Day by day, IT is growing, and everyone wants to develop their own applications and solutions to build their presence in this rapidly changing industry. When gathering requirements for your project, you also face the challenge of hiring developers or a development company that is the best for you, and with all these, you also recognize your budget and time to make a wise decision. If you have a small or low-budget project, then you must go for outsourcing your project to the best developer.
IT outsourcing models are available in several phases, but IT outsourcing has many models and choosing the ideal one is also challenging. Before choosing, you have to learn about a particular model to make a decision of choosing for your project.
According to Statista, the value of outsourcing is on a trajectory to exceed $413.72 billion by the end of 2021. This robust growth is a testament to the increasing number of companies outsourcing services, with IT services leading the charge. Moreover, the Global Industry Analytics Report predicts a further 5% growth in the outsourcing market in the next four years (2021-2024), instilling confidence in the industry’s future.
So here in this guide, we will discuss all types of outsourcing models in detail. It will help you to understand each model clearly, and then you’ll be able to make a decision of choosing the best one for your development solution.
What is IT Outsourcing?
IT outsourcing is when a company, business, or a particular person hires another company or individual engineers outside of their organization to handle their development of projects and other information technology (IT) tasks. IT tasks like managing computer networks, developing software, or providing technical support. By outsourcing, companies and businesses can focus on their core business activities while the outsourced professionals manage their IT needs. This method can save time, reduce costs, and provide access to global talent.
IT outsourcing is divided into 3 different types of outsourcing models:
- Relationship Based
- Location Based
- Pricing Models
Let’s start a discussion on IT Outsourcing Models!
Types of Relationship-Based Outsourcing Models
There are three major types of relationship-based IT outsourcing models adopted by various IT companies. It will help you to strategize the process accordingly and also help to avoid any conflict or roadblock.
1. Team-based Outsourcing Models
The team-based model defines a process where the company or business chooses a whole development team to handle your development project and provides you with complete development services. In this case, a company business or individual contacts a reputable organization that provides a whole developers team for your project as per your requirements, or in this same case, the company or individual can also make their own customized development team by hiring different programmers with the expertise you require for your project. The outsourced team will work and behave like your company’s in-house team, which will help you manage all business processes and the project perfectly.
When considering team-based outsourcing models, it’s essential to have a clear vision. This table outlines the pros and cons of team-based models, providing a strategic framework for decision-making about your project.
Pros | Cons |
Cost Efficiency | Communication Challenges |
Reduced labor and operational costs. | Time zone differences can cause delays. |
Access to Expertise | Quality Control Issues |
Leveraging different time zones for quicker turnaround. | Challenges integrating outsourced work with internal systems. |
Access to a global pool of skilled workers. | Varying standards can affect quality. |
Scalability | Dependency Risks |
Easily scale teams up or down as required. | Reliance on third-party vendors. |
Focus on Core Business | Security Concerns |
Innovation | Hidden Costs |
Internal team can focus on core activities. | Risk of data breaches or IP theft. |
Flexibility | Cultural Differences |
Faster Time-to-Market | Integration Issues |
2. Project-Based Outsourcing Models
In this model, you have the flexibility to hand over the entire control of your project’s technical process to the IT outsourcing company. They will handle your project, manage the teams, and understand specific requirements. The team will develop your project from scratch to finish, and if you need post-support, they will also provide you with support and maintenance services. The project-based outsourcing model is a preferred choice when you don’t have an in-house team and you don’t want to deal with technical and management complexities related to the project. It can also be adopted when your teams are working on other projects, and there is no current option for more recruitment.
Here’s a table outlining the pros and cons of project-based outsourcing models for development. With this table, you will be clear about using project-based outsourcing models for development.
Pros | Cons |
Cost Savings | Potential for Higher Costs |
Fixed price for the project can be more economical compared to hiring full-time staff. | If the project scope changes, additional costs may arise. |
Fresh perspectives can lead to innovative solutions and approaches. | The outsourcing partner’s goals may not always align with the company’s objectives. |
Access to Expertise | Communication Challenges |
Access to specialized skills and knowledge not available in-house. | Time zone differences and language barriers can cause miscommunication. |
Focus on Core Business | Quality Control Issues |
Risk Mitigation | Dependency on the Outsourced Team |
Allows in-house teams to focus on core business activities. | Ensuring the outsourced team meets quality standards can be challenging. |
Easy to scale resources up or down based on project needs. | Less direct oversight and control over the project’s progress and execution. |
Faster Time-to-Market | Security Risks |
Experienced outsourced teams can accelerate project timelines. | Sharing sensitive information with third parties can pose security risks. |
Risk is shared with the outsourcing partner, reducing the burden on the company. | High dependence on the outsourcing partner for project success. |
3. Staff Augmentation Outsourcing Models
A staff augmentation model is about expanding your development team with additional IT experts. For instance, your entire team is busy working the particular tasks and you need more helping hands to complete another important task, in this case, you have to scale up your team, and then go for the staff augmentation outsourcing model. Very similar to this if you need to hire more skill sets as per your project requirements, you can opt for a staff augmentation model without worrying about future liabilities of augmented staff.
