The IT outsourcing landscape has changed dramatically in recent years, especially after the outbreak of the Covid-19 pandemic from 2019 until now. The pandemic has caused a fundamental shift in how businesses operate and perceive IT outsourcing. Previously, many companies outsourced their IT functions as a pragmatic solution to save costs. However, cost-saving is no longer the primary driver for outsourcing to IT service destinations across the globe.
Instead, companies are now focused on business continuity and resilience. As businesses grapple with the new normal, they have had to re-evaluate their outsourcing strategies and models. There are different types of IT outsourcing models, each with its own benefits and drawbacks. In this listicle, we will take a look at the most common outsourcing models and how they can be adapted to the current business landscape.
What is the definition of an IT outsourcing business model?
An IT outsourcing business model is an arrangement in which a company outsources its IT functions to a third-party service provider. The IT outsourcing company is responsible for delivering these services to the client, according to agreed upon Service Level Agreements (SLAs). The service provider manages and maintains the company’s IT infrastructure and systems and provides support to end users.
There are several advantages of outsourcing IT functions to a third-party service provider.
First of all, it can help reduce costs associated with maintaining an in-house IT staff. Second, it can optimize resource utilization that can be better used elsewhere within the company. Third, it can provide access to skilled IT professionals who can help improve the efficiency of the company’s operations. Finally, it can help enhance the quality of the company’s products and services by providing access to state-of-the-art technology and systems.
Different types of IT outsourcing models
There are a variety of IT outsourcing models to choose from, so it can be challenging to determine which option will best suit your business. Therefore, it is significantly important for business owners to have basic knowledge of different types of IT outsourcing services as well as the benefits and possible pitfalls of each before making a decision. The types of IT outsourcing models can be categorized into smaller types based on the location, relationship, or purpose as below:
Location-based outsourcing model
• Offshore outsourcing: This is when businesses contract workers in other countries to complete IT tasks. The most common IT outsourcing destinations for offshore outsourcing are India, the Philippines, and China. Currently, Vietnam has become the new promising IT destination in the Asia-pacific region.
• Nearshore outsourcing: This is a type of IT outsourcing that takes place in a nearby country. This is often seen as a compromise between offshore outsourcing and onshore outsourcing, as it offers the benefits of both models. Nearshore outsourcing can be less expensive than onshore outsourcing while still providing workers who are familiar with the local culture and language.
• Onshore outsourcing: Onshore outsourcing is when businesses contract workers in the same country to complete IT tasks. This type of IT outsourcing can be more expensive than offshore or nearshore outsourcing, but it often provides a higher quality of work. Onshore outsourcing also eliminates the language and cultural barriers that can sometimes occur with other types of IT outsourcing.
Relationship-based outsourcing model
• Staff augmentation: IT staff augmentation is an outsourcing model in which the service provider supplements the company’s existing IT staff. This type of outsourcing is often used by companies and organizations that have a need for additional IT resources on a short-term basis. And it is also a good solution to deal with the IT talent shortage.
• Dedicated team model: The dedicated team outsourcing model is when a company contracts with an outsourcing provider to create a dedicated team of IT professionals. This type of outsourcing is often used by companies that need a long-term solution for their IT needs. The advantage of this outsourcing model is that the company has more control over the team and can customize the team to meet their specific needs.
• Project-based outsourcing model: Project-based outsourcing is when a business contracts with an outsourcing provider to complete a specific IT project. This type of outsourcing is often used by companies that need a one-time solution for a specific IT problem. The best thing about this model is that it can save the company time and money by using the expertise of the outsourcing provider.
Function-based outsourcing model
• Managed services: Managed services refers to a type of IT outsourcing in which the service provider manages all or part of the company’s IT infrastructure. This type is a good choice for companies that do not have the internal resources to manage their IT infrastructure.
• IT Consulting: In this IT outsourcing model, the service provider provides advice and assistance to the company on its IT needs. This type of outsourcing is often used by companies that need help with their IT strategy or planning.
Benefits of IT outsourcing
One of the primary benefits of IT outsourcing is that it can save the company budget. When a company outsources its IT functions, it does not have to invest in the infrastructure and personnel needed to support those functions. Another benefit of IT outsourcing is that it can improve the quality of the work. When outsourcing, a company can choose to work with an experienced and qualified provider. This can lead to improved quality of work and increased efficiency.
The third benefit of IT outsourcing is that it can increase the company’s flexibility as it can choose to scale up or down its IT operations as needed. This can help the company to act more quickly on changes in demand or market conditions.
Choosing the right outsourcing vendor and type of IT outsourcing model is critical to the success of the outsourcing project. Businesses should carefully consider their needs and objectives before making a decision. Now that you have gone through all of the most popular ones, it is time to make a choice for your business.
Please keep in mind that each outsourcing model boasts different strengths as well as weaknesses. The most important thing for businesses to remember is to carefully consider their needs and objectives before making a decision. The wrong decision could lead to wasted time and money, so it is important to be extra careful in every step of the way.