IT outsourcing is a B2B service that involves one party providing another with IT teams, team extensions or specialists to fulfil a technology staffing need.

As a professional service, IT outsourcing can be packaged in a variety of different ways. But the underlying model is that specialists directly employed by the provider take on IT functions required by the client organisation.

IT outsourcing can be used as either an alternative or complement to a directly employed in-house IT team.

In the context of outsourcing, the term “nearshore” refers to international labour markets that have relative geographic proximity to the client organisation. 

For example, Eastern Europe is generally considered a nearshore labour market in relation to Western Europe. Mexico is a nearshore market from the perspective of the USA. 

The term nearshore denotes outsourcing markets as closer than offshore alternatives.

Among the advantages that make IT outsourcing a popular service are:

• Cost efficient – it can be cheaper to use IT outsourcing services than to directly employ IT specialists in-house in high salary economies, especially if remote teams are based in nearshore and offshore locations. 
• IT outsourcing also allows companies and organisations to only pay for expensive IT specialists when they are needed. Direct employees are an overhead even when not working on strategically important projects.
• IT outsourcing companies are specialists in the recruitment and management of IT teams and experts. It can save organisations that don’t have that in-house expertise a lot of time and money to outsource the recruitment, payroll and management of IT functions.

Despite the advantages IT outsourcing can offer, there are also many scenarios which could mean your needs would be better met by directly employing needed IT specialists. These include:

• Sensitive Data: If your IT projects involve sensitive data (e.g., financial institutions, healthcare organisations), you might prefer to keep IT in-house to have better control over data security and privacy. Regulatory requirements might also dictate this. 

• Complex, Specific, or Unique Technology Needs: If your technology needs are very specific, complex or unique, it may be beneficial to have dedicated in-house employees who understand your systems inside and out.

• Innovation and Competitive Advantage: If IT is a key strategic and IP (intellectual property) asset for your company (like tech companies), keeping IT in-house can help maintain a competitive advantage.

It’s a very broad question involving many potential variables but organisations use IT outsourcing services because it is directly or indirectly more cost efficient than directly employing for the same functions.

The direct cost paid to an outsourcing partner to provide nearshore and offshore IT specialists can often be lower than employing domestically for the equivalent skills.

Indirect cost efficiencies include avoiding recruitment agency fees or the expense of in-house recruitment, the need to set up and manage international payroll, and the flexibility to scale IT resources up and down with project cycles.