Here’s a table of the pros and cons of staff augmentation outsourcing models for development. This table will help you clearly understand these models for your projects.
Pros | Cons |
Access to Specialized Skills | Higher Costs |
Companies can quickly access specific skills and expertise that might be lacking internally. | Staff augmentation can be more expensive than hiring full-time employees, especially for long-term projects. |
Companies can save on costs associated with employee benefits like health insurance, retirement plans, etc. | There can be concerns about the quality of work and commitment from augmented staff compared to full-time employees. |
Allows businesses to scale their workforce up or down based on project needs. | Over-reliance on external staff can lead to challenges in maintaining project continuity and knowledge transfer. |
Speed | Integration Challenges |
Cost Savings on Benefits | Potential Quality Concerns |
Quickly fills gaps in the workforce, enabling faster project start times and completion. | External staff may take time to integrate with the internal team and understand the company’s processes and culture. |
Reduced Recruitment Efforts | Communication Issues |
Minimizes the time and resources spent on hiring and training new employees. | Differences in time zones, language barriers, and remote working can lead to communication and collaboration issues. |
Trial Period for Future Employees | Management Overhead |
Provides an opportunity to evaluate potential full-time hires without immediate long-term commitment. | Managing an augmented team requires additional oversight and coordination efforts. |
Provides an opportunity to evaluate potential full-time hires without an immediate long-term commitment. | Security Risks |
Allows internal teams to focus on core business activities and strategic goals. | Sharing sensitive information and intellectual property with external staff can pose security risks. |

Types of Outsourcing Price Models
Here’s a comparison table for the Fixed Price Model, Time and Material-based Price Model, and Dedicated Team Price Model. This table highlights the main differences between the three pricing models, helping you understand which model might be best suited for different types of projects and business needs.
Criteria | Fixed Price Model | Time and Material-based Price Model | Dedicated Team Price Model |
Definition | A contract where the price is agreed upon before the project begins. | A contract where the client pays for the actual time and resources spent on the project. | A model where a dedicated team works exclusively for the client. |
Payment Structure | Pre-determined, fixed amount. | Based on the actual hours worked and materials used. | Monthly salary for the team members plus a service fee. |
Scope Flexibility | Low – Changes in scope can require contract renegotiation. | High – Flexible to changes in project scope and requirements. | Medium – Some flexibility, but major changes can affect cost and timelines. |
Budget Predictability | High – Costs are known upfront. | Low – Costs can vary based on project duration and scope changes. | Medium – Monthly costs are predictable, but total cost depends on project duration. |
Use Case | Best for well-defined projects with clear requirements. | Suitable for projects with evolving requirements and scope. | Ideal for long-term projects requiring ongoing development and support. |
Risk | Vendor bears the risk of cost overruns. | Client bears the risk of project duration and cost. | Shared risk – Vendor provides the team, but the client manages them. |
Time to Market | Moderate – Fixed timelines, but less flexibility for changes. | Fast – Can adapt quickly to changes and new requirements. | Variable – Depends on team setup and project management. |
Project Control | Low – Vendor controls most aspects of the project. | High – Client has control over tasks and timelines. | High – Client has control over the team and project priorities. |
Examples | Developing a specific software with clear features. | Continuous improvement and updates to an existing application. | Setting up a team for ongoing product development or support. |
This table highlights the main differences between the three pricing models, helping to understand which model might be best suited for different types of projects and business needs.
Fixed Price Model
The fixed price model is the most traditional and straightforward pricing model in IT outsourcing. In this model, both parties agree on a fixed price for the complete project or specific deliverables. The pricing is determined based on the details of the project scope, requirements, and expected outcomes. This model first considers estimated costs as per the requirements, and then, whenever the client knows the exact amount, they will pay for the development project.
It is suitable for projects with well-defined requirements and a clear understanding of the scope. If once a fixed price model is agreed upon for working in this scenario, then it requires a lot of time, money, and effort to change the scope of the work. The process of changing the scope of work in the fixed price model involves a renegotiation of the contract, a reassessment of the project requirements, and a potential adjustment of the project timeline and budget. That’s why project delivery in this pricing model is not flexible.
