Different types of outsourcing: Which one to choose?

See updated information in Outsourcing services 2021.


  • What is outsourcing?
  • Why do you need it?
  • Types of IT outsourcing 
  • Outsourcing vs outstaffing
  • How to find the best IT vendor?

Outsourcing services have become a source of expertise inevitable for growing a business — especially if you’re starting from scratch. Whether you have limited in-house resources or need an expert opinion on your product, there’s help. Outsourcing software development is a considerable investment, though. So you need to make sure you do it right. Keep reading to learn more about key types of IT outsourcing that can bring value to your project.

What is outsourcing?

Outsourcing is the business practice of hiring a party outside a company to perform services or create goods that traditionally were performed in-house by the company’s own employees and staff. This is often done to reduce costs, access specialized skills, or free up internal resources for other activities.

The peculiarity of IT outsourcing lies in its focus on technology-related services and tasks. According to Deloitte surveys, this type of outsourcing is among the most popular ones, which is due to the rapid pace of technological change, the specialized skills required, and often the global nature of the IT workforce. You can outsource a variety of IT services, for example:

  • Software development
  • Web development and maintenance
  • Technical support and helpdesk
  • Cloud services management
  • Cybersecurity services
  • Data analytics
  • Network management
  • Database management
  • Quality assurance
  • IT infrastructure management

Why do you need it?

Outsourcing has lots of benefits that can create a competitive advantage for your business. Check out the following questions – if you answer “yes” to at least one of them, it might be the right time to consider outsourcing for your project:

  • You need to minimize operating costs.
  • You can’t find a particular expert locally, so you consider an international labor market to hire The One.
  • You want to avoid risks and expenditures connected with hiring new people.
  • Your team has too many time-consuming tasks which they can’t fit into their current schedule.
  • There’s a lack of specific expertise inside your organization.
  • You have capacity issues — little space for accommodating new in-house specialists.

Almost every type of organization can win by delegating its IT services to third parties. You can be a small Israeli startup with little budget; you can be a large US-based enterprise that values quality the most; you can work in healthcare, education, or manufacturing; you might need an idea analysis, the development, or the maintenance of the existing app

Mention, though, that there are at least five outsourcing models, and while some of them will be the best match for your project, others might not be the best fit. Let’s figure out, which type of IT outsourcing is your soulmate. 

Types of outsourcing

outsourcing services

Your best-fitting outsourcing models will pretty much depend on your business needs, budget, resources, and the specificity of your project. Check out the main types of IT outsourcing to figure out which one fits you the best. To facilitate this process, we provided some examples of projects that would benefit the most from one or another outsourcing model.

Professional outsourcing

Case: Your company is working on the development of a mobile app, but there’s a lack of iOS developers. So, you’ll hire professional engineers to fill the gap for you.

This is what most people mean when they talk about outsourced processes. Any type of service in a specific professional domain that you’re bringing into your project is a subject to professional outsourcing. It could be an accounting firm, a dedicated development team, or a UX designer.

The biggest perk of professional outsourcing is that you only pay for a service provided. No recruitment expenses, no legal and training costs. In most cases, you also won’t pay for the equipment. So you can get the world-class expertise for a good price, no matter where your company is physically located.

Examples of professional outsourcing platforms: Upwork, Remote Work Hub, MWDN.

Manufacturing outsourcing

Case: You want to sell robots in the U.S., but the physical details that you need to assemble a robot are too expensive, so you choose to outsource manufacturing from China.

In fact, the model of manufacturer outsourcing is known to everyone who’s ever purchased an iPhone. Whenever you buy a new model, you see the box read “designed in California.” This means the wireframing and product design for your iPhone has been done in California — not the manufacturing part. The actual creation of the components of an iPhone is usually done in different locations across the world. For instance, Camera is created in Japan, accelerometer — in China, South Korea, and Japan, while the countries assemblers are Malaysia, Thailand, and China.

Manufacturing outsourcing models help businesses based in the Western world save lots of money and get high-quality production from offshore destinations — mostly, Asia.

Examples of manufacturing outsourcing providers: Arena, Lennox, Align Technologies.

Operational outsourcing

Case: You have a small bakery store and want to start delivering your products locally. It doesn’t make much sense to hire a delivery guy just yet, so you decide to cooperate with a local service instead.

This is one of those outsourcing models you probably never consider to be outsourcing. Some call it a partnership, the others — hiring. In fact, almost every manufacturing business deals with operational outsourcing in terms of repairing operations, equipment maintenance, delivery, and more.

There are different forms of operational outsourcing such as full, targeted, and temporary assistance. Full and temporary models are based on the contract period. Targeted outsourcing means you hire a third-party service that works alongside your in-house team.

Project-based outsourcing

Case: You decide to publish a book. This is your first project, so you have no idea whether you’ll need to do the same work in a long-term perspective. Therefore, you hire a professional illustrator for the project that is limited in time.

Whether your company is focused on information technology or automobile production, a project-based outsourcing model can be something you integrate into a business strategy. The benefits are endless:

  • You save money by limiting the amount of time needed for project completion.
  • You get expert help from the outside if you can’t get it from the inside.
  • You establish a network of professional connections that you can use for your projects in the future.

Whatever the type, outsourcing includes an agreement between a business and a hired team/person or a business and an outsource provider. The latter is a clever option if you need a dedicated team to work on your project — so you’ll need a professional agency handling the recruitment process.

Outsourcing vs outstaffing

IT outsourcing models and IT outstaffing aka staff augmentation are two different approaches to utilizing external resources for information technology needs, and each comes with its own set of core difficulties.

Difficulties in IT outsourcing

  1. Loss of control. When a company outsources IT tasks, it hands over control of that aspect of its business to an external vendor, which can lead to issues with quality.
  2. Communication challenges. Different time zones, language barriers, and cultural differences can complicate communication between the company and the outsourcing provider.
  3. Dependence on suppliers. Over-reliance on an external provider can become a risk, especially if the supplier faces financial instability or business strategy changes.
  4. Security risks. Outsourcing IT functions can increase risks related to data security and intellectual property, especially if sensitive information is handled by a third party.

Difficulties in IT outstaffing

  1. Management overhead. In outstaffing, the external staff technically work for another employer but are managed day-to-day by the hiring company. This dual management structure can create complexities in supervision and accountability.
  2. Employee turnover. There can be higher turnover rates among outstaffed employees, which can disrupt ongoing projects and lead to a loss of accumulated knowledge.
  3. Legal and compliance issues. Navigating employment laws and regulations can be more complicated with outstaffed employees, mainly when they are located in different countries with varying legal frameworks.

However, any of these issues can be easily tackled if you choose the right strategic partner. How exactly do you do that?

How to find the best IT vendor?

Remember, the “best” vendor is not always the biggest or cheapest but the one that aligns closely with your specific needs and business values. Here is a quick how-to guide that will keep you on the safe side.

Step 1. Define your requirements. By clearly outlining what you need (scope of work, technical skills required, timeline, budget), you will easily choose between all the outsourcing models.

Step 2. Check out a portfolio. It’s one of the most powerful testaments of quality and showcases all types of projects the company can handle.

Step 3. Look up the best offshore outsourcing destinations. China and India used to be the leaders in price and accessibility. Today, Central and Eastern Europe are winning over — so you might want to check out countries such as Poland, Ukraine, and Romania.

Step 4. Make sure you get to work in an environment that knows no cultural barriers — no matter where your outsourced team is located.

Let’s get your project going! Contact our managers to find out more about MWDN expertise and ways in which we can boost your business productivity. 

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