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Digital Transformation|Offshore Development|Outsourcing Software Development September 21, 2021 Last Updated: March 17, 2023

Outsourcing IT service is the need of the hour if you are looking for a quick turnaround for your solution-oriented development needs. Let’s understand what Outsourcing IT services and RFP information technology mean and how it’s becoming crucial for businesses in 2021 and years to come. According to Statista,  in 2021, spending on IT services is expected to amount to around 1.2 trillion U.S. dollars worldwide, a growth of 9.8 percent from the previous year. The overall spending in the outsourcing industry is highest in the American region, followed by EMEA and the Asia Pacific regions. Now let’s take a closer look at the benefits of outsourcing and most commonly outsourced services.

Table of Contents:

  • What is IT Outsourcing?
  • Types of IT Outsourcing
  • Which IT services are typically outsourced?
  • Pros and Cons of IT Sourcing

What is IT Outsourcing?

IT outsourcing is generally defined as using external service providers for building and delivering IT-enabled business processes, business infrastructure solutions, and more. Outsourcing IT service includes software as a service and cloud-enabled Outsourcing that helps in developing the right kind of sourcing strategies. IT outsourcing also helps enterprises take advantage of the external service provider’s expertise to reduce cost and accelerate their position in the market.

Outsourcing IT service can also be termed as a co-sourced IT service as it works closely with the organization’s internal IT team. IT outsourcing is a service usually taken by larger organizations, and these organizations have the option of working with one or many service providers.

Types of IT outsourcing

Offshore Outsourcing

Offshore Outsourcing refers to the systematic hiring of a third-party provider in a different area to exploit cost advantages. It further helps in marking the company’s potential and technological superiority to align market products with cutting-edge industry solutions. Offshore Outsourcing typically processes the needs of third-party companies that are located offshore, at a distant location or continent.

Offshore outsourcing IT service helps businesses get access to global resources like talent and skill set and use them for their productive output. One of the most crucial elements of Offshore Outsourcing is its capability to reduce cost and increase the availability of competitive International skill resources.

Nearshore Outsourcing

The outsourcing IT service from the nearest location or adjacent nation is referred to as Nearshore Outsourcing. Nearshore Outsourcing is preferred by most businesses due to its convenience and because it is an outsourcing model that is near to them. Unlike Offshore, the third party companies are located nearby, increasing the chances of business collaboration.

Nearshore Outsourcing IT service also helps bring newer expertise and capabilities that are found locally. Companies get to exploit the true potential of these services as they are cost-efficient and provide productive resources for IT services.

Onshore or domestic Outsourcing

Onsite or Domestic Outsourcing is a form of Onsite Outsourcing where the service provider sends a team of professionals and experts directly to the client’s location. Time constraint is a major factor for Onshore Outsourcing IT services as this type of service often requires an increased amount of workforce.

For the Onshore Outsourcing service providers, their priority always remains local or national companies. Since this service is largely local and domestic, it is highly cost-efficient and increases convenience. Although Onshore Outsourcing helps in providing local solutions easily, they are often restricted to a particular region or location. They are also often exposed to fewer companies and lesser talent resources for the team.

Cloud computing

Cloud computing services are provided by third-party companies or cloud providers and are referred to as a system that allows access to storage or developmental platforms. Cloud computing outsourcing IT service is generally considered to be cheaper, more scalable, and increasingly convenient.

Cloud computing is used by many top companies as it has well-established data centers dynamically and offers high-tech services. With cloud computing services, data management maintenance issues get resolved as they are easily handled by centralized centers. These services also allow remote computation facilities that increase their versatility as an IT outsourcing service and are highly reliable due to their advanced security measures.

Managed services

Managed services are referred to as Outsourcing IT services based on a contract or subscription. These services are often used to reduce the workload of in-house IT teams and ensure maximum coverage of IT duties. Managed service providers have skilled professionals with high expertise and knowledge about the system requirements.

Since the Managed services are on a contract basis, it eliminates the recruiting and training process of the company. IT also allows companies to pay only for the coverage or services they require and enhance the infrastructure performance for higher output from revenue-generating tasks. Managed service providers are also available to work off-hours with fewer workflow disruptions and flexible schedules.

Which IT Services are typically outsourced?

