Outsourcing helps you reduce costs and focus your resources on growing your business. However, not all outsourcing is created equal. Different types of outsourcing models entail different collaboration formats, responsibility distributions, and deliverables.

We at Sombra have 10+ years of experience as an outsourcing software development partner for 70+ clients from across the globe. Today, let us draw on our expertise to break down:

Location-based and relationship-based outsourcing models
Common outsourcing scenarios and examples
How to set up your new outsourcing partnership for success

Location-based outsourcing models

Outsourcing models can be grouped into two categories based on either the vendor’s location or the relationship between the service provider and the client.

Let’s start with the first category: onshore, offshore, and nearshore outsourcing models.

Onshore

Onshore outsourcing model means hiring an external company within the same country. For example, if your company is based in Miami, FL, partnering up with a service provider in Portland, OR, is onshore outsourcing.

Collaborating with a team in your country helps you avoid culture gaps, the language barrier, and significant time zone differences. However, this outsourcing model is typically the most expensive option: for instance, As an example, companies based in the US typically charge between $100-149 per hour.

Offshore

Offshore outsourcing model means hiring a company in another country, regardless of the time zone difference and distance. For example, collaborating with a partner based in Ukraine while your company operates in the US is offshore outsourcing.

Partnering with an offshore company allows you to maximize cost savings. It also means you can find a partner with a similar workplace culture under various outsourcing models.

Client's review of Sombra performance

Client’s review of Sombra performance

Nearshore

The nearshore outsourcing model means hiring a company in a time zone similar to yours. For example, if you’re located in the United States or Canada, partnering up with a company in Latin America is nearshore outsourcing.

Colombia is one of the prime software development outsourcing destinations in Latin America, and Sombra has an office in its second-largest city, Medellin.

Colombia is located in the same time zone as the United States, and the lower hourly rates allow clients to cut costs. Colombia-based companies charge between $25 and $99 per hour, while US service providers demand $100-149 per hour.

Looking for a partner with offices across the world? Contact us to discuss how we can help you reap the benefits of nearshore or offshore outsourcing.

Locations of Sombra offices

Locations of Sombra offices

Relationship-based outsourcing models

The relationship-based outsourcing model you choose determines the distribution of responsibilities between you and the service vendor. You can build your collaboration based on the dedicated team, project-based team, or staff augmentation models.

Let’s break down what these outsourcing models entail and when you may want to opt for them.

Dedicated team

Under the dedicated team outsourcing model, your partner provides a team that will work on your project full-time. The chosen specialists will be dedicated to your business needs exclusively.

Collaboration under this outsourcing model is typically long-term (upwards of three months). A dedicated team also assumes a time and materials pricing model.

The dedicated team outsourcing model is the right choice for you if any of these outsourcing examples hit close to home:

You have a new software product that requires more focus from your in-house software development team. In this case, you may choose an outsourcing managed team to maintain and support an existing software product.
You want to get a minimum viable product (MVP) or Proof-of-Concept (POC) without dedicating your in-house software engineers to it. If you want your in-house software development team to continue focusing on the key product, a dedicated team can deliver the MVP or POC under this outsourcing model.
You need to develop a new software product, but you don’t have an in-house software development team. In this case, you can entrust a dedicated team with building the new product.

Project-based team

Under the project-based outsourcing model, you entrust an external partner with your short-term project from A to Z. Your responsibilities concern only preparing the project requirements, approving conditions, and validating the project results. Your involvement is less hands-on compared to other types of outsourcing.

This outsourcing model is commonly utilized for projects lasting between six to 24 months. If you decide to continue outsourcing beyond the initial development project, consider hiring a dedicated development team.

The project-based outsourcing model is the right choice for you if any of these examples of outsourcing hit close to home:

You have a specific scope of work to be done within a strict timeframe and budget. A client may request specific functionality to be added within six months and a specific budget. A project-based team can deliver it on time with minimized risks.
You need to develop an MVP within a set timeframe and without exceeding the budget. A project-based team will deliver it based on your requirements, while your in-house team focuses on its priorities.
You don’t have experience in hiring an in-house software development team. However, you have a clear idea of what you want to receive as a result.

Staff augmentation

The staff augmentation model involves bringing one or several specialists on board to quickly expand the existing in-house team.

Under this outsourcing model, an external partner offers a wide selection of specialists ready to augment your team. The company is responsible for recruiting, HR management, and office premises while you interview and select the specialists.

The staff augmentation outsourcing model is the right choice for you in the following outsourcing business model examples:

You need to close a talent gap in your in-house team quickly or on an ad hoc basis. In this case, a company like Sombra can help you scale your team up and down based on the workload and expertise required. For example, our client, OperationsRx, needed more developers to grow the company. We supplemented the in-house team with one to five specialists based on the client’s varied needs.
You can’t find the right tech talent with a good price-quality rapport. Software engineers in North America ($62-$209) are costlier than those in Latin America ($34-$96) and Eastern Europe ($26-$95). The staff augmentation outsourcing model will help you close the talent gap without outlandish costs.
You don’t have experience in hiring software engineers. In this case of business process outsourcing, a staff augmentation partner will help you select the right people for your needs. The company can take on technical interviews with candidates, for example.
You already have a dedicated manager for a remote software engineering team. They’re in charge of managing culture, communication, time zone differences, expectations, and meeting timelines and budgets. Full-time dedicated software development managers are more suitable for handling this outsourcing model, in our experience.

