IT Outsourcing Guide: Types, Benefits, and Management Strategies

Outsourcing can be a life raft for companies drowning in IT workloads.

With a solid 76% of businesses now using it to plug resource constraints, based on the Deloitte Global Outsourcing Survey 2022, the $460-billion outsourced IT market is on its way to growing 10.99% by 2028.

According to Forbes, mass remote work adoption also opened the floodgates of global talent, so it’s easier to find and collaborate with IT experts worldwide.

Should you dive in? In this post, we guide you through everything you need to know about IT outsourcing — what it is, the benefits it can offer your business, and how to choose an outsourcing partner.

What is IT outsourcing?

IT outsourcing means delegating some (or all) of your company’s information technology functions to an external service provider. Outsourcing software development services can be contracted on an ongoing or a per-project basis.

Exactly what IT functions can you outsource? Almost anything. You can hand over entire IT operations or selectively outsource specific tasks such as disaster recovery, network security, quality assurance, or software development.

IT outsourcing service models

There are different development outsourcing service models to choose from depending on your needs.

These models differ in scope and control, but they all allow you to build your dream outsourced development team without the expense and complications of recruitment and training.

• IT staff augmentation – Do you need a specific skill for a few months? Staff augmentation lets you temporarily hire tech talent to integrate into your team. This model is ideal for short-term projects requiring extra resources or specialist skill sets, like developing a new mobile app feature or migrating your data to a new cloud platform.
• Dedicated teams (a.k.a. managed services) – Looking for a longer-term solution? You can hire a dedicated development team of tech experts to build a digital product from the ground up, fill skills gaps, or scale quickly. For ongoing needs, consider managed services. This means hiring a remote team of IT specialists who focus on specific functions like cybersecurity or cloud services.
• Software outsourcing – Got a big project in mind? You can partner with a software outsourcing company to take it from concept to completion. Software outsourcing (sometimes called project-based outsourcing) is often the best fit for projects that require specialized skills and a defined timeframe, like building and launching an IoT app.

Software development outsourcing solutions

You can outsource software development tasks of all kinds, from business-critical processes to one-off development projects. Here are just some of the many different outsourcing development solutions:

• Software testing & QA – Do you want to make sure that your app is bug-free? You can outsource testing to a QA team with experience in a wide range of devices and environments.
  
• Cloud services – Outsourcing lets you access scalable on-demand storage and computing power without buying and maintaining your own infrastructure.
  
• Mobile and web development – Looking to build a website or app? With outsourcing, you can instantly tap a global talent pool of developers proficient in the latest technologies.
  
• Maintenance and support – Outsourcing is a quick way to resolve issues and keep your app or network running smoothly with 24/7 technical assistance.
  
• Blockchain services – Experienced consultants can help you take full advantage of blockchain’s secure and transparent data storage for supply chain management and other trustless applications.
  
• Data science – From collection and cleaning to analysis and modeling, you can outsource data science functions to gain insight from your large data sets.
  
• Infrastructure solutions – Third-party specialists can design, implement, and build a robust and scalable backbone for your IT operations.
  
• Internet of Things (IoT) – Planning to build a mobile app that interacts with IoT devices? You can outsource mission-critical tasks like device firmware and cloud management.
  
• UI/UX design – With outsourcing, you can hire talented designers to build intuitive app interfaces without employing them full-time.
  
• Mobile applications – Building a custom app specifically designed for smartphones and tablets? An external team can handle the entire development lifecycle, from ideation to launch.
   
• MVP development – Outsource MVP development to test your business idea before you commit more resources.
  
• AR development: Are you Looking to create an immersive app experience? Augmented reality experts can seamlessly overlay digital information into the real world to drive user engagement.
  
• IA development – You can hire an information architecture team to take the burden of content inventory, wireframing and prototyping, and time-consuming tasks off your shoulders.
  
• AI development – If you’re planning to use artificial intelligence for data analysis or automation, outsource your project to ML or RPA specialists who can build AI models or software robots to address your goals.

Types of IT outsourcing

Let’s break down the three main types of outsourcing models by location:

Nearshore outsourcing

Nearshoring means outsourcing IT projects to companies in neighboring countries with similar time zones and affordable labor costs. For example, you can nearshore to Brazil and other Latin American countries, if you’re in North America. Next-door IT experts share your office hours and work patterns so they can work seamlessly with your team.

