--- title: "IT Outsourcing: Models, Costs and How to Choose | Azendo" description: "Five ways to buy IT outsourcing, from contractors to a managed offshore software team, what each costs in money and management time, and how to choose." url: "https://azendo.co/blog/engagement-models/it-outsourcing/" --- 1. [Home](https://azendo.co/) 2. [Newsroom](https://azendo.co/newsroom/) 3. [Engagement models](https://azendo.co/blog/engagement-models/) 4. IT outsourcing # IT outsourcing: the models, the real costs and how to choose. IT outsourcing covers arrangements that work very differently. A managed offshore development team and an hourly contractor are both sold as outsourcing, and they ask very different things of the person who runs them. One question sorts the models: who manages the work. With contractors, staff augmentation or your own entity abroad, you do. With project outsourcing or a managed offshore team, the provider does, and that choice sets most of the real cost. By [Mikkel Schmidt](https://azendo.co/about/mikkel-schmidt/) Published 23 September 2026 · Updated 29 October 2026 The models differ mainly in who directs the work day to day. ## What IT outsourcing means IT outsourcing means contracting technology work to an external provider instead of employing the people who do it. The definition is broad on purpose, and software outsourcing, where the work is building and running your product, is the part many companies mean. It covers a helpdesk contract, a fixed-price app build, three contractors joining your standup, and a dedicated [offshore development team](https://azendo.co/) that works on your product for years. One question separates them: **who directs the work day to day, and who answers when it slips?** The models, by who runs the work You direct the work**Contractors and staff augmentation**You choose the people, set the tasks, run the standups and own the outcome. The provider supplies and invoices. The provider directs the work**Managed teams and project outsourcing**The provider plans, runs quality and answers for delivery. You set the priorities and review what arrives. Location, contract shape and rate card all sit underneath this one question. ## What companies outsource in IT Most IT outsourcing falls into five areas, and each has its own kind of provider. * **Support and service desks.** First-line and second-line support for staff or customers, usually priced per ticket or per user, against response-time targets. * **Infrastructure and cloud operations.** Running servers, networks and cloud accounts, monitoring and backups. Often bought as managed IT services with a service level agreement. * **Security operations.** Monitoring, incident response and compliance work, from a specialist provider. * **Software development.** Building and maintaining your own product, from a single feature to a whole platform. This is where the choice of model matters most, because the work never really ends. * **Data and AI.** Pipelines, analytics, machine learning and automation, increasingly bought alongside software development. The first three are operational: the work is repetitive and measurable, so service levels work well. Software and data are creative and cumulative: the value builds up in people who know your product, so continuity and accountability matter more than ticket counts. ## What to keep in-house Outsourcing works best when the boundary is clear. Most companies keep product ownership, architecture decisions, security policy and vendor management on their own side, and outsource the building and running around them. A provider can plan sprints, write code and manage engineers. Deciding what your product should become is a job for the people who own it. ## The IT outsourcing models you’ll be offered Scroll the table sideways to see every column. | Model | Who manages | Priced by | Suits | Struggles when | | ---------------------- | ------------ | -------------------------- | -------------------------------------------------- | ------------------------------------------------------------------ | | Contractors | You | Hours | A gap of a few months | You need continuity, or someone leaves mid-sprint | | Staff augmentation | You | Per person | A known skill gap in a team that already runs well | Your managers are already stretched | | Project outsourcing | The provider | Fixed scope | A defined build with an end date | Requirements move, which they usually do | | Managed offshore team | The provider | Committed monthly capacity | Ongoing product work | The work has a clear end date | | Your own entity abroad | You | Salaries and overheads | A permanent second office | The six months of setup and the country manager are underestimated | Two of these get confused often, and the mix-up is costly. [Staff augmentation vs managed services](https://azendo.co/blog/engagement-models/staff-augmentation-vs-managed-services/) explains the gap in one page: augmentation adds people you manage, and a managed service adds capacity the provider manages. ## Onshore, nearshore and offshore IT outsourcing Location is a separate decision from the model. It’s a trade between cost, working-hour overlap and the size of the talent market. * **Onshore.** Same country, highest cost, no time zone or language friction. * **Nearshore.** A neighbouring region, moderate cost, most of a shared working day. * **Offshore.** Further away, lowest cost, with overlap that depends on the country. Thailand is five hours ahead of Northern Europe in summer and six in winter, so a European morning meets a Thai afternoon. Offshoring and outsourcing are two separate decisions, and mixing them up is how companies end up with the wrong provider in the right country. [Offshoring vs outsourcing](https://azendo.co/blog/engagement-models/offshoring-vs-outsourcing/) covers both decisions in detail. ## What IT outsourcing costs, including management time Every provider gives you a rate you can compare in a spreadsheet. The cost that decides whether the arrangement works is the management time it takes from your own people, and that never appears in a quote. Where the hidden cost sits 1. ContractorsCheapest per hour. Your own engineers plan and review the work, and absorb the ramp-up again each time someone rotates off. 2. AugmentationSlightly higher per person. The management load is the same as employing someone, because in effect you are. 3. Fixed projectPredictable at the start. The cost arrives as change requests once the requirements move. 4. Managed teamHigher per person than a contractor and lower in total for ongoing work, because planning, quality and continuity sit with the provider. Compare total cost, including your own people's time, instead of rate against rate. ## How to choose an IT outsourcing model, in four questions 1. **Is the work finite or ongoing?** A defined build with an end date suits a project or a contractor. A product that keeps producing work suits a dedicated team. 2. **Who has time to manage?