Best IT Outsourcing Models: How Do They Work?

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Srbuhi Avetisyan
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The international IT industry is growing along with every model and type of software outsourcing. It has been snowballing for more than a decade. The benefits of outsourcing software development are not limited to only financial support and reduction of expenses.

Advantages and Disadvantages of Software Outsourcing
As with any other business process, software outsourcing has its advantages and disadvantages.
Advantages of Software Outsourcing
IT outsourcing opens up the global talent pool. When companies form an in-house IT department, they follow the local resources and plan their software development strategy accordingly. In software outsourcing, companies have a huge spectrum to choose from. There are numerous international tech hubs that provide a wide range of web and app development services with multiple tech stacks. For example, CodeRiders is an Armenia-based software outsourcing company. Most of our clients hire us for the following services:
? Web development and design,
? Mobile app development,
? Custom software development services,
? Software development maintenance and support.

Cost reduction.
Faster software development lifecycle
Possibility to expand the team and upscale fast
Flexible working hours

Disadvantages of Software Outsourcing
Language barrier
Mentality and working habits
Physical distance

Types of IT Outsourcing
The types of software outsourcing establish the style of cooperation between the client and the software vendor.

Nearshoring or nearshore IT outsourcing is the process of outsourcing your software development needs to a software company located in a nearby country.
Let’s review one of CodeRiders’ projects as an example. We worked with a German computer software company, Abramov Software GmbH. They hired some of our software developers to upgrade an existing e-commerce solution with new technologies and ensure its proper functioning. This is a typical example of nearshoring.
Nearshoring is ideal for businesses that need small-time differences and similar working ethics. Armenia is in GMT+ 4 time zone and is 2 hours ahead of Germany. In the meantime, there are no hurdles to working mindset and ethics.

Offshoring or offshore IT outsourcing is the process of working with software companies from distant countries. Offshoring is inconvenient for companies that need real-time communication. On the flip side, if a business operates beyond working hours or night-shift offshoring is beneficial. Besides its affordability, offshore IT companies charge no extra fees for providing services during non-working hours.
For example, CodeRiders worked with an Australia-based lifestyle management software company, Dwel. Our software developers built and implemented custom lifestyle management software from scratch. We carried the whole software development lifecycle, which lasted a year. It was an ideal option for our client because our software services were extremely affordable compared to the Australian IT market, and they did not need to be fully included in the software development lifecycle. Occasional reports and testing were enough for the client.

Onshoring or homeshoring
Onshore software outsourcing or homesourcing is the practice of handling software services to a third-party IT team, located in the same country. Onshoring is extremely common in famous IT hubs. For example, Armenia-based businesses hire local labor as the country itself is a rising IT hub and has all the benefits of IT outsourcing.

Multirsourcing 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 were working on the project before he started.
Some other examples include building a wealth management platform from scratch. We provided a senior software developer who worked closely with 2 other software developers from South Africa. Another example is about building a private work-related social platform from scratch. CodeRiders provided 3 software developers who work closely with another developer from China. To learn more about our IT staff expertise, leave us a message now.

Software Development Outsourcing Models

Staff Augmentation
Staff augmentation is a software outsourcing model or a strategy where the company assesses its existing staff and determines additional skill and labor requirements. In staff augmentation, a company can hire additional tech resources on an external basis to cover their tech needs temporarily or permanently.
Staff augmentation is an ideal solution for companies that already have an in-house IT department and need more software developers but do not intend to hire an additional in-house IT team. This is a fantastic way to support your in-house team and save on technical needs. If you hire new remote software developers from a software outsourcing firm, these resources are employed directly by your software vendor, cutting out full-time in-house employee expenses.
Example: A Namibia-based wealth management system hired 2 of CodeRiders’ software developers to join their in-house team. One of our senior developers had a lead developer role, and the second one was a full-time developer. They helped manage wealth management transactions, including transfers, withdrawals, deposits, and needed enhancements.

Dedicated Software Development Team
Hiring a dedicated software development team is ideal for clients looking for long-term cooperation without too much involvement in the software development lifecycle. Usually, dedicated software development teams work on long-term and complicated projects and are self-organized and responsible for the quality of their work. To manage and be informed about the progress of your software vendor, you can define specific fixed hours for daily reports and demonstrations.
Example: A Switezlarnd-based leading CRM portal for business management, Worldsoft Business Suite, hired 2 of CodeRiders’ software developers to work on its SaaS project of e-mail marketing software development. It was a 3.5-year-long project consisting of back-end software development and API sub-projects.

ODC (Offshore Development Center)
ODC is in the process of locating its full-time software developers and other IT specialists in an international tech hub. The goal is to enter a larger talent pool, where the number of IT specialists is much higher while the salary and cost of living in software outsourcing destinations are much lower. As the company is a newcomer and naturally is unaware of the ins and outs of the specific tech hub, it is much more beneficial to partner with an outstaffing vendor. Another good option is to work closely with an already-existing software development team and then eventually buy the team and open your company branch or a new office.

Project-Based Software Outsourcing
Companies from different industries with a one-time need for software solutions usually choose the project-based software outsourcing model. They search for software vendors with exclusive expertise in their required software services. The dedicated software team may join the already existing in-house team and cover the missing solutions or become the only source. The project-based software outsourcing model is the best solution for those companies where the outsourcing software solutions are not considered among the core functions of the company.
Example: A Hong Kong-based English school needed an online school management system and a classroom management app. Two senior software developers from CodeRiders worked on web and hybrid mobile app development, as well as database architecture.