Software Development

  • Software Product Development

Software product development is an important process which deals with tailoring and developing specific features of the software to meet the needs of the market. This type of outsourcing IT service has a repetitive logical process that helps in building programmed software that stays unique for a business or personal goal.

Software product development generally deals with 4 basic types of software products:

  • System Software Products: Software that helps in simplifying application programming such as operating systems, database management systems.
  • Programming Software Products: Set of programs that help developers in creating and maintaining other programs with the development of tools such as compilers, text editors, debuggers, and more.
  • Application Software Products: Development of applications that help perform tasks such as data management software, media players, and more.
  • Embedded Software Products: Development of products that are used to control machines and other devices through telecommunication channels.
  • MVP Development

MVP or Minimum Viable Product Development refers to building software that helps verify business assumptions and test demand for new products with basic infrastructure. This MVP outsourcing IT services can be deployed by businesses with a minimal investment strategy.

MVP Development features 2 variants: No-code MVP Development and Code-based MVP Development.

  • No-Code MVP Development: No-Code MVP Development helps businesses test out the demand for a new product without actual coding and using minimal investment strategies. In this form of MVP development, there can be a landing page that displays the business idea to the audience and helps analyze engaging features for further development.
  • Code-Based MVP: Code-based MVP development has 2 forms, single featured MVP and Piecemeal MVP. Single feature MVP involves building one key feature that has the core functioning value. Piecemeal MVP involves a custom application that includes basic features from existing elements. However, Piecemeal MVP can be upgraded or replaced later.
  • App Development (Web/Mobile)

Application Development of Web and Mobile involves the process of creating software for various devices. Mobile App Development and Web App Development are largely similar and use the same traditional software development process. However, a key differentiator for Mobile App Development is that the program is created specifically for taking advantage of the unique features provided by a compact hand-held mobile device.

Web App Development offers condensed website content that improves functionality and allows access to mobile-friendly content to a large number of users. Web App Development is often considered a cost-effective method to enhance Web application processes and increase consumer reach.

  • eCommerce Development

The structuring and development of an online business or retail store for proper functionality are known as eCommerce Development. The process involves frontend and backend development for testing and deploying at a later stage. eCommerce Development is an outsourcing IT service that improves the scope of online transactions and increases sales exponentially. Some of the essential elements to keep in mind while developing eCommerce sites are SEO statistics, the latest programming and technology, networking, and more.

eCommerce Development ensures higher levels of convenience along with a wider platform that goes beyond geographical barriers. With eCommerce Development services, businesses can enhance their revenue model and increase interactivity levels on their site for higher customer engagement.

  • QA & Testing Services

QA and Testing Services involve activities that improve functionality, integration, compatibility, performance, security, compliance testing, and performance. Quality Assurance and Testing Services help in identifying errors or glitches in the software development process to make the product bug-free and up-to-date. Testing Services include Mobile Application Testing, Functionality Testing, UI Testing, Security Testing, Performance, and Load testing, and much more.

Quality Assurance is responsible for preventing software glitches, while Testing Services have the role of using methods and techniques that identify those glitches. These types of outsourcing IT services are often used by businesses to avoid any software glitch or error before implementing certain applications.

Read More: Software Quality KPIs: A Complete Guide | ISHIR

  • Managed IT Outsourcing

Managed IT outsourcing involves using remote outsources that deliver IT services such as network, infrastructure, security management to its clients. Managed outsourcing IT services are implemented to ensure higher levels of scalability and flexibility with increased output levels. Managed IT outsourcing is typically subscription or contract-based and often involves the replacement of employees within the IT department of an enterprise.

Since the Managed Outsourcing IT services are on a contract basis, they also offer services after work hours. Many companies incorporate Managed IT outsourcing services as they help in creating a flexible schedule and manage IT-related servicing costs and time efficiently.

According to Statista,  the global managed services market is expected to reach around 274 billion U.S. dollars by managed services market

Digital Transformation

  •  AI/ML (Machine Learning)

Artificial Intelligence or Machine Learning are computational tools that can replicate human intelligence with advanced software integration. Outsourcing IT services for AI/ML helps in enhancing software development and cyber operations. Artificial intelligence services can process big data more efficiently and securely.

