Outsourcing and Outstaffing in Software Development
Developing software is a difficult and rather complex process that requires special knowledge and skills. The good news is that software development companies can now benefit from various models that allow them to deploy resources consciously.
Such models are IT outsourcing and IT outstaffing. These two models focus on fixing various problems within a software company to get the best results. But then a question occurs, which of these two models are better? Meaning, should you hire a professional team from overseas, or order the development of a project from the service provider?
The trend of using the outsourcing model is not new. There is more than one affordable foreign location where you can order the development of software without paying a fortune. But still, in some cases, you may benefit more from outstaffing. So, which one is better?
Check out the article to learn more about each of these models, and figure out which one to choose. The article is dedicated to explaining all the details related to both mentioned IT models.
What is Outsourcing in IT?
Let’s imagine the situation. Your company has a project to develop, but none of the IT specialists that you have are experts in this industry. What would you do in this case? Reject the project? Hire new specialists? Or use the services of a third-party company? Hint: the third option is “the one”.
One might think that it’s a good idea to expand the staff in a company by hiring more specialists. But let’s add another requirement to our imaginable situation — you have only one project of this type, and you won’t have more.
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So what? Are you going to hire a specialist to just fire them when the project is completed? Probably, you won’t. Otherwise, you would have to explain the reason for firing a good specialist and that doesn’t sound like a good idea.
Another bad idea is to spend funds on training your specialists for this specific project. Even though new knowledge and skills are always good to acquire, but not in this case. After all, you will have just one project of such type, why would your experts need skills that they won’t deploy in the future?
So, your best bet is to use the services of a third-party company that has the required knowledge, skills, resources, and experience. That’s exactly what the outsourcing model offers.
Simply put, outsourcing means delegating projects to a third-party company, often from overseas. Such an option often requires fewer expenses and guarantees great results thanks to collaborations with skilled specialists.
The IT industry keeps growing, which means that a lot of great companies in different countries and different industries offer the benefits of contractors that develop high-quality software and other valuable services for rather low costs.
But still, the main task of outsourcing is to deploy all resources to the fullest, while also developing new business directions without the need to hire or train staff. Instead, a company delegates the project to a foreign company for more cost-effective solutions.
What is Outstaffing in IT?
Outstaffing is similar but still different from outsourcing. That’s why these two models are often confused, they do have a lot of similarities. Outstaffing is a model that requires “employing” a company. This company will be responsible for all, or almost all time of the outstaffed team. Meaning, the team will be dedicated to one client.
But the difference from the previously mentioned model is that when it comes to outstaffing, the client employs the team, but does not provide official employer benefits. That’s still on the shoulders of the official outstaffing services provider.
The Difference Between Outsourcing and Outstaffing
So, what is the difference between these two models? At this point, outstaffing and outsourcing still sound like two identical approaches.
When it comes to outsourcing, the provider typically has full control over the project. Meaning, the client fully delegates the development of the project to a remote team that is fully involved in the development of the project.
The client barely ever has access to this development team. Moreover, it is typical for the outsourcing team to work on different projects at a time. But still, the project is done on time and is of good quality.
When it comes to outstaffing, it’s almost as if you get new employees, without actually hiring them. When you use the services of an outstaffing provider, the company delegates a separate team that is fully involved in your project without having any other side or main projects.
You can compare this model to hiring a separate team of specialists with the skills and knowledge to complete the project. But you don’t have to pay taxes for hiring them or offering the benefits of being a full-time employer. That burden is still on the shoulders of the outstaffing provider.
So, the main difference is that when you hire an outstaffing team, you almost always get full-time employees, but you don’t pay salaries, wages, benefits, etc. You just pay for the job according to a predetermined schedule.
But outsourcing also means that a full team of individuals work on your project, rather than just a small team like in the example with outstaffing.
Why Do Businesses Prefer Using these Two Models?
Expanding or training staff is not always an option. In some cases, it is unreasonable to hire more specialists to complete a project. It may be too expensive, even wasteful in terms of business resources.