Offshore outsourcing

Looking to maximize your budget? Offshoring means sending your IT functions to a country with significantly lower labor costs. However, time zones and cultural differences can pose communication challenges and complicate project management.

Onshore outsourcing

Sometimes, proximity matters. Onshoring means working with a team within your own country. Keeping your project close to home facilitates face-to-face meetings and may, to some degree, strengthen security compliance. But it is also the most expensive of the three types.

Why outsource IT?

Many companies struggle to manage their growing IT demands because of ballooning infrastructure costs and persistent IT skills shortages. 

Outsourcing addresses both issues. It opens doors to a wider talent pool and is more affordable. It’s also much faster than hiring in-house IT talent because you can skip the recruitment and training process.

Read our blog to see more reasons to outsource IT.

Benefits of outsourcing development

Outsourced IT services can give you:

• Access to specialized expertise – In a talent-strapped market, outsourcing expands your workforce beyond borders. It connects you with specialists who can fill your internal knowledge gaps and get the job done.
  
• Cost savings – Outsourcing eliminates the costs of recruiting, training, and managing a full-time IT staff (the provider assumes all these responsibilities). You can also capitalize on lower labor rates in certain locations. And because outsourcing turns fixed IT costs into variable costs, you can quickly adjust your spending based on your changing requirements.
  
• Scalability and flexibility – Do you need to scale up to meet a product launch deadline? Your provider can add more firepower to your team. Need to scale down post-launch? Your provider can dial back support. Pay only for the services you need when you need them.
  
• More time to focus on your core competencies – This is one of the biggest yet most overlooked advantages of IT outsourcing — it frees up your internal team to focus on core business activities. The result? You can hone your strengths and focus on initiatives that drive revenue and growth.
  
• Enhanced efficiency and productivity – Outsourcing partners often have access to specialized tools (like integrated development environments and CI/CD pipelines) that most companies lack. These technologies can streamline your project.

Outsourced IT for small businesses

Tech woes are major time and resource drains for small businesses. Outsourcing developers is a cost-effective way to build your own tech SWAT team — a network of specialists ready to tackle your IT needs. It makes scaling up or down easier, so you don’t tie up resources on fixed staffing or infrastructure.

How much does outsourcing software development cost?

Simple tasks like ongoing maintenance often cost less than developing a custom software solution from scratch. For instance, a custom MVP could range from $100,000 to $300,000.

Generally, North American and Western European providers charge higher hourly rates ($60 to $250), while offshore locations like India offer cost-effective options ($30 per hour).

Brazil — offering a middle ground at $40 to $85 per hour — is a great choice if you want to nearshore to a country that shares a similar time zone and professional culture.

For more information, check out this post: How much does it cost to outsource software development?

How to choose and manage an outsourced development team

Once you’ve chosen what IT services you want to outsource, here are some tips for choosing an outsourcing software development company.

1. Know your project’s scope and requirements

Define your vision clearly. What functionalities do you need? What results do you want to achieve? A well-defined roadmap puts you and the outsourced team on the same page and improves results.

2. Set a realistic budget

Your budget should consider all potential costs, plus a buffer for scope creep. Choosing the cheapest provider might not be the best long-term solution if it leads to communication hurdles or project delays, so always consider their experience and cultural fit alongside their rates.

3. Interview multiple outsourcing providers

Prepare a list of questions to assess each candidate’s technical skills and experience with similar projects. During the meeting, you’ll also get a sense of their communication and work style.

4. Consider any cultural or language barriers

Language and cultural incompatibilities can quickly derail even the best-laid plans. Look for providers with a strong track record of working with international clients. Nearshoring is often superior to offshoring in this regard.

5. Choose a partner

After careful evaluation, choose a development outsourcing company that understands your project, matches your team’s communication style and work culture, and offers a transparent pricing structure. Ultimately, you want a team you can trust to deliver high-quality work on schedule.

Choose Cheesecake Labs for IT Nearshore Outsourcing

Supervising your outsourced project should be easy if you choose a provider with proven processes.

Cheesecake Labs’ dedicated teams approach is a great example of a well-established system. Here’s how it works:

• We pair you with a Solutions Architect to understand your goals and assemble the perfect team.
• Our dedicated team spends a week immersing themselves in your project to eliminate information gaps.
• Weekly check-ins ensure transparency and collaboration.

And because we understand that software development is an iterative process that may require adjustments along the way, we keep everything agile and flexible.

Looking to outsource app development to Latin America? Find out more about our process.