What exactly prompts companies to hire people that work for third party organizations? Why do companies outsource? Here are a few common reasons that can help explain the trend:

Cost reduction. More often than not, outsourcing means saving money. This is often due to lower labor costs, cheaper infrastructure, or an advantageous tax system in the outsourcing location.

Access to skills that are unavailable locally. Resources that are scarce at home can sometimes be found in abundance elsewhere, meaning you can easily reach them through outsourcing.

Better use of internal resources. By delegating some of your business processes to a third party, you’ll give your in-house employees the opportunity to focus on more meaningful tasks.

Accelerated business processes. When you stop wasting time on mundane, time-consuming processes, you’ll be able to move forward with your core offering a lot faster.

The Benefits of Outsourcing

Reduced expenses. You get to enjoy significant cost savings when you outsource to a country with lower production costs: a lower cost of living for employees, meaning lower salaries, as well as lower infrastructure and operational costs.

Access to a global talent pool. Outsourcing allows you to reach professionals that may be in short supply or unavailable locally.

Significant time savings. When you partner with an outsourcing vendor, you don’t have to advertise for, interview, select, and train new in-house employees, all of which can be very time-consuming.

Ability to upscale fast. You’ll be able to work with new clients and take on new projects without having to spend time on the processes described above.

Uninterrupted workflow. Your business will function round the clock thanks to the time difference between the in-house team and the outsourcing vendor’s team.

The Disadvantages of Outsourcing

Time difference. This can be a curse as much as a blessing, and in the worst cases it can significantly hamper the communication flow between you and your outsourcing partner.

Language barriers can result in miscommunication and wasted effort unless you and the vendor you partner with have at least one language in common.

Different work habits, which can be the result of different cultural environments, can interrupt your established workflow and will definitely need getting used to.

Long distances between you and the outsourcing vendor can turn business trips into an expensive and tiresome experience.

Integrisoft has invested its expertise and efforts in identifying the pain areas for such engagements and has evolved with mutually beneficial “Value Added Transparency” models.

These engagement models not only ensure that transparency is maintained throughout the engagement but also that this transparency is utilized for overall value addition to the engagement by learning lessons and incorporating these lessons at every level of transparency.

Integrisoft has realized that the key to success is not hiding problems from the clients but looking at every problem or a deemed problem openly, discussing it with the client and treating it as an opportunity to improve the efficiency of engagement with this learning.

There are three main outsourcing model types commonly used in projects. Carefully review their features to understand which model best suits your project.

1. Dedicated Team

Dedicated development has different other names such as outstaffing or staff augmentation, but the principle of these models is pretty the same: a vendor provides an additional workforce to the client’s project on demand. This can include both tech experts of different levels and non-tech specialists.

In such a scheme, you will be able to:

Build a team according to your specific requirements.You can hire a strong team of Senior developers or choose Middle / Junior developers to fulfill your project team. The model takes all your preferences into account.

Use the benefit of long-term cooperation.The specialists provided by the vendor become closely integrated into your project, that’s why they acquire deep expertise in your company’s domain. That means they know what they do and save you time and money on project handling.

Low cost of talent acquisition. If you hire developers from the market, you need to run a recruiting campaign, lose time on testing candidates, their adaptation, and handle the risks of the recruitment. With a dedicated application development model, you get the necessary experts easily and quickly.

2. Fixed Price

Among the other types of outsourcing, the fixed price is primarily used when the client has some budget restriction. It helps to define the project budget once and for all and eliminate the hidden costs. The first step to implement this model is to develop business requirements and estimating the project. After this stage, the vendor provides you the price that won’t be changed if only you don’t modify the list of the features. If you are satisfied with the price, the development team provided by the outsourcing company starts working on your project’s implementation.

As you see, this model is advisable to apply only if you have stable requirements. If not, you would better consider other options.

Dos:

• Clear project scope
• The funding risks are minimized
• You don’t need to hire professionals and manage resources

Donts:

• Flexibility is excluded

If you still don’t see any reasonable option for you, look at the last model.

