3 Different Types of Outsourcing you Need to know!

3 Different Types of IT outsourcing

Table of Contents

The remote work trend is at an all-time high. More and more companies are outsourcing software development to ensure the sustainable growth of their business.

Indeed, as technology is evolving quickly, the software outsourcing trend is going to flourish in the near future. But the question is which type of IT outsourcing model will suit your business or project requirements?

Let’s get started!

Every entrepreneur dreams of becoming successful as Richard Branson, Steve Jobs, Larry Page, and Warren Buffet. However, to reach heights in the business, you need to make more strategic and smart decisions. And software outsourcing is one such decision.

For a business to prosper, you need an efficient workforce. Two decades earlier, scaling up an IT team wasn’t easy. But in this technology-driven era, entrepreneurs can quickly and easily hire developers while neglecting geographical boundaries.

Let’s consider that you own a business and have an idea to solve a challenge through a software solution. To act on this idea, you need a team of dedicated developers. But it’s not an easy task to onboard developers locally without spending a good amount.

That’s where most of the companies step back and drop the idea.

What is IT Outsourcing?

What if, you can hire developers with hands-on experience and reduce the development cost up to 60%? Will you act on your vision?

Most of the passionate entrepreneurs will say “Yes”!

Not because of just reduced cost, but the value behind it. And this value lies in the idea of working with a highly experienced, dedicated, and reliable remote development team.

Are you planning to outsource your business functions like software, website, or mobile app development?

Of course, you are on the right track. After all, you only have to make sure that you have in-depth knowledge about different types of outsourcing, its benefits, and the best policies to implement this strategy for your business.

Before we talk about the different types of IT outsourcing models, let’s first understand its concept!

The Concept of IT Outsourcing

IT Outsourcing can be defined as the strategic utilization of external IT resources. These external resources or remote developers are professionals living in different geographical locations, handling tasks, and delivering functions as per the requirement that is otherwise managed by internal resources.

Application or software development, web development, technical support, application support, networking, data center management, data storage, security, etc, are a few examples of outsourcing services.

The concept is quite simple. In short, outsourcing software development in a country where the cost of living is less is a good opportunity for a business. You can consider the opportunity in terms of the following:

  • Highly qualified professionals at lower costs.
  • You can focus better on your core business activities.
  • Hiring becomes more flexible.
  • Easy to scale up and down quickly.
  • Improved efficiency of the in-house team and a lot more.

Want to learn more about outsourcing? Here are some outsourcing facts and statistics you should know as an entrepreneur.

Why Outsource?

Wondering why an enterprise chooses to outsource, right? Though there are countless reasons why companies work with dedicated offshore developers, the most common ones are:

  • For boosting brand visibility
  • Access to global resources
  • Controlling operational cost
  • To increase efficiency for time-consuming tasks
  • To distribute risks
  • Reducing service delivery time
  • Accommodate peak loads

However, when you hire a dedicated development team and handover tasks to them, they maximize flexibility. This type of outsourcing offers a great opportunity to obtain digital transformation and growth while reducing risks and increasing profit.

The Different Types of Outsourcing (Infographic)

Outsourcing can be broadly classified into three major categories based on location. Let’s discuss the three outsourcing types and which one should you choose!

Types of Offshore Development
Source – Google Images

Onshore Outsourcing

Handing over tasks to a company located in the home country or nearby region is onshore or local outsourcing. Let’s discuss a few benefits of this type of IT outsourcing model.

Local Companies

  • Speak the same language.
  • Are easily accessible.
  • Easy to control.
  • Live in the same timezone.

Form the above benefits, onshore outsourcing looks very promising and reassuring.

But before you start jotting down the top outsourcing companies in your region, you have to take care of one thing so that you don’t get disappointed.

That is the cost they will charge from you. Although there are no cultural barriers in onshore development, the operational cost is very high as compared to other types of outsourcing models.

