5 Types Of IT Outsourcing: There is One for Everyone

IT outsourcing is 4th among all outsourced functions after finance, real estate, and contact center. Such popularity is because there are numerous benefits of delegating business processes to third parties like cost reduction and simple scaling. All of these make many entrepreneurs stick their heads out of the sand and look closer to outsourcing. 

However, stepping on this path requires a profound understanding of the real-world advantages of outsourcing compared to in-house development and a fine contractor for software development. All the secrets are revealed in our article dedicated to outsourcing.

What is IT Outsourcing and Why Is It of Special Relevance Right Now?

Outsourcing is the involvement of external resources to perform certain tasks or business processes that do not belong to a company’s core specialty but are a necessary part of the company’s business processes. Such services can be information technology, HR management, accounting, marketing, advertising, and logistics.

The goal of outsourcing is to save the company time and money, as well as to focus the company on the type of activity that is a priority and the main focus of the company’s expertise.

IT Outsourcing Model

IT Outsourcing Model

What makes outsourcing popular? Due to the impact of global crises such as the COVID-19 epidemic, businesses are forced to look for ways to reduce costs. Particularly effective in this regard is the involvement of an external provider that is 100% focused on a certain function and has the effect of scale for successful service delivery. In 2022, IT outsourcing will hit about $395 billion in revenue.

According to Zippia, IT is the leading industry and business department for outsourcing — 13.6% of the average IT department budget is dedicated to outsourced tasks and about 37% of IT tasks are outsourced. 

Benefits of IT Outsourcing

The survey “Outsourcing trends statistics for 2020 and beyond” introduces the list of compelling reasons why businesses choose cooperation with outsourcing providers. Among them are:

  • Cost-efficiency (59% of respondents)
  • Better focus on core functions (57%)
  • Improvement of work capacity (47%)
  • Higher expertise and quality of services (31%)
  • Compliance with critical business needs (28%)
  • Elimination of talent crisis and labor market issues (28%)
  • Business environment management (17%)
  • Business transformation (17%).

Famous Facts About IT Outsourcing in 2022

  • Business processes are outsourced by 74% of IT companies. (Statista)
  • 93% of businesses are thinking about adopting cloud services or currently do so to improve outsourcing. (Purchasing Strategies)
  • Robotic process automation is being considered or put into practice by 83% of financial businesses. (Purchasing Strategies)
  • Accounting and IT tasks are outsourced in 37% of cases. Digital marketing at 34%, development, and human resources at 28%. (Clutch)
  • The vast majority of companies (78%) feel positive about their outsourcing partners. (Fortunly)

5 Types of IT Outsourcing Services

There are several ways to divide outsourcing IT services into categories. One of the most frequent categorizations is by the type of services provided and the location of the contractor. According to this typology, there are:

  • Project-based outsourcing. A company fully delegates the design, development, testing, and maintenance of the project to a third party.
  • Professional outsourcing. A company delegates only a part of its project. For example, code maintenance or quality assurance.
  • Extended team outstaffing. A company has an in-house IT department but decides to strengthen it with a dedicated remote team.
  • Staff augmentation. A company requires additional help from time to time and hires new specialists only for “high seasons”.
  • Tech recruiting outsourcing. A company describes the open position to the contractor and the contractor starts to search for an IT talent.

IT Outsourcing by Service Model

A business model is how a company creates a product, delivers it to a customer, and makes a profit. In IT outsourcing, there are several types of business models:

  1. Front-office outsourcing. It is when your contractor directly communicates with your clients, like in the example of sales or customer support outsourcing. 
  2. Back-office outsourcing. These are services where a contractor doesn’t have to communicate with the client directly, for example, software development. 
  3. Offshore outsourcing. If you hire a company from another part of the world, for example, from the Philippines, India, or Ukraine, if you’re a US-based company, it will be considered offshore outsourcing.
  4. Nearshore outsourcing. If you choose a contractor from a country that has common borders with your country (Canada or Mexico for the USA), that would be nearshore outsourcing. 
  5. Outsourcing doesn’t necessarily mean going abroad. There is also domestic outsourcing – the one where business delegates services to third-party professionals in their native country. 

Popular Business Areas for IT Outsourcing

  • Software development
  • Management
  • Quality assurance
  • Business analysis
  • Database development
  • UI/UX design
  • Sales and marketing
  • Legal processes

The Most Trending Technologies for IT Outsourcing:

According to the Deloitte global survey, in 2020, robotic process automation (RPA) and artificial intelligence (AI) were among the most popular outsourced services. More than 75% of interviewed companies claimed that they actively outsourced RPA services.

  • Robotic process automation
  • Augmented and virtual reality
  • Machine learning
  • Artificial intelligence
  • Natural language processing 
  • Engineering and robotics
  • Blockchain technology

The Most Trending Technologies for IT Outsourcing:

Other IT services commonly outsourced by the companies include:

  • Mobile application development
  • Web Pages development
  • Other software development
  • Technical support of existing software
  • Cybersecurity
  • Research and Development

Some experts believe that IT support/ help desk/ service desk are among the most commonly outsourced IT services. 

How to Contact the Best Provider of IT Outsourcing Services?

There are several signs of an experienced provider of outsourcing services in the market:

All of it is in place with MWDN – a seasoned software development provider with a vast global presence. Around the world and in various industries, we hire the best remote developers and engineers who perform a wide range of services from web development to Research and Development solutions. More than 200 products are already under our belt. The next one might be yours – drop us a line.