3. Time & Material Model (Pay-As-You-Go)

This model envisages the best flexibility for your project. It is applicable for the most unstable projects where the requirements are changed on the go. The team is composed in the way that allows to add or exclude members during the project development. When it’s necessary to have more software developers at the project you can add team members. If, on the contrary, it turns out some members are redundant, you can exclude them or replace with the specialists of the other sphere like analysts, managers, etc.

In this case, your project budget will consist of only the resources you actually spend on its implementation. If you need 5 developers, you pay them an hourly rate and keep going, if you needed 5 developers before but now you need less, you can scale the team and don’t pay for the downtime. The same concerns the other resources required for the project – you pay only for the time and materials spent.

In this case, your project budget will consist of only the resources you actually spend on its implementation. If you need 5 developers, you pay them an hourly rate and keep going, if you needed 5 developers before but now you need less, you can scale the team and don’t pay for the downtime. The same concerns the other resources required for the project – you pay onlyd for the time and materials spent.

In the whole, we can say that among other types of outsourcing, this one is the most cost-efficient though it doesn’t have a fully defined scope of work and can’t guarantee the budget will be the same if you change the requirements.

Dos:

• Outstanding flexibility
• Cost efficiency

Donts:

• The budget has strict limitations

Summary: How to Choose Types of Outsourcing

To sum up, in this post we described how to choose engagement model for outsourcing partnerships. Usually, there are three main types of outsourcing services models: time & material, fixed-price, dedicated team. To make the right choice, one may know the peculiarities they envisage and the specifics of the project they want to outsource.
In short:

If you want to find offshore developers for your project, choose dedicated development model.
If you don’t plan to scale up the project’s budget on the go, try fixed price scheme.
If you need a total flexibility and don’t want to pay for the downtime, time & material is the best option for you.
Consider these tips while making a decision to save your time, money, and get the best result out of a cooperation. Good luck!

Outsourcing is an umbrella term that encompasses a few more specific definitions. Offshoring, for one, often comes up as a synonym for outsourcing, even though the two terms are not exactly interchangeable. So what is offshoring?

Offshoring (offshore outsourcing) means outsourcing IT services to a distant location to benefit from lower labor costs, more favorable economic conditions, time zones, or a larger talent pool. Time differences we are talking about here are at least 5 or 6 hours.

Extreme time differences can definitely come in handy for companies that need to provide uninterrupted tech or customer support, and for those who run constant updates and maintenance work.

Example: a US business outsources web development to an Indian company.

Nearshoring (nearshore outsourcing) is very similar to offshoring, albeit with one important difference: this is that nearshoring means outsourcing software development or other IT functions to a location that is much closer to your home — usually in the same time zone or one within a couple of hours of it.

Nearshoring enables much smoother communication compared to offshoring. What’s more, countries that are located close to each other share cultural crossovers that can simplify communication.

Example: a startup based in Norway hires an Android developer from Ukraine for nearshore software development services.

Onshoring (homeshoring) refers to delegating a number of business processes to a different location within national borders. Usually the chosen location has lower labor and operational costs.

While cost savings are the main reason to onshore, skill shortages can also drive businesses to look for talent in alternative locations.

Occasionally, the term “homeshoring” is also used to describe a situation in which employees work from home.

Example: a company based in Washington engages IT security experts from Texas.

Multisourcing is a term that describes outsourcing business processes to multiple vendors, thus diversifying the risk in vendor operations.

Example: the main development capacities of a German software development firm are located in Munich. Occasionally, the company works on projects that also require design services, and when this happens, they contract a small design agency in Hamburg. Later, the company lands a major long-term project that requires skills the Munich team doesn’t have, which is when they partner with a development company in Ukraine to help them complete it. A few years later, the company releases its own product which they want to market in China, and for this purpose they engage a Chinese marketing agency with a much better knowledge of the local market.