TL;DR
An IT outsourcing company provides external software engineering, infrastructure, or IT services to organizations that choose not to build those capabilities in-house. Models range from project-based outsourcing (fixed scope) to staff augmentation (embedding engineers into your team) to dedicated development centers. The key differentiator between vendors is talent quality, delivery model, and time zone alignment.
How sound is your IT strategy? If you answer “not very”, “I’m not sure” or even “I don’t have a strategy”, then you have a big problem in your hands. During these dark times, when many workers are relying on tech to carry them through the workday, having a solid IT infrastructure is especially important.
Because it’s so vital to have an IT infrastructure in place that you can rely on, some businesses outsource their services to third-party providers. But what exactly is an IT outsourcing company?
What Is an IT Outsourcing Company?
An IT outsourcing company is a third-party provider that delivers software development, IT infrastructure, or technical services on behalf of client organizations. Clients contract these firms to access skills they don’t have in-house, reduce hiring costs, scale engineering capacity faster, or manage non-core technical functions. Models include staff augmentation, dedicated development teams, project outsourcing, and managed services.
There are many different models for IT outsourcing, as well as arrangements and services they provide.
Types of Outsourcing
- OnshoreThe business outsources IT services to another organization or individual within their home country. For example, a company based in Texas might outsource services to a provider in California. This is often the most convenient arrangement since there are no cultural barriers and minimal — if any — timezone discrepancies — but it’s usually the most expensive one as well.
- NearshoreUnder this partnership, a business outsources IT services to a provider in a nearby country. An organization in the United States, for example, might work with a provider in Latin America. This is often seen as the best of both worlds — the partners are culturally similar, in similar time zones, and the price is lower than that of an onshore arrangement.
- OffshoreOutsourcing to an offshore partner means working with a provider overseas. A company in the U.S. could outsource IT services to India or China, for instance. This is usually the least expensive arrangement, although there might be complications, such as communication and geographical barriers.
Models
| Model | Who Controls Work | Best For | Cost Structure |
| Staff Augmentation | You (client) | Filling specific skill gaps | Per-developer/month |
| Dedicated Team | Shared | Long-term product development | Team rate/month |
| Project Outsourcing | Vendor | Defined-scope deliverables | Fixed price or T&M |
| Managed Services | Vendor | Ongoing IT operations/support | Retainer/SLA-based |
| BOT (Build-Operate-Transfer) | Vendor then client | Building an offshore center | Setup + operations fee |
- Project-Based – In a project-based model, the business outsources a specific project to an outside provider. Often, this is a project that doesn’t fall under the purview of the contracting business and its core business functions. This doesn’t necessarily mean the arrangement will be short-term — the provider might complete a series of projects for the business as needed.
- Staff Augmentation – Perhaps you don’t have the necessary skills in-house to complete certain tasks or projects. Staff augmentation services are a good solution for filling in any gaps that exist in your on-site team. This is typically a longer-term arrangement than a project-based one. Staff augmentation is also a good model if you have tasks that require additional workers to complete. Your provider can perform regular maintenance and adjustments as part of their contract, allowing your full-time employees to focus on other issues.
- Development Center – Opening an off-site development center is often considered an outsourcing arrangement. A development center contains resources that the home office can’t accommodate and employees people from the region to carry out IT operations.
- Hosting – Through a hosting model, the contracting business hires an IT provider to establish and run a server or multiple servers. Unlike other arrangements, the provider is responsible for one specific task that requires minimal work to maintain — rather, you’re essentially paying for the equipment and storage space, as well as the technical skills to update them.
Why Do Businesses Outsource IT Services?
#1 Gain Access to Talent Around the World
As we’ve discussed, software development outsourcing means you can work with a provider in a country that’s not your own — even one on the other side of the world. You may find specializations you lack in-house but need to complete a project.
#2 Control Costs
Even if you choose an onshore IT outsourcing model, you’ll still save on costs. In-house teams require full-time salaries, benefits, and additional fees for resources and equipment. Not only will you not need to provide full-time salaries and benefits to a third-party team, but the vendor will also have its own infrastructure and resources that you won’t have to fund. Moreover, the provider will invest in the training and professional development of their team.
Of course, if you outsource to a provider in a developing country, such as one in Latin America or Asia, you’ll save even more.
#3 Focus on Core Business Functions
Perhaps you have some IT-related projects that are integral to your core functions as a business, such as app development. You may want your in-house IT team dedicated to those matters, but where does that leave the rest of your tasks — including general maintenance and upkeep? Outsourcing will allow you and your in-house team to focus on core business functions.
#4 Share Risk
Compliance, functionality, and other IT-related risks are mitigated when you outsource projects and tasks to a third-party provider. This is because the provider will share the responsibility and risk as a partner in the venture, which makes you safer overall.
#5 Assist with Growth and Short-Term Needs
As your company grows, you may find that you don’t have the staff and resources to accommodate your efforts to scale up. Many businesses outsource during transition periods. This provides short-term solutions to keep them going until they determine how they’ll meet their longer-term needs, either by hiring full-time IT employees or forming a more established relationship with an IT outsourcing company.
Alternatively, you may have fluctuating demands depending on the nature of your industry, the season, and other factors. During busy periods, outsourcing can help you accommodate your workload.
What IT Services Are Most Commonly Outsourced?
There are a number of commonly outsourced IT services. They include:
- Web development
- Web design
- Web/cloud hosting
- Web optimization
- Cybersecurity
- Application development
- Software and website management and updates
- Technical support
- Database management
- Data storage
- Quality assurance (QA) testing
When to use
IT outsourcing makes sense when you need skills your team doesn’t have, want to scale engineering capacity faster than hiring allows, need to reduce costs without reducing quality, or want to focus your in-house team on core product and let a specialist handle adjacent technical work.
When NOT to use
Don’t outsource work that requires deep, proprietary business context your vendor can’t access, security-sensitive systems with regulatory constraints on data residency, or early-stage product discovery where face-to-face collaboration accelerates learning faster than any cost saving justifies.
An IT outsourcing company can provide many advantages to businesses of all sizes, offering different models and means of delivering technology services of all types. If you’re considering using one as part of your strategy, think about your goals, and do your research to find the best partner for you.
Key Takeaways
- An IT outsourcing company provides software development, infrastructure, or IT operations services to clients who choose not to build or maintain those capabilities in-house, enabling faster scaling, cost control, and access to specialized talent.
- Staff augmentation embeds external developers directly into your team — they work under your management, processes, and tooling, making it the most flexible model for filling skill gaps without handing over full project control.
- Costs vary by model and geography. Staff augmentation for senior engineers in Latin America (nearshore) ranges from $50–$100 per hour, offering a balance of cost efficiency, time zone alignment, and high-quality talent compared to onshore or offshore options.