Don’t have resources in-house to handle a new project? Contact us to supercharge your development capabilities without getting sidetracked.

Engagement model	Dedicated team	Project-based team	Staff augmentation
Sombra responsibility	Recruiting, HR management, office premises. Team management. Team composition proposals.	Recruiting, HR management, office premises. Project, team, and budget management. Team composition choice.	Recruiting, HR management, office premises.
Client responsibility	Project vision and requirements. Provide a responsible person (project/product manager) from their side to unblock us on any issue; who is responsible for the final result of the project.	Candidate interactions. Project requirements, project conditions’ approval, project result acceptance.	Candidate interviews and selection. Project communication, planning, management.
Engagement duration	Long-term (3+ months)	Short-term Usually, clients move on to the dedicated team model after the main scope is complete.	Long-term Clients may switch to the dedicated team model later on.

How outsourcing helped a top 15 bank fulfill its engineering needs

Sombra has been collaborating with a global top 15 bank since 2015, extending the outsourcing team from one developer at the start to over 50 engineers now. Over the years-long cooperation, Sombra specialists have worked on 30+ projects.

Software development outsourcing allowed our client to:

Receive continuous development and technical support processes thanks to the time zone difference between the US and Ukraine
Get a development team that adapts to changing requirements constantly
Reduce costs thanks to long-term involvement and a trusting relationship that minimizes errors and maximizes performance

The development team from Sombra for a global top 15 bank

Sombra’s software development team for a global top 15 bank

How to succeed in software outsourcing

Outsourcing involves hiring a third-party service provider, freelancer, independent contractor, or temporary worker to complete specific tasks. Outsourcing allows companies to focus on core activities by delegating non-core tasks.

To help you set up your collaboration for success, we gathered tips from our clients’ reviews on Clutch.

Communicate what you do and why

Communication is key to a successful IT outsourcing contract. So, make it a point to contextualize your actions and describe in detail what you do and why.

Thanks to your communication efforts, the outsourcing development team should now fully understand:

Your company’s activities, top initiatives, and priorities
Its current projects and undertakings
The outsourced project, its goals, and your expectations

Client's review of Sombra project management outsourcing

Client’s review of Sombra project management

Check in with business development representatives

At Sombra, we hold meetings between our clients and the account manager or delivery manager or Chief Delivery Officer, Oleh Kozak, every month.

These check-ins allow us to ensure our client and we are on the same page. We gather feedback regarding the performance of the project team (including PM). We also discuss our client’s wishes and challenges to fine-tune our outsourcing services and help them choose the most suitable outsourcing model.

Discuss the hiring process with competence leads

In our experience, the job descriptions companies put together usually don’t match the professionals they need in reality. Only 30% of job descriptions match actual organizational needs.

But before companies realize a mismatch, they have to invest valuable resources into considering and interviewing candidates. A meeting with competence leads before kicking off recruitment can help you avoid wasting those resources.

At Sombra, we suggest our clients meet with our technical competence leads at the start of our partnership under any of our outsourcing models. This way, they don’t have to create the job descriptions themselves. Instead, we define selection criteria based on the client’s expressed needs and expectations.

To that end, our technical competence leads conduct a thorough interview on:

The project in general and what part of it the engineer will be involved in
The engineer’s job, tasks, and responsibilities
The ideal candidate’s set of skills and background

Sombra's team of competence leads

The team of competence leads at Sombra

Make documentation and permissions available

If your outsourcing partner’s engineers realize they have no permission to access a specific file during the development process, waiting for them can hinder the whole collaboration.

Preparing access and documentation can take weeks or months. Before starting any project, it’s important to contact the competence lead to clarify the necessary permissions and documentation needed by the team.

Define clear requirements for your project

For the outsourcing team to meet and exceed your expectations, they need to know what those expectations are. So, be clear about what you’re looking for, as well as your preferred outsourcing model, goals, time constraints, and budget. If you need to verify your project’s requirements and scope — choose the discovery phase.

Explicitly defining the scope of work before choosing the outsourcing model leaves little to no room for miscommunication and ensures you get results that match your vision.

That said, allow the outsourcing partner to make suggestions along the way, too. Since they have expertise in the domain, their thought leadership can refine and enhance your project.

Build trust with your outsourcing partner

Collaboration built on trust means you don’t need to micromanage the team and can speak freely about possible issues. The software outsourcing team can contribute beyond contractual obligations, making the project more efficient and fruitful.