Time and Material-based Price Model
The time and material (T&M) model is a totally flexible pricing model that is commonly used for projects with evolving requirements or where the project scope or tasks are not fully defined upfront. In this model, the client is billed based on the actual time and resources spent on the particular project. The developer charges an hourly or daily rate for each task involved, along with any additional expenses incurred. The T&M model is highly adaptable, allowing the client to adjust the project requirements and allocate resources based on all project needs.
Essentially, clients are billed based on the number of hours team members spend on the project. This price model is the most popular in IT outsourcing because it is more flexible and cost-effective for clients, allowing them to adjust requirements/specifications without being charged additional fees. It’s suitable for long-term projects where features, goals, and scope can change over time.
Dedicated Team Price Model
In this case, the client hires an entire team to work on the particular project. Such collaboration requires more engagement of outsourced programmers in the project. Hired team members become your advisors and implementers in the development processes. As the client, you will be responsible for managing the team, providing direction, and ensuring the project’s success. This model is perfect for early-stage startups, complicated long-term projects, and projects with many vague requirements.
The dedicated development team allows for the swift augmentation of its development capabilities with highly qualified offshore coders and internal staff. This type of contract in software project management is based on a dedicated team price model, ensuring a cost-effective investment in your project.

Types of Location-based Outsourcing Models
Here’s a comparison table for Nearshore, Offshore, and Offshore Outsourcing Models. This table highlights the main differences between these three location-based outsourcing models, helping you understand the advantages and disadvantages of each approach.
Criteria | Nearshore Outsourcing Models | Onshore Outsourcing Models | Offshore Outsourcing Models |
Definition | Outsourcing to a nearby or neighboring country. | Outsourcing within the same country. | Outsourcing to a distant country, often on a different continent. |
Cultural Similarity | High – Similar cultural and business practices. | Very High – Same cultural and business environment. | Low – Significant cultural and business practice differences. |
Geographical Proximity | Close proximity, often within the same time zone or a few hours difference. | Within the same country, typically minimal time zone differences. | Significant geographical distance, often with large time zone differences. |
Control and Oversight | Moderate – Easier than offshore but harder than onshore. | High – Maximum control and ease of oversight. | Low – More challenging due to distance and time zones. |
Cost | Moderate – Costs are lower than onshore but higher than offshore. | High – Generally the most expensive due to local wages and living standards. | Low – Typically the most cost-effective due to lower wages. |
Communication | Easier communication due to similar time zones and cultural similarities. | Very easy communication with no time zone or cultural barriers. | Potential communication challenges due to time zone differences and cultural barriers. |
Travel and Collaboration | Relatively easy and cost-effective for in-person meetings. | Very easy for in-person meetings and collaboration. | More challenging and costly for in-person meetings and collaboration. |
Legal and Compliance | Moderate – Easier to navigate legal issues compared to offshore. | Easy – Follows the same legal and regulatory framework. | Complex – Different legal and regulatory frameworks can complicate compliance. |
Examples | U.S. companies outsourcing to Mexico or Canada. | A company in New York outsourcing to a firm in California. | U.S. companies outsourcing to India or the Philippines. |
Nearshore Outsourcing Models
Nearshore outsourcing entails contracting organizations or professionals from nearby nations to complete certain jobs or projects. They are working in similar time zones with this technique having the advantage of facilitating easier and more effective communication. Cultural and business habits are frequently very similar, lowering the possibility of misunderstandings. It is quite convenient and economical to travel for in-person meetings. A compromise between cost and ease of collaboration is achieved by nearshore outsourcing, which is typically less expensive than onshore alternatives even though it can be more costly than offshore ones.
Onshore Outsourcing Models
Onshore outsourcing, the practice of assigning tasks to organizations or experts within the same country, is often perceived as more costly than offshore or nearshore outsourcing. However, this model provides the maximum degree of comfort in terms of legal compliance, cultural alignment, and communication. It is easy to interact in real-time because there aren’t any notable time zone disparities. Since traveling within the same country is easy, in-person meetings and oversight are quite simple. Onshore outsourcing is typically more costly than offshore or nearshore outsourcing due to the higher cost of local expenses and living standards.
Offshore Outsourcing Models
Offshore outsourcing entails contracting organizations or professionals in distant locations, typically across continents, to execute specific jobs or projects. Since this approach takes advantage of lower salaries in other nations, it is usually the most economical. Some of the main challenges are time zone variations, cultural and commercial practice disparities, and possible communication impediments. Different frameworks can also make legal and regulatory compliance more complicated. Despite these difficulties, offshore outsourcing is common due to its cost-saving benefits, particularly for large-scale or long-term projects.
