read the fine print before signing an outsourcing contract. This includes understanding the service level agreement (SLA) and the terms and conditions.

Be clear about what is included in the contract and what is not, otherwise you could end up with an unexpected invoice and the actual collaboration would be very different from what you expected.

8. Ask for References and Testimonials

Nothing speaks louder about IT service outsourcing than the experiences of other companies that have used it. So when you’re considering a particular provider, it pays to ask for references and testimonials.

It may turn out that the services you were looking for are not up to the standards you expect. Conversely, if other clients or small businesses can recommend that software development provider, you may also get some ideas about what it’s like to work with them.

9. Check Communication Setting

Any outsourcing company you plan to execute your existing or ongoing projects with needs to have more than just technical expertise or a team of talented software developers. In addition, they must communicate with you in the same way.

You must be comfortable communicating with the supplier, and the supplier must be able to understand your needs and requirements. Otherwise, it will be very difficult to successfully manage your complex projects.

10. Check Out Support and Consulting Solutions Afterward

Often IT projects require more than just software services and the customer will be more interested in getting a full range of services. This would require the provider to offer further support and consulting services.

If you are considering looking on a global scale, choose an outsourcing company that offers help around the clock. This is especially true if you are looking for a long-term relationship with a particular vendor, as you need to be sure that they will be able to support your project, even after it is complete.

11. Schedule a Call or Consultation

It’s okay to still feel insecure about outsourcing. Call or schedule a meeting with the selected provider. This will give you the opportunity to ask questions and learn more about their services to help you decide if they are right for your project and confirm their value proposition for your business.

Why Outsource IT Services? 

Now that you know about the type of engagement models, now is the time to understand what benefits a company can reap if they decide to be a software outsourcing company. There are myriad benefits of outsourcing to third-party providers that are offered to companies with IT managed services or software outsourcing service providers.

  • Access to More Talent

A key benefit of IT operations outsourcing is that there are no restrictions on the workforce, there are many people who can be accessed through internal, external and close hiring models. Information technology outsourcing allows companies to integrate external expertise with their internal resources. Outsourcing provides access to developers who possess world-class technical capabilities and skills.

  • Consistent Results

Outsourcing companies have already brought success to many companies and therefore have the competence and experience to deliver perfect business results.

  • Fast and Scalable Resources

Access to the right set of resources improves the hiring process and offers convenience and flexibility to scale resources up and down as needed.

  • Innovation in the Center

With creativity and innovation taking center stage in every IT outsourcing activity, they enable companies to bring new things to market.

How Can You Calculate the Cost of IT Outsourcing Services?

Once you’ve selected your provider, you can determine the cost of outsourced IT. The most fundamental method for determining the costs of IT outsourcing is called differential cost analysis.

The following four steps clearly demonstrate how outsourcing affects business costs:

IT Outsourcing Services

Step 1: Be Specific About the IT Functions You Need to Outsource

The most important step is to identify the quality and quantity of the tasks you plan to outsource. This will help you compare what you can do with the in-house team and what the outsourced partner can provide.

Step 2: Determine Avoidable Internal Costs

You can identify costs you could avoid by outsourcing by listing direct costs and eliminating variables you no longer need to pay for.

Step 3: Calculate Total Outsourcing Costs

The cost of outsourcing can comprise the cost of contact management, the cost of transition minus the revenue from sales of unnecessary equipment, supplies and furniture.

Step 4: Measure the Difference

By calculating the costs, the distinction between the cost saved and the costs incurred by outsourcing, you can identify whether it is beneficial to outsource or not.

Time to Conclude

IT outsourcing services will continue to increase at a significant rate. The continued strong growth in both the breadth and depth of IT outsourcing requires that this management practice be more than a passing fad and that, under the right circumstances, IT outsourcing can deliver the advantages noted by its advocates. We hope you find this blog on IT outsourcing useful and help you outsource successfully.

An experienced and trusted IT outsourcing services partner can help you propel your business forward. Quytech has been providing our clients with the proficient IT outsourcing they need for day-to-day IT tasks and long-term strategic accomplishments.

After learning about IT outsourcing services, if you are looking for an offshore software development company, no matter if you are a start-up, SME or large enterprise, we can point you in the right direction.

If you’re looking for a partner who knows how to make outsourcing grow your business, we’re ready to help. Get in touch with our experts to find out what values we can bring to you and your company.

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