Countries like the USA has a very high cost of living that corresponds to high hourly rates for developers ($100-$250 on an average of approximately).

It is entirely up to you if you are willing to take the risk and choose this outsourcing type. But there is no guarantee that high rates will ensure high-quality results.

Recommended Read – Cost-Benefit Analysis of Outsourcing: India vs USA

Nearshore Outsourcing

Nearshore software outsourcing is getting the work done by companies or professionals that are located in countries having similar time zones or minimal time differences.

In the nearshore outsourcing type, the hourly rates of the developers may vary from $25-$50.

This adds up the major cost savings making everything a breeze. Although, there should be some similarities related to time, culture, and people. Many United States companies outsource work to Canada and Mexico.

Pros of Nearshore Outsourcing
  • Geographical proximity
  • Less or no timezone difference
  • Cost-saving
  • High efficiency
  • Cultural and language similarities

Nearshore outsourcing is a good choice for projects that need innovative thinking and experimental tasks. Your product or service will not only be fully developed but fully supported by the team.

Retain good control & high responsiveness when you choose a nearshore company that will thoroughly understand your market.

Everything is translated into better quality because the workers don’t have to adjust their schedules to other countries’ working hours.

Offshore Outsourcing

Among all the other outsourcing types, offshore development is a strategic practice where the company hires a third party or an individual from another country to perform certain tasks for your business, usually to leverage cost benefits.

India is the first country that comes to mind when you think of hiring offshore developers. Low price is the major factor. Hourly rates range from $10-$20. Surprised? Don’t be, because that’s true.

Why do Most Enterprises Consider Outsourcing in India or Offshore Outsourcing?

1. Less Cost: The best thing about offshore outsourcing is that currency exchange works in your favor. It also saves the cost you would have invested in renting large office premises or extending the already existing office.

Moreover, in this type of outsourcing, you only have to pay when the task is complete and not otherwise.

2. Professionals Having the Right Skills: Your business idea may be excellent but you may not know how to perform the task. In this case, outsourcing in India becomes a huge advantage. It’s because India has a large talent pool of professionals that are ready to work at low wages.

3. Round The Clock Customer Support: Offshore outsourcing gives you the opportunity to connect with your customers across the globe as you provide them 24/7 assistance.

4. Scale Your Business: Offshore outsourcing can help boosts your business as the tasks are performed by experienced and highly skilled professionals. Having more time in hand, the business owner can then focus on other business objectives.

5. Risk Mitigation: When you rely on technology, it may become outdated too quickly. And this happens quite often. The offshore development companies keep you ahead of the curve as they stay up to date with the ever-evolving trends in the industry & technology.

Which Outsourcing Type Should You Choose And Why?

Your preference completely depends on the complexity and depth of the occurrence. Offshore Outsourcing is A Win-Win Situation!

Collaborating with an offshore development center levels the global playing field and you should consider it because of the following reasons:

1. Get The Best that the World Has to Offer

While outsourcing, there is nothing that can stop your search for expert professionals overseas. When you can hire dedicated developers no matter where they are, then why settle for less?

On top of that, the option to choose the best strategy among different types of outsourcing makes the process more flexible.

2. Get More Services at Reasonable Prices

The cost of living differs from country to country. Also, outsourcing gives you the opportunity to hire remote teams from the country where your budget fits in.

3. Span Time Zone

Every business has some deadlines to keep. In such a case, outsourcing becomes a great decision. Also, while you & your local team are busy sleeping, your hired remote team can complete the urgent tasks.

Recommended ReadOffshore Development: The Bigger Picture

Depending on the service you are planning to outsource, your offshore development partner can enhance your operational efficiency, streamline communication, and make it simpler for your existing team to collaborate.

If you genuinely want your business to outshine and stay ahead in the competition, focus on core competencies, and utilize the latest technologies.

Just pick the best strategy among different types of outsourcing for your business, hire a remote development team, and achieve all that you want to and more!

Want to set up your offshore development center in India? Contact Us.


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