Read More – How to Hire Offshore Developers
How to Pick the Right IT Outsourcing Model?
There is no cut-and-dried answer to this question. However, we can guide you to the right answer.
Right Outsourcing Model = Competitive Advantage
Consider the following factors at the time of choosing the IT outsourcing models for your project, with these factors soon you’ll choose the best one for your business.
- Clearly define the work scope.
- Keep experience and competence as crucial requirements.
- Think about your brand reputation in the market.
- Be specific about your spending plan or budget.
- Protect your data & intellectual property rights.
- Choose a flexible partner for your project.
Answer the questions that will help you choose the best outsourcing model.
1. What specifications do you have for your project?
Understanding your project needs like the back of your hand will help you avoid mistakes while outsourcing. The following queries need to be addressed:
- What is the scope of your project?
- What are the key features you desire in your final product?
- Have you set project milestones?
- What are the predetermined timelines?
2. What kind of relationship do you prefer with your outsourcing partner?
The type of relationship you choose to maintain with your IT outsourcing partner will help you choose an outsourcing model for successful project management.
- Do you just want to assign your project and wait for it to be completed before starting communication?
- Or would you like to participate in the development process?
3. What pricing model would you like to use?
Defining a predetermined budget and considering several price models suitable for your project’s outsourced services are critical.
Depending on the services and expertise of the resources, you can choose between a set price, value-based, or competitive pricing strategy. Once your budget has been fixed, you can focus your search on finding an experienced and trustworthy outsourcing provider that can meet your project’s specific needs while staying within your means.
Bonus Read – Benefits of Offshore Software Development
How Much Does IT Outsourcing Cost?
The cost entirely depends on your requirements, and it is essential to know what scope and functionality you need in your software solution. This understanding will empower you to make informed decisions about your IT outsourcing. This table provides an overview of IT outsourcing costs by country, highlighting the range of average hourly rates for software development, technical support, data analysis, and cybersecurity services. Actual costs can vary based on the complexity of the project, the specific skills required, and the experience level of the professionals. Here’s a table for IT outsourcing costs as per country, highlighting average hourly rates for different types of IT services:
Country/Region | Average Hourly Rate (USD) | Software Devlop | Technical Support | Data Analysis | Cybersecurity |
United States | $75 – $150 | $100 – $150 | $75 – $100 | $80 – $120 | $100 – $150 |
Canada | $60 – $120 | $80 – $120 | $60 – $90 | $70 – $110 | $80 – $130 |
United Kingdom | $60 – $120 | $80 – $120 | $60 – $90 | $70 – $110 | $80 – $130 |
Poland | $40 – $70 | $50 – $70 | $40 – $60 | $45 – $65 | $50 – $75 |
Ukraine | $30 – $60 | $40 – $60 | $30 – $50 | $35 – $55 | $40 – $65 |
India | $20 – $50 | $25 – $50 | $20 – $35 | $25 – $40 | $30 – $50 |
Philippines | $20 – $40 | $25 – $40 | $20 – $30 | $25 – $35 | $30 – $45 |
Brazil | $30 – $50 | $35 – $50 | $30 – $40 | $35 – $45 | $40 – $55 |
Mexico | $30 – $50 | $35 – $50 | $30 – $40 | $35 – $45 | $40 – $55 |
Why is DPH Your Trusted IT Outsourcing Partner?
DeveloperPerHour is a trusted and reputed software development company, renowned for its expertise in providing IT outsourcing services. Our development team is proficient in multiple tech stacks and domains , ensuring that we can meet your specific needs. As compared to others, we provide cost-effective outsourcing solutions to our clients without compromising the quality of the services. Our professional team also includes post support and maintenance for our clients and makes long-term relationships to maintain our reputation in this market. We have a track record of successfully delivering software solutions, and our top priority is our client’s satisfaction with the work. We are always available for our clients and make sure to provide the exact work they demand and expect from us. All these things make me a trusted partner for your IT outsourcing solutions.
Final Words
Outsourcing is the best and most adopted option for IT solutions. In this guide, we cover everything about IT outsourcing models. You need to understand each one and choose the best according to your project requirements. We also cover cost estimation as per the country, which will help you choose the suitable country for your outsourcing project.
At DPH, you can get the best IT outsourcing solutions within your budget. Our services are provided by highly qualified coders, ensuring high-quality work. You can hire these experts by simply contacting our professionals. Just discuss your requirements, and we will provide you with a list of particular tech experts who perfectly fit your demands. Choosing DPH for your IT outsourcing needs means getting high-quality services within your budget.
So don’t think too much and connect with us to start your project. We’ve made the process as simple as possible, so you can focus on your project without any unnecessary stress.