** If your managers are already at capacity, choose a model where the provider directs the work. 3. **How long do people stay?** Ask for the retention figure and how it’s calculated. On a long engagement, retention matters more than rate, because knowledge of your codebase is the expensive part. 4. **Who answers when a sprint slips?** If it’s a named person on the provider’s side, you’re buying a managed service. If it’s you, you’re buying people. ## Where Azendo fits Azendo runs the managed team model for software, data and AI work. We assign [dedicated developers](https://azendo.co/hire-a-dedicated-development-team-in-thailand/) full time to one client’s product and manage them from our offices in Chiang Mai and Bangkok, under one agreement with a [committed monthly capacity](https://azendo.co/pricing/). Your service delivery manager is part account manager and part Talent Success manager, and our specialists stay with Azendo for 3.3 years on average. It’s built for companies whose product keeps growing, whether they want to add one remote team or roles across several areas. Our guide to [software development outsourcing](https://azendo.co/blog/engagement-models/software-development-outsourcing/) compares the three ways to outsource product work, and how it works walks through the four steps from first call to a working team. Two of these models have guides of their own: [offshore staffing](https://azendo.co/blog/engagement-models/offshore-staffing/) and [staff augmentation](https://azendo.co/blog/engagement-models/staff-augmentation/). Both can be delivered as a fully managed service, which is how we provide them. Send us a message Tell us what you want to build. We come back with the team we would assign and what it costs. ## Two IT outsourcing models and the management they leave with you. Augmentation and a managed team side by side: who answers for the work, and how the coordination load grows with the team. What stands behind the person doing the work Both models put an engineer on your product. A managed team also puts a development programme behind them, which is what keeps them with you, and improving, in year three. Staff augmentation Your teamdirects the work Assigned specialist Behind the specialist Employment and payroll. Development, coaching, reviews and retention are usually left to you. Your side carries * Priorities * Scope * Technical decisions * Acceptance * Sprint planning * Quality gates * Performance reviews * Training * Retention * Continuity Azendo managed service Your teamsets the roadmap, reviews output Azendo service delivery manageroversees operations and delivery Assigned specialist Talent Success programme, around every specialist * Talent Success and Workplace Experience managers Two per specialist * Well-being check-in Every 2 weeks * Coaching and development Tailored to each plan * Development plan Built every quarter * Client delivery score Every Friday * 360° performance review Quarterly * Growth track and promotion readiness Live skill profile * AI training Every specialist 3.3 years Average time a specialist stays with Azendo, which keeps your product knowledge in the team Your side carries * Priorities * Scope * Technical decisions * Acceptance * Sprint planning * Quality gates __What stands behind an assigned specialist in each model__ | Element | Staff augmentation | Azendo managed service | | ------------------------------------------------ | --------------------------- | ----------------------------------------------------------- | | Who manages the specialist day to day | Your team | Azendo, with a service delivery manager overseeing delivery | | Talent Success and Workplace Experience managers | Not part of the arrangement | Two per specialist | | Well-being check-in | Not part of the arrangement | Every 2 weeks | | Coaching and development | Not part of the arrangement | Tailored to each plan | | Development plan | Not part of the arrangement | Built every quarter | | Client delivery score | Not part of the arrangement | Every Friday | | 360° performance review | Not part of the arrangement | Quarterly | | Growth track and promotion readiness | Not part of the arrangement | Live skill profile | | AI training | Not part of the arrangement | Every specialist | | Average specialist retention | Not published | 3.3 years | Coordination hours a week falling on the client As the team grows, staff augmentation takes on the hiring and leaves the management with you. Azendo's estimate from our engagements, at the midpoint of four to eight hours per specialist per week. __Client coordination hours per week, by team size__ | Team size | Staff augmentation | Azendo managed service | | ------------- | ------------------ | ---------------------- | | 1 specialist | 6 hours | 2 hours | | 3 specialists | 18 hours | 2.5 hours | | 5 specialists | 30 hours | 3 hours | | 8 specialists | 48 hours | 4 hours | ## Questions about IT outsourcing. What is IT outsourcing? IT outsourcing means contracting technology work to an external provider instead of employing the people who do it. It covers everything from a helpdesk contract to a dedicated offshore development team building your product. The models differ mainly in who directs the work day to day, and that decides how much management lands on you. What's the difference between IT outsourcing and offshoring? Outsourcing is about who does the work. Offshoring is about where it happens. You can outsource to a company in your own city, and you can offshore by opening your own office abroad. Most arrangements combine both, which is why the words get mixed up. Which IT outsourcing model is cheapest? Per hour, contractors and staffing arrangements usually look cheapest. In total they often cost more, because planning, coordination and quality work move to your own engineers, and that time rarely shows up in the comparison. Our estimate is four to eight hours a week per specialist when you run the people yourself. How long does it take to start? A contractor can start in days. A managed offshore development team takes longer: at Azendo, four weeks to hire from signing, because the provider selects named developers for your stack, you meet them first, and the working rhythm is agreed before day one. Setting up your own entity abroad takes six months or more. When does IT outsourcing work best? When someone on your side sets a clear direction and the work keeps coming. Outsourcing moves the building, the running and the management of the people to the provider. The decisions about what to build, in what order and to what standard stay with you, and so does the code. ## Tell us what you want to build and we will tell you what it takes. A service delivery manager replies with the roles we would assign, the monthly capacity and what the first month looks like. [Get in touch](https://azendo.co/get-in-touch/) [How it works](https://azendo.co/how-it-works/) ## Not sure which engagement model fits your business.