outsourcing model – onshore, offshore, nearshore

Attracting the best minds in software and app development to build an in-house team is a worthwhile move, but only if you have the money needed to make this move. Otherwise, outsourcing is the better option. Today, different outsourcing models are available, along with numerous options. The sheer number of these options is enough to confuse anyone. This write-up aims to quell this confusion to make it easier for you to decide on the right model.

Winning the attention of the best minds in the field of software and app development to build an in-house is an excellent idea. Then again, it works only if you have enough in your business bank account. Outsourcing is a much better alternative if you don’t have that kind of money to spare.

Now, the sphere of outsourcing is laden with numerous options. The sheer number of these options is enough to confuse anyone. A few third-party service providers work on a turnkey basis, while others can offer to expand the internal team of your business with their specialists. There are also a few firms that will give you the services of a project manager that others won’t.

This write-up will attempt to explain to you the different types of outsourcing models you can adhere to when you hire a top rated IT services company. You will also learn how to select the right model for your project.

The two types

Experts segregate outsourcing types into two categories. These include,

  • Location-based
  • Relationship-based

This topic will prioritize location-based outsourcing wherein the most important consideration is the distance between your company and the IT services company you choose to work with.

Location-based outsourcing

So, what does location-based outsourcing include?

1. Onshore development

The term “onshore development” fundamentally refers to an outsourced team that resides in your own nation. Your third-party service providers may have their office in another region, state, or city. For instance, if you can’t pinpoint a company that delivers an attractive price-quality ratio in Philadelphia, PA, you can try another company in India. It’s quite a convenient option as you’ll be working with a team from your home country. By opting to work with such IT solutions and services company, you won’t have to worry about language problems, time zone differences, or cultural issues. Then again, residents of countries like Canada, USA and Australia may have to put up with extremely high onshore development expenses. You may have to pay somewhere around $150/hour. It means complex projects having long working hours will result in a massive bill. Even a few established companies with handsome annual turnovers will think twice before resorting to onshore development due to such high prices, let alone startup firms.

2. Offshore development

Offshore development is the exact opposite of onshore development. In this process, you’ll be working with an IT solutions and services company based in another country. In most instances, the distance between the client’s country and the service provider’s nation will be significantly high. For instance, if you reside in Philadelphia PA, you can hire developers based in Kyiv, Ukraine, or Delhi, India. While this model makes outsourcing a much more affordable venture, maintaining it can be challenging due to linguistic barriers and time zone differences. Of course, the presence of an experienced project manager will save your company the trouble associated with these drawbacks. The best project managers will always come up with an appropriate communication plan to ensure your business remains in touch with the third-party service provider using platforms you’re comfortable with using, such as video conferencing systems or emails. The outsourcing agencies situated in these countries hire people with proficiency not only in software and app development but also in the English language.

3. Nearshore development

The third outsourcing model is the nearshore development procedure where you’ll be delegating your project to the providers of IT solutions services based in neighbouring nations. For example, if you’re a resident of Germany, and if you choose to work with a service provider in Polar, you utilize the nearshore development model of outsourcing. The time difference between neighbouring countries doesn’t exceed more than one to three hours. When compared to onshore development, nearshore development will be much more affordable. However, it won’t be as pocket-friendly as offshore development. In Germany, for instance, software development agencies charge somewhere between $80 and $100/hour, while in Belarus or Ukraine, the price will be as low as $37-$50/hour.

Relationship-based outsourcing

Relationship-based outsourcing models are of three types, just like location-based outsourcing. These include,

  • Staff augmentation
  • Managed team model
  • Project-based model

If you continue reading, you’ll learn a bit more about each.

1. Staff augmentation model

In this model, your company will be able to expand the in-house staff base temporarily by outsourcing your requirements to the providers of IT solutions services. You will be paying this third-party agency at eight working hours per day per specialist multiplied by the hourly rate.

2. Managed team model

In this system, you, the client, will hire dedicated developers to handle a specific work scope. The outsourced team of your choice won’t work directly with the in-house team of your company but will report to your project manager, CTO, or you. The payment procedure will be the same as the staff augmentation model. You’ll be paying for eight working hours per day multiplied by the hourly rate.

3. Project-based model

Finally, in this particular model, you will delegate your project fully to an outsourcing agency. Once you hire dedicated developers, they will handle everything associated with the project, from the planning phase to the release date. In this model, you can pick one of two types of payment methods. The first one incorporates the number of hours needed to finish the project multiplied by the hourly rate. In the second one, you have to pay the value that equals the number of hours necessary to finish the scope multiplied by the hourly rate.

How to choose?

There’s no need for you to depend on just one of these outsourcing models, even if you’re going to work with one service provider. The best IT agencies offer some form of flexibility regarding selecting the model of collaboration. You may even get a hybrid pricing model. For instance, you can decide on developing a T&M contract, but only with a monthly cap of hours.

select best IT outsourcing partner

The budget affixed for your project will be the primary determiner of your choice of the outsourcing model. Then again, the budget isn’t the only factor. Several others will influence your decision, including the following.

  • The project scope.
  • The level of technicality associated with the project.
  • The estimated project duration.
  • The management methodology of your choice.
  • Whether the team needs scaling during the development process or not.

While coming up with a contract with an outsourcing agency, you must take all the aspects mentioned here into account. If possible, you should seek the support of your potential tech partner when making a decision.

Final words

Outsourcing with the right company will help you reduce your expenses and increase efficiency. Every solution created by the best outsourcing agency will have a team of industry specialists backing it. These experts will aid you in extending your abilities so that you can get the results you seek. When it comes to increasing revenue, you need to utilize the accounting team to its full potential. It’s the only way you can grow and increase profits. Apart from providing valuable services, they’ll use their skills for your business’s internal requirements.

The most reputable and recognized outsourcing firms provide structured solutions including training and support for the people in charge of specific departments of your business. The remote team that you choose to work with can also provide training to the new people you hire. By offering this facility, your outsourcing partner will help you save valuable time that you’d have to spend on getting the new people up to speed. It’s all about the ability to extend the services of your company. In doing so, your business will succeed in the competitive landscape of business. If you manage to do it appropriately, outsourcing has the power to serve innovation and sustainable business success to you on a silver platter.

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Jayanti Katariya

At the core, Moon Technolabs is driven by the vision, sharpness and flourished under the leadership quality led by none other than the founder & CEO i.e, Mr. Jayanti Katariya. His simple-approach & never-give-up attitude is the virtue or rather aptitude that the entire team tries to grasp and follow. From client relations to business development, from industry updates to floor walking, he does everything in his power to provide support to the team.

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