The Best IT Outsourcing Models: How Do They Work?

An image showing the main types of IT outsourcing, with an example of a famous IT hub

Software outsourcing has its benefits like cost reduction for software solution, bigger IT talent pool, better business strategy etc

Software outsourcing has its benefits like cost reduction for software solution, bigger IT talent pool, better business strategy etc

Knowing these pros and cons of software outsourcing will help you make a logical decision as to whether your business needs remote software developers or not

Software outsourcing benefits include IT cost reduction, access to global IT talent pool, better software development strategy, etc

Here are the main IT outsourcing models, types and key factors including augmentation, dedicated IT team, ODC, offshoring, nearshoring and more.

CALIFORNIA, LOS ANGELES, UNITED STATES, July 16, 2022 / — The growing list of benefits of IT outsourcing and the global IT skills shortage are leading more and more companies to hire remote software development firms.

All Types of IT outsourcing have one thing in common – working with software development companies or dedicated software developers from the top IT hubs.

The most important factors for IT outsourcing include:
● Access to outsourcing software development services or specific skills that are too expensive or not available in the local market,
● Simplified business processes or software development lifecycles (especially if the customer has limited technical expertise),
● faster software development process,
● A better business strategy,
● Ability to focus on top business goals (when software solutions are not a priority),
● cost reduction,
● Ability to act on an international level.

Benefits of software outsourcing
There are numerous international tech hubs offering a wide range of web and app development services across multiple tech stacks. For example, CodeRiders is an Armenia-based software outsourcing company. Most of our customers hire us for the following services:
● web development and design,
● mobile app development,
● Custom software development services,
● Software development maintenance and support.

cost reduction. In the age of technology, IT services and solutions are an absolute necessity. However, hiring software developers is expensive. Especially in developed countries like USA, Canada, Australia, Eastern Europe, Scandinavia, etc. in developing countries, this leads to lower salaries and operating costs, making affordable, high-quality software services a reality. For example, companies in Armenia can hire dedicated software developers at an hourly rate of $25-$50, which is almost impossible in developed countries.

Shorter software development life cycle (consulting, software development, implementation, maintenance and support)

Opportunity to expand the team and move up the ranks quickly. Software outsourcing companies have well-trained IT teams. They prioritize providing quality software solutions and sufficient resources.

Flexible working hours. Night shifts, overtime or overtime are expensive when a company works with its own software developers. On the other hand, flexibility in software outsourcing is at the highest level. For example, you can hire an IT team from a different time zone.

No additional resources for managing the IT team. If you don’t want to invest extra effort in tech-related matters and you are not a “tech person” yourself, you don’t need to hire an additional employee to lead the software development project.

Types of IT outsourcing

Nearshoring or nearshore IT outsourcing is the process of outsourcing your software development needs to a software company in a nearby country.
As an example, let’s look at one of CodeRiders’ projects. We have worked with a German computer software company, Abramov Software GmbH. They hired some of our software developers to upgrade an existing ecommerce solution with new technologies and make sure it was working properly. This is a typical example of nearshoring.

Offshoring or offshore IT outsourcing is the process of working with software companies from distant countries. Offshoring is impractical for businesses that need real-time communications. On the other hand, if a company works outside of working hours or night shifts, offshoring is beneficial. Aside from affordability, offshore IT companies do not charge additional fees for providing services outside of working hours.
For example, CodeRiders worked with Dwel, an Australia-based lifestyle management software company. Our software developers have designed and implemented bespoke lifestyle management software from the ground up. We performed the entire software development lifecycle, which took a year. It was an ideal option for our client as our software services were extremely affordable compared to the Australian IT market and did not need to be fully involved in the software development lifecycle. Occasional reports and tests were sufficient for the customer.

Onshoring or Homeshoring
Onshore software outsourcing or homesourcing is the practice of outsourcing software services to an external IT team in the same country. Onshoring is widespread in famous IT hubs.

Multisourcing is the process of hiring multiple software vendors from the same or different countries. A typical example of multisourcing is one of our current projects at CodeRiders. Our client hired one of CodeRiders front-end React.js software developers to work on an investment website. However, he is not the only developer in this project. He works and cooperates closely with other fellow developers from Ukraine who worked on the project before its launch.

Outsourcing models for software development
staff augmentation
Augmentation is a software outsourcing model or strategy in which the company evaluates its existing staff and determines additional skill and job requirements. When augmenting staff, a company may hire additional technical resources externally to meet its technical needs on a temporary or permanent basis.

Example: A Namibia based wealth management system hired 2 software developers from CodeRiders to join its in-house team. One of our lead developers had a lead developer role and the second was a full-time developer.

Dedicated software development team
Hiring a dedicated software development team is ideal for clients looking for long-term collaboration without too much involvement in the software development lifecycle. Typically, dedicated software development teams work on long-term and complicated projects and are self-organized and accountable for the quality of their work. To manage and be informed of the progress of your software provider, you can define specific fixed times for daily reports and demonstrations.
Example: A Swiss-based leading CRM portal for business management, Worldsoft Business Suite, hired two software developers from CodeRiders to work on its SaaS project to develop email marketing software.

ODC (Offshore Development Center)
ODC is in the process of locating its full-time software developers and other IT specialists in an international technology hub. The goal is to get into a larger talent pool where the number of IT specialists is much higher while the salary is lower.

Project based software outsourcing
Companies from different industries with a one-time need for software solutions usually opt for the project-based software outsourcing model. Example: An English school based in Hong Kong needed an online school management system and classroom management app. Two senior software developers from CodeRiders worked for them.

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