Machine Learning is considered a subset of AI and allows machines to automatically learn from programming levels and past data availability. Machine Learning can easily interpret data and provide an accurate output through machines.

  •  BI Intelligence (BI)

BI Intelligence refers to the formation of business tactics and organizational decisions based on services that transform data into actionable insights. BI Intelligence tools are used to analyze data sets like reports, graphs, charts, or dashboards to provide users with detailed information of the business status. BI tools are also used to deliver actionable insights about the businesses based on available data resources.

  • Blockchain

Blockchain is a type of database that is used to store specific data in blocks that are chained together in a program. Whenever information is filled in a block, it gets chained to the next block systematically. Every new data generated creates a new block that is chained together in chronological order. While there are varied types of blockchain, the most commonly used is as a ledger for transactions.

In the case of assets like cryptocurrency, the blockchain is decentralized, eliminating the control of any one person or organization. The data entered in the blockchains are irreversible, and the transactions are permanently recorded. According to Statista, worldwide spending on blockchain solutions is expected to grow from 4.5 billion U.S. dollars in 2020 to an estimated 19 billion U.S. dollars by 2024.

  •  Chatbot

A chatbot is referred to as a computer program that can process human conversations and allows human interactivity through digital devices. Chatbots are also considered digital assistants that can answer a query with one-line answers. These programs can increase personalization levels and can gather information to process easily.

  • IoT

IoT or the Internet of Things refers to physical objects that are embedded with sensors and software for the sole purpose of exchanging data and connecting devices and systems over the internet. IoT has increasingly become popular because it can connect everyday objects to the internet via embedded devices that allow information exchange. IoT uses minimal human intervention and can exchange data through low-cost computing, cloud, and mobile technologies.

  •  DevOps (AWS / Azure / Google Cloud)

DevOps is the practice of certain operations that are designed to accelerate software delivery with enhanced quality. It allows developers and operation teams to have greater control over their applications without reducing their speed. With an automated workflow, DevOps can deliver higher business value with a shared focus that increases product satisfaction.

  • Cybersecurity

Cybersecurity is a form of application of technologies that prevent any cyber-attacks and protects software systems, networks, and programs. Cybersecurity helps in protecting software against unauthorized exploitation and keeping the stored data secure. Outsourcing IT services for Cybersecurity helps in bringing skilled professionals that can handle cyber threats with advanced skills. These experts monitor the detection and response platform 24/7 and can respond to threats in real-time.

  • Infrastructure Services

Infrastructure services are used for administering and managing technology and information securely and proactively. IT Infrastructure services help minimize downtime for businesses and improve asset life cycle management, network and connectivity issues, and more. The services also help in monitoring service performance and actively detect when the service dips below the required standard.

 The Pros and Cons of IT Outsourcing


  • Outsourcing IT services have the potential to focus on core competencies.
  • IT outsourcing helps in providing access to skilled resources across technologies that can provide instant IT solutions.
  • Outsourcing your IT services can help save up money and is considered a cost-efficient method that provides the latest infrastructure with flexible payment schedules.
  • IT Outsourcing services can lessen the service outage risk and give access to multiple backup servers that prevent revenue or data loss.


  • IT Outsourcing inflicts longer wait times as the outsourced provider needs to assess the situation to provide solutions without any estimated resolution time.
  • Outsourcing IT services makes businesses lose control over their equipment and software and are pushed to invest in unnecessary software.
  • IT Outsourcing has the threat to security and trust issues as information is being managed by a third party, even if under a security and regulatory measure.
  • IT Outsourcing offers slower outsourced response time creating long periods of inquiries and communication.

Get all your IT outsourcing services securely by ISHIR. ISHIR has more than 21 years of business-centric tech expertise. By signing up with ISHIR, businesses get to tackle complex challenges with adaptable, innovative, and straightforward solutions. Being a globally diversified leading offshore software development company, ISHIR offers extensive IT Outsourcing services with expertise over multiple solutions. Check out ISHIR for various services and IT-related tech solutions and optimize your business model.


  1. Chidera Allison says:

    Thanks for sharing the pros and cons. Great article!

  2. Britt says:

    Outsourcing IT services is the new normal. Great facts published!

  3. Douglas Fuller says:

    It is a great comprehensive guide on IT outsourcing. Would like to read more from you on this topic.

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