Key takeaways
- Every one of the types of outsourcing sorts two ways: by location and by function.
- By location: onshore (your country), nearshore (nearby), offshore (further afield).
- By function: BPO, IT (ITO), knowledge (KPO), legal (LPO), recruitment (RPO), and more.
- You also choose a contract model: a one-off project, a dedicated team, or a managed service.
- Most small and mid-sized businesses land on offshore BPO or IT outsourcing with a dedicated team.
The types of outsourcing look confusing because most guides dump ten or fourteen of them in a single list. It is simpler than that. Every type sorts along two axes: where the work happens (location) and what work it is (function). Once you see it that way, choosing gets easy. This guide lays out both axes, defines the acronyms in plain English, and then does the part the lists skip: helps you pick the type your business actually needs.
Two Ways To Sort Every Type Of Outsourcing
There are really only two questions behind all the types of outsourcing. First, where is the team? That gives you onshore, nearshore, or offshore. Second, what do they do? That gives you the functional types like BPO or IT outsourcing. Almost every label you will see is just a combination of those two, plus a contract model. Hold that framework and the long lists stop being intimidating.
Types By Location: Onshore, Nearshore, Offshore
Location decides cost, time-zone overlap, and control.
- Onshore: a provider in your own country. Highest cultural fit and cost.
- Nearshore: a nearby country with close time zones. A middle ground.
- Offshore: a distant country such as the Philippines, for the lowest cost and deepest talent pool.
For a deeper comparison, see our guide on staff augmentation vs outsourcing and how the models differ.
Types By Function: BPO, ITO, KPO, LPO, RPO And More
Function decides what you actually hand off. The acronyms are simpler than they look.
- BPO (business process outsourcing): back-office and front-office work like customer support, data entry, bookkeeping, and admin.
- ITO (IT outsourcing): software development, QA, and technical support.
- KPO (knowledge process outsourcing): higher-skill analytical work like research and financial analysis.
- LPO (legal process outsourcing): document review, contract support, and paralegal work.
- RPO (recruitment process outsourcing): sourcing and hiring handled by an outside team.
- Plus manufacturing outsourcing and professional or project-based outsourcing.
BPO is where most businesses start. See our complete guide to business process outsourcing in the Philippines.
Contract Models: Project, Dedicated Team, Managed Service
The last piece is how you engage. A project model is one-off work with a fixed scope. A dedicated team is staff who work only for you, ongoing, and whom you direct day to day. A managed service hands a whole function and its outcome to the provider. Most SMEs that want control plus continuity choose the dedicated-team model.
Which Type Does Your Business Actually Need?
Here is the decision the lists never make for you. Match the types of outsourcing to your goal. If you want lower cost on ongoing back-office work, offshore BPO with a dedicated team. If you need engineering capacity, offshore or nearshore ITO. If you need same-day real-time collaboration above all, lean nearshore. If control and cultural fit outweigh cost, stay onshore.
“Most businesses overthink the type and underthink the setup. Pick the function you need handled, put it offshore if cost and scale matter, and run it as a dedicated team so you keep control. The label matters far less than whether the people stay and learn your process.”
Kris Uba, Director of Operations, Big Outsource
The Most Common Choice For SMEs
For a 10-to-200-person company, the usual answer among the types of outsourcing is offshore BPO or IT outsourcing, run as a dedicated team. It gives the lowest cost, a deep talent pool, and, with a stable partner, the continuity that keeps quality high. Big Outsource clients see 40% faster response times after handoff, from teams that stay for years.
“They always deliver on time with no issues at all. Their commitment to employee welfare creates a familial atmosphere, aligning perfectly with our small company values.”
Sam Hinchey, Operations Manager, OpenRoad
Explore the back-office and technical options in Big Outsource back-office support and software development services.
How To Get Started
Pick your function, pick your location by priority, and pick a contract model, usually a dedicated team. Then start small with the one function that drains the most time. To map the right type to your business, explore Big Outsource services or book a discovery call.
References
- Oracle NetSuite. (2025). The 14 Types of Outsourcing: A Guide. https://www.netsuite.com/portal/resource/articles/erp/types-of-outsourcing.shtml
- Deloitte. (2022). Global Outsourcing Survey 2022. Deloitte Insights. https://www2.deloitte.com/us/en/pages/operations/articles/global-outsourcing-survey.html
- Indeed. (2025). What Is Outsourcing? (Including Types and Advantages). https://www.indeed.com/career-advice/career-development/outsourcing
