TechRepublic estimated that in 2020, 1 million programming jobs in the US went unfilled. With a shortage of qualified engineers and big global differences in salaries, more companies turn to IT outsourcing (ITO); Statista put the market at $92.5 billion that year.
VARTEQ has seen ITO from both sides. Before founding the company, our leadership worked at large and mid-size US companies, leading projects and working with outsourcing vendors. Since 2014 we have worked with 100+ clients. This article covers why companies outsource, the hidden costs of doing it badly, how outsourcing destinations and engagement models compare, and what makes a partnership last.
Why companies outsource IT work
Flexibility. Companies keep full-time staff for core systems, but rewrites, upgrades and big new features create spikes in demand. Outsourcing lets them scale capacity up and down for months or years without long hiring cycles.
Talent. Some skills are easier to find outside the US, for example front-end frameworks (React, Angular, Vue), machine learning and AI, Java, PHP, and eCommerce platforms and CMSs. Remote work has made global teams normal, as long as English, culture and time zones are handled well.
Cost. The most cited reason: rates for the same skills vary widely by region.
The hidden costs of outsourcing done badly
The hourly rate is the visible cost. The hidden costs decide whether outsourcing pays off:
- Rework. Unclear requirements and weak reviews lead to features that have to be rebuilt.
- Management overhead. Internal leads spend their time chasing status and correcting direction.
- Communication gaps. Language, culture and time zones slow every decision.
- Vendor lock-in. Knowledge stays with the vendor, and the internal team can't maintain the result.
- Turnover. When vendor engineers keep changing, every newcomer has to learn the system again.
Outsourcing destinations compared
Rates below are typical ranges at the time of the original article (2021) and change over time.
- US and Western Europe: common language, culture and time zone; highest rates, about $100–200 per hour for US consultants.
- Eastern Europe: large pool of engineers, strong STEM education, good English and a work culture close to Western teams; about $20–60 per hour; home to companies such as Grammarly and GitLab.
- India: largest talent pool and lowest rates, about $10–35 per hour; larger cultural and time-zone differences and uneven quality; often process-heavy and spec-first.
- Latin America: close time zones for North America; about $20–50 per hour; a younger IT sector that is still building expertise and processes.
Engagement models compared
- Fixed cost: scope and price agreed upfront, often through an RFP; predictable budget; needs mature requirements; large fixed bids push teams into a rigid waterfall approach where changes are slow and expensive. Works best when deliverables are broken into smaller, incremental pieces.
- Time and materials: the client pays for time spent, usually at agreed hourly rates; flexible as scope evolves; total cost isn't fixed upfront; works best for organizations with mature delivery processes that can manage and integrate an external team.
- Dedicated team: the vendor assembles and manages a team that works on the client's roadmap; long-term capacity without in-house hiring; the client sets priorities.
What makes a long-term partnership work
From our work: For more than ten years, VARTEQ has been Follett's engineering partner on Aspen, its student information system for K-12 districts. Long relationships like this rest on the same things every time: clear ownership of priorities and technical decisions, a stable team that keeps the knowledge, and engineers who integrate with the client's own processes and culture. Read the Follett case study.
Frequently asked questions
What is the difference between staff augmentation and a dedicated team?
With augmentation, you manage the engineers; a dedicated team is managed by the vendor on your roadmap.
Which engagement model is cheapest?
It depends on scope. Augmentation is usually the cheapest way to start.
Can we switch models later?
Yes. Many clients start with one model and change it as the work grows.
Final thoughts
Outsourcing works when the partner is chosen for fit, not only for the rate. VARTEQ offers dedicated development teams, IT staff augmentation and end-to-end projects. Contact us to discuss your needs.
