IT Outsourcing Model: How It Works and the Benefits for Business

The IT outstaffing model has become an increasingly popular way for companies to meet their technology needs flexibly and cost-effectively. This article will explain what IT outstaffing is, how the model works, and the key business benefits it offers.

What is IT Outstaffing?

IT outstaffing involves hiring external IT professionals on a contract basis to supplement or replace internal IT staff. Companies can outsource entire IT functions or specific roles, such as software developers, QA testers, DevOps engineers, etc.

The outsourced talent from outstaffing company works remotely from offshore locations, usually places with high-quality talent pools like India, Eastern Europe, Latin America, etc. However, the client company manages and directs the work. So, unlike IT outsourcing, the client retains control over the outsourced resources.

How The IT Outstaffing Model Works

There are typically three main parties involved:

• Client Company: The company is looking to hire remote IT talent. They direct and manage the work.
• Outstaffing Provider: The agency that sources, hires, handles payroll/benefits, etc., for the technical talent.
• Outstaffed Engineers: The individual IT professionals working remotely for the client.

The client company contacts and partners with an outstaffing provider. The client communicates its specific technical resource needs, and the provider then sources qualified candidates from its global talent pool.

The client interviews and selects the candidates who best fit their requirements. The outstaffing provider then formally hires the engineers and handles all HR administration.

The outstaffed engineers integrate directly into the client’s team and work according to their specifications, usually communicating via video chat and collaboration platforms.

Key Business Benefits

The IT outstaffing model offers a variety of tangible business benefits that enable companies to accelerate growth and enhance competitiveness. By leveraging an on-demand, global talent pool, organizations can stretch their technology budgets further and scale capabilities in a way that drives broader strategic objectives.

The most transformative benefits include:

Cost Savings

The cost savings potential of IT outstaffing provides major budget relief for resource-constrained IT departments. The average Spend per Employee in the IT Services market is projected to reach US$399.00 in 2024. Forecasts indicate that by 2024, the average spend per employee in the IT services market will be USD 399.00. Based on prevailing wage rates, offshore engineers with similar expertise to US talent cost 40-70% less. For a 20-person team, first-year savings could reach seven figures. These savings drop directly to the bottom line or can fund complementary initiatives like upskilling programs. They also create capacity for technology investments that might have been deferred or deprioritized without outstaffing.

Access to Specialized Talent

Through the outstaffing model, organizations gain on-demand access to critical emerging skills not well-represented in current labor pools. For example, MLOps engineers who can operationalize machine learning, blockchain developers to build decentralized applications, IoT cloud architects to mesh hardware and software, etc. This facilitates the adoption of the latest innovations to drive differentiation. It also mitigates opportunity costs tied to unfilled roles and skill gaps.

Scalability

The outstaffing model’s flexibility supports aligned growth between IT capabilities and business demands. For example, as a new product gains traction, additional UI/UX designers and mobile app developers can quickly bolster the team to enhance the customer experience. Conversely, when initiatives wind down, team size can recede to appropriate levels. This “elastic workforce” avoids the painful downsizing that often accompanies shifting business priorities. The expanded talent pool also parallels rising data volumes, allowing data teams to scale up big data and analytics capacity.

Increased Efficiency

Many studies show that developers can achieve much higher productivity working offshore. This stems from factors like fewer meetings, fewer workplace distractions, and more continuity during working hours. More output with the same number of engineers directly powers faster feature development, product iteration, and technical debt reduction. Efficiency gains can also optimize costs over time, creating a leverage effect from the original investment.

Focus on Core Priorities

For resource-constrained IT leaders, outstaffing alleviates internal project bottlenecks. With an offshore team managing critical yet repetitive tasks like daily builds, technical documentation, live site monitoring, and ticket resolution, internal staff avail more cycles for value-added work that are tightly aligned with corporate objectives. This enables them to function as true partners in driving business outcomes vs. just “keeping the lights on.”

When Does IT Outstaffing Make Sense?

IT outstaffing offers the most value for companies that:

• Have chronic tech talent shortage/high turnover locally
• Need niche technical capabilities not available locally
• Require developers with expertise in new/modern tech stacks
• Seeking to increase IT team bandwidth for less investment
• Want greater flexibility around team size and composition

Models for IT Outstaffing

Dedicated Outstaffing

Each outsourced engineer works exclusively for one client at a time, which helps them integrate deeply with the client’s systems and processes.

Shared Outstaffing

With shared outstaffing, clients pay only for the specific number of hours they need per month. The engineers work for multiple clients at once, offering maximum flexibility and cost efficiency.

Project-Based Outstaffing

In project-based outstaffing, clients contract technical teams to deliver specific, fixed-scope, fixed-timeline projects, such as building a mobile app. This model fits needs with clearly defined endpoints.

Key Considerations for Success

While IT outstaffing offers notable upside, there are a few key factors that determine success:

• Clear communication of scope, priorities, and preferred work styles
• Infrastructure to support documentation and collaboration
• Cultural alignment and soft skills assessment during hiring
• Willingness to provide extra guidance early on
• Measures to security protect source code and data

The technical landscape today demands far more agility and capability than ever before. As the data shows, IT outstaffing serves as rocket fuel for technology innovation by expanding skills, increasing output, and reducing costs. The model empowers ambitious companies to achieve their boldest IT roadmaps.