3 Types of IT Outsourcing Models and How to Choose Between

    Outsourcing as a business has stuck around for quite a long time. It is a fast-growing industry sector and a valued solution for several companies, as both start-ups and large enterprises are reaping the advantages of outsourcing their businesses.

    This approach helps companies to minimize costs and enhance their competitive advantage. Also, by outsourcing software development, it becomes possible for companies to bridge existing expertise gaps and accelerate projects on a larger scale.

    Outsourcing now provides so many options. Some outsourcing companies run based on “turn-key”, while some offer to expand your in-house team with their programmers; Some will provide you with a project manager, while others will not. 

    Choosing the appropriate break/fix model is essential for success. This article aims to highlight types of IT outsourcing models and how to choose between them.

    Types of IT Outsourcing Models

    Types of outsourcing models can be divided into two different categories which are:

    • Location-based (how far away from you the team resides).
    • Relationship-based (how you are going to work with them).

    Types of IT Outsourcing Models (Based On Location)


    3 Types of IT Outsourcing Models and How to Choose Between

    Onshore outsourcing means the team is located in the same country, while your developers may be from another city, state, or region. This option is compelling since you will work with a team in your country of origin. Typically, there will be no language issues, major time zones, or cultural differences.

    However, the disadvantage of this approach is that development services offered in your country can be pretty expensive.

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    Nearshore outsourcing explains the delegation of software development to neighboring countries. The time difference between you and your developers does not usually exceed 1 to 3 hours. For example, Singapore companies choose technology partners in Vietnam, or a company in Germany chooses technology partners in Poland.

    Nearshoring is often considered a perfect balance between quality, profitability, and physical closeness to your outsourcing partner. Moreover, it is more cost-effective compared to onshore development.


    Offshoring is the process of outsourcing IT services to a company that is entirely in another country. There is often quite a distance, and interestingly, hiring offshore developers is typically the most cost-effective option.

    There are various advantages of offshore development, but it can be more challenging to sustain due to language constraints and the differences in time zone.

    Nevertheless, if you have an experienced and competent project manager, you are most likely not going to have any of those drawbacks because an experienced project manager will come up with a communication plan to keep in touch when and where it is convenient for you (such as Skype, emails).

    Types of IT Outsourcing Models (Based On Relationship)

    Staff Augmentation Model

    The staff augmentation model, also known as an extended team, allows you to include professional developers in your internal team. This will help maximize the efficiency and competencies of your in-house development team.

    These outsourced professionals become a part of your internal team and then collaborate with your employees. By employing this outsourcing model, you will be able to maintain complete control over the project.

    The staff augmentation model may be the appropriate choice for you when you lack advanced expertise or when your development process is too slow. It works best for short-term services, like when your in-house specialists are on an extended vacation or when there is an increased demand for developers.

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    It is still appropriate for long projects, as you will be able to fill a skill gap, minimize costs, and save time when hiring internal employees takes too long. However, the staff augmentation model is not appropriate for projects that will take more than two years to complete or if you require skill on an ongoing basis. The risk is that your augmented staff may turn over within such a period.

    Pros of Staff Augmentation Model

    • It is cost-effective.
    • Quick access to developers.
    • Full control over the project development.
    • Best talent pool. That is access to top talents.
    • Flexibility.


    • Communication gaps.
    • Collaboration difficulties.

    Project-Based Model

    This model is called the software outsourcing model. In this model, the software outsourcing partner takes charge of the overall process concerning the specifications highlighted at the beginning of the project. The project-based model is more conventional and practical than the remaining outsourcing models.

    When companies have their projects without core expertise, a software outsourcing provider may be hired who will be able to entirely handle the software development process within the stipulated time frame. In this model, companies sustain little control but can be regularly kept abreast of project progress.

    This model is best for companies that have limited software development expertise and also companies that have a vivid idea of the product they want to create.

    Pros of Project-Based Model

    • Time-efficient.
    • Quick recruitment process.
    • Total accountability lies on the project manager
    • No micro-management.
    • Specific time-frames and results.


    • Less control over the project.
    • Inflexibility.

    Dedicated Team Model

    In this IT outsourcing model, the supplier will give you a dedicated team of employees to work on your project. The team will be made up of not only software developers but also project managers, testers, UI/UX designers, and analysts. You share the responsibility to guide the project with the outsourcing partner.

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    In this model, dedicated staff is exclusively assigned to your project, and the outsourced project manager is accountable for the team. Note that these developers are not part of your organization.

    This model enables you and the team to agree on accountabilities, results, timelines, and scope. Additionally, it is essential to communicate effectively in order to steer the direction of the project. Furthermore, it is in the best interest of the outsourcing company to manually select a group of people who can work excellently together and achieve a successful outcome.


    • The minimal risk involved.
    • Quick development process.
    • Effective communication.
    • More flexibility.
    • Transparency is high.
    • Total control.


    • A lengthy recruitment process.
    • Added responsibility.

    How to Select Between Outsourcing Models

    As a business owner, you must analyze all aspects of the project with the outsourcer. The following are some factors that can help you determine the most suitable model for your project:

    • The estimated timeframe for the project.
    • Your preferred project management method.
    • The needed amount of flexibility.
    • The degree of technological innovation in the project.
    • Abilities and competencies of the internal team.
    • Whether the team will need to be augmented for the development process.


    3 Types of IT Outsourcing Models and How to Choose Between

    While drafting a contract with an outsourcing company, bear all the points mentioned above in mind. Ideally, you should get help from your potential technical partner in your decision-making process. Describe your project, needs, budgetary constraints, as well as time, and be sure to state whether you have an internal team or not, including the flexibility level you expect. In all, always choose the best price-to-quality ratio.

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