This is why Sombra is open to our client feedback. It allows us to fine-tune our outsourcing models and match our client’s business needs perfectly.

Beyond giving feedback, building trust under any of the models of outsourcing means:

Requesting the team’s input on improving the project or product
Discussing whether the outsourcing company has the expertise in your technology stack
Talking over issues with the project or delivery manager or chief delivery officer
Discussing potential cultural differences with the project or delivery manager

Discuss post-launch support options

Launching the product doesn’t mean you won’t need engineers’ help again. The product still needs to be maintained, updated, and fine-tuned.

If you’re not willing to take on those tasks in-house, make sure your outsourcing partner will be there for you post-launch. Discuss what outsourcing models are available for post-launch collaboration.

Need to expand your development capabilities fast? Contact us to seamlessly add experts to your team in no time.

4 benefits of outsourcing for your business

Accelerance estimates that 60% of companies outsource or plan to outsource software development in 2023.

Why do companies choose to outsource work? The number one reason for outsourcing software development is cost savings: it’s the top priority for around 70% of companies that opt for outsourcing business models.

But it’s not the only benefit of outsourcing. Here are the four advantages of outsourcing you can reap.

It helps reduce costs

In the world of economic turbulence, reducing costs and increasing efficiency is key to ensuring the business’s survival and profitability.

Various types of IT outsourcing allow to cut costs by 40-70% by making tech talent more affordable. It also gives a greater cost control capability to clients as they can quickly adapt headcount to their needs and budget constraints.

It gives you access to the global tech talent pool

Recruiting developers with the right skills remains tough. According to Deloitte, 50% of executives consider talent acquisition as a top internal challenge.

Various models of outsourcing can help your company circumvent these skilled talent shortages. With offshore and onshore outsourcing, you can expand the available talent pool beyond Canada and the United States.

Client's feedback of Sombra performance

Client’s review of Sombra performance

It allows you to concentrate on scaling your core product

You may need to develop a new product or functionality, but your in-house team is already responsible for maintaining the core product. In this case, an IT outsourcing contract can help you in either of two ways:

The outsourcing partner takes on product maintenance while your in-house software development team develops the new product.
Or, the outsourcing partner builds the new product or functionality while your internal software development team continues to maintain the core product.

In either case, various types of IT outsourcing allow your in-house software development team to concentrate on what matters most.

And what if you don’t have an in-house software development team at all? In this case, outsourcing allows you to focus your internal resources on growing the business.

It allows for launching an MVP/POC without losing focus

If you don’t want your in-house software development team to get sidetracked to work on an MVP or POC, turning to the outsourcing business model can help you retain the focus on the core product. You also won’t need to reallocate your likely limited resources to this project.

4 challenges of outsourcing for your business

Of course, all types of IT outsourcing aren’t perfect. There are both outsourcing advantages and disadvantages. So, let’s describe the key challenges of IT outsourcing – and how to overcome them.

Time zone differences

The significant time zone difference can be listed on both sides of the pros and cons of outsourcing. While it can power almost around-the-clock support, maintenance, or development, it can also:

Make meetings and appointments more challenging
Leads to communication gaps
Make the project slower due to longer approval times

Ensure your outsourcing partner has strong in-house project management capabilities for various IT outsourcing models to overcome challenges.

For example, the ten-hour time zone difference between Sombra and our client in North America, Wineshipping, became an advantage because of our “effective local project management.”

Both offshore and nearshore models of outsourcing come with a risk of cultural differences that may hinder communication. For example, your service provider may be a yes-man, unwilling to contribute new ideas or suggest improvements.

For best results, your outsourcing company should be able to discuss all possible solutions and provide argumentation for why this or that one is the best.

How to overcome this challenge? We advise you to look into service providers that already have experience in working with clients from your region under various IT outsourcing models. Before kicking off collaboration, make it a point to discuss cultural expectations with your service provider.

Sombra's clients outsourcing

The map of Sombra’s clients

Communication gaps

When outsourcing, communication gaps may arise due to differing expectations. For instance, you may anticipate feedback but only receive brief responses. How can this be resolved?

At Sombra, if you realize a communication gap between you and your team members, we encourage you to discuss it with the project manager. You can also give feedback to our delivery manager or Chief Delivery Officer, Oleh Kozak.

Lack of trust

In all models of outsourcing, trust is key. Building it, however, takes time. In our experience, clients need between two weeks and one month to build a trusting relationship under dedicated team or project-based IT outsourcing models, and two weeks – with augmented staff.

How to overcome this challenge? Choose the outsourcing partner wisely. The company’s project manager has to be proactive in communication, regularly updating you on the project’s status and task completion. In critical situations, those updates can be 10 to 20 minutes apart.

Need an outsourcing partner well-versed in handling challenges? Contact us to reap all the benefits of outsourcing without a hitch.

Client's review of Sombra project management outsourcing

Client’s review of Sombra project management

Types of Outsourcing Models: Pros and Cons, Examples, and Tips

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