Understanding different types of software development outsourcing models

This region is an emerging offshore outsourcing destination for Europe-based companies. For companies operating in the US and willing to delegate software development tasks to the skilled workforce in neighboring countries, this is a nearshoring option. In this article, we’ll compare nearshore, onshore and offshore outsourcing and disclose their primary differentiators. But first, let’s focus on the amount of money companies spend in the IT outsourcing industry worldwide and in the US. Before you choose to offshore a vendor, you’ll need to be aware of several drawbacks that come with this model. First, the considerable time zone difference between you and the vendor might be an issue.

What is the offshore outsourcing model

Outsourcing makes the provision of workspace, equipment, and human capital somebody else’s problem. S you can consider, depending on your business objective and the type of support required. Learn how offshoring improves your productivity and helps grow your business. MicroCreatives A creative design agency powered by MicroSourcing, for your graphic design, content writing, motion graphics and WordPress development projects. Locations We have 8 locations in purpose-built hubs across the Philippines, giving you the best performance and talent pool possible. You have full visibility and control, without having to worry about facilities, operations and regulations.

What Is the Best Country for Offshore Outsourcing?

However, it wasn’t until the 1980s that corporations perceived it as an effective business strategy. It was also in that year where companies mainly outsource to allow them to have greater focus on their core competencies. Such companies may also be scams, or may engage in illegal work practices. They may even sell your customer data, leading to serious legal troubles. Every offshore outsourcing agreement begins with a comprehensive contract.

What is the offshore outsourcing model

Nearshoring can be just as costly as onshoring, and is generally less cost efficient than offshoring. In this model, a Business Process Outsourcing firm is engaged to manage everything – across talent, infrastructure, performance, operations management and quality assurance. Here, the offshoring party is not required to have any local knowledge or spend time recruiting or managing the staff. With this model, the Businesses can completely hands off the day-to-day execution and management of processes while focusing on more strategic initiatives and business development. This is something all businesses are concerned about before hiring an offshore partner.

How Do I Know if Offshore Outsourcing is Right for My Company?

Another main reason is offshore IT outsourcing companies have a larger number of qualified employees, and it’s easier to find expert staff than it is to recruit locally. The key is to clearly define the project specifications and outline your expectations to a service provider. Also, establishing effective, regular communication with your partner and monitoring the project’s progress is essential to ensure everyone stays on track.

Most developing countries have lower labor costs than developed countries. You can also avoid social security taxes, healthcare insurance, and other compulsory employment costs in the United States. All these elements are pre-arranged and calculated into your contract with the outsourced partner. And they usually cost a fraction of what you’d pay in a developed country. With the COVID-19 pandemic, businesses of all sizes are taking every possible step to stay profitable, including outsourcing some of their business activities to offshore partners. This can be a good option if you have one-time assignments requiring specialised knowledge/skills rather than long-term, continuous labour.

Faster Turn-Around Time

Besides, offshoring offers more feasible technical support than any other type of software development company. But on the flip side, it’s more expensive than other models, and you don’t get any control over your offshore team’s business processes, which means quality nearly always suffers. Your offshore team isn’t properly integrated into your business, and there can be a disconnect between the two cultures.

  • No surprise that 45% of companiessaid they plan to do more outsourcing soon.
  • When you outsource your project to a software development company, you need to know the value of resources and technological infrastructure offered.
  • And you need to be aware of the pros and cons of each to make the best decision.
  • With this model, you get a work-ready team you can easily integrate into your business while retaining complete control of the team’s processes, tasks, KPIs and service quality.
  • Offshoring happens when some business procedures provided in country A are outsourced to a foreign country B.
  • We all know that the country is known as the Business Process Outsourcing capital of the globe, and is well known for call center services.

A contract should include clear deliverables and a detailed scope for all activities. Make sure you understand the timelines and communicate expectations with your team. Although accreditation isn’t everything, these industry standards usually indicate that an employee is more highly trained onshore software development and has more relevant experience than uncertified workers. Search for news stories with the company’s name to see if they have positive or negative press. It’s important to avoid scams and companies with poor reputations. The Philippines has two official languages, Filipino and English.

Explore outsourcing today

Organizations usually do this strategy to access a wider talent pool at a low overhead cost without sacrificing the quality of work done. Even if you’re not sure how offshoring fits into your business model, it’s worth checking out. You may identify services or processes that you didn’t even realize could be outsourced. Many companies believe offshore outsourcing will lead to a loss of control over essential business activities.

Initial migration costs and complexity will naturally vary from business to business. This process has become infinitely easier in recent years, however, thanks to the cloud and other data-sharing technology. It has never been faster or easier to communicate, share information, and get set up.

offshore outsourcing FAQs

It’s a way to get access to the technology and expertise you need to keep your business running smoothly without building and maintaining your own IT department. Citigroup is another global company that prefers outsourcing https://globalcloudteam.com/ IT services. In 2012, the company cut down nearly 25% of in-house IT-related positions to outsource them. Armenia and Georgia are the top options to consider when searching for qualified candidates for your next project.

What is the offshore outsourcing model