Instead, these businesses prefer models where they get a role of an employer, and the third-party company becomes a contractor. So, what are the main reasons for using these two types of models? Check here:
- It’s cost-effective. Hiring a specialist means paying salaries, taxes, wages, providing benefits, etc. Plus, the services of a full-time employee could cost a lot depending on the expertise.
- Allows using the resources to the fullest. The resources you have to complete the project can be used wisely by collaborating with a third-party company from an affordable location.
- No need to train staff for a new project.
- Access to a team with resources, knowledge, skills, experience, and required equipment.
A simple example from the real world. If you have a pipe leak at your house, what do you do? Hire a permanent plumber? Or do you buy the services of a professional plumber who has the knowledge, skills, and equipment to fix a problem for a reasonable price? You, probably, know the answer.
Advantages and Disadvantages of Outsourcing Model
Any business model has advantages and disadvantages, and outsourcing isn’t an exception. You can check a detailed description of the benefits and drawbacks of using the outsourcing model further in the article.
Here are the key advantages of using an outsourcing model:
- No need for everyday management and involvement. The vendor is deploying resources as needed, as well as coordinating all processes between their internal and your external team. Plus, the whole team can be engaged in a project if needed.
- Code quality is on the vendor’s shoulders. A vendor responsible for your project makes sure that the team meets the coding requirements.
- The third party is responsible for human resources. Whether the team needs more or fewer people, the vendor that you work with uses resources as needed. The vendor handles recruitment, payroll, taxes, etc.
- You don’t have to buy and install new software. As it was mentioned, the outsource team has everything — resources, equipment, people, etc.
- A vast range of resources is available. Your business may focus on one industry, so you don’t have the resources to complete a different project. While the company that you collaborate with has. They can simply hire more people or get more resources.
As for the disadvantages, here is a list:
- A vendor has full control over the project. From the beginning to the end. You don’t have to be involved, and it could be an advantage. But it could also be a disadvantage depending on how much involvement you want to have.
- It’s more expensive than the outstaffing model. Outsourcing means you pay per hour to the IT specialists as well as to the managers that coordinate the project.
Advantages and Disadvantages of Outstaffing Model
If you are currently debating whether to use outstaffing or outsourcing, you could benefit from learning about the pros and cons of outstaffing. Check out some benefits and drawbacks of the model below.
The advantages of this model are as follows:
- It’s cost-effective. The company that you collaborate with provides you with a team of specialists. But the cost of working with this team is usually lower as long as you have a dedicated management team. The vendor providing outsourcing services adds the cost of a managing team to the plan, so you can save resources by hiring an outstaffing team.
- You are more involved in the project and have more control when working with an outstaffing team. If you would like to hire more specialists, but simply don’t have the resources, your best bet is outstaffing services. You work together on a project as if you are part of one team. You just don’t pay for their salaries, taxes, wages, benefits, etc.
- Full access to needed resources and act as a manager of the team, but don’t hire them. You get full involvement, can add changes, etc.
- Outstaffing offers a flexible hiring model. You get to choose an outstaffing provider, to control over whom to work with.
- Access to resources and IT services, while the outstaffing provider handles everything else.
When using this type of model, you may face some of the following challenges:
- Managing and coordinating is your responsibility. Some companies prefer more involvement, while others would love to have a team coordinate everything for them. Meaning, this is a pro and a con at the same time.
- Communication problems. These problems may or may not occur, depending on the software used by the client and the vendor.
The Bottom Line
So, which model should you choose? There is one thing for sure — these two models are certainly better than trying to hire or train a team. The decision on which model to choose should be based on the resources that you can deploy and the level of your involvement.
If you have extra resources to use and want the job done without being involved, then your to-go option is an outsourcing model. But if you want to reduce the costs — choose outstaffing. You will be involved more in the development of the project since outstaffing companies do not provide clients with a management team. Based on this information, it should be easier to make a decision.
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