Statistics are clear. Nearly 54% of all companies use some form of the third-party support team to deliver the business goals they have.
We already wrote about the difference between a dedicated team and an IT team extension. Yet here we would like to pay more attention to outsourcing and outstaffing services features.
In the following paragraphs, you will be able to read more about the definition of both models, their differences and some common pros and cons of each of them.
Let’s begin with the outsourcing
The first alternative to creating an in-house development team we are going to talk about is outsourcing. In short, outsourcing is a business model where your company hires software developers from another country to perform assigned tasks.
When you choose this model, more often than not, the outsourced team will be responsible for the complete scope of work. That means they will take over the whole development cycle – including technical requirements, development, testing, and maintenance. In most cases, besides developers who are working on the product, a project manager will also be an integral part of the team.
Outstaffing is a similar concept, except…
The outstaffing model usually does not involve handling the whole scope of the project through the vendor’s side. In this model, a vendor and an individual contractor are indirectly hired to perform tasks on a client project.
Generally, the end client handles the project scope, and the client-side provides the product owner or project manager. The vendor takes care of the legal, administration, and HR-related responsibilities and obligations in this case.
So, all in all, the most significant difference between outsourcing and outstaffing is whether the vendor’s or client’s office provides the project management.
Benefits and Potential Challenges of Outsourcing
Benefits
- Saving costs. It is hard not to include this as a point, particularly if your business headquarters are in Northern America or Western Europe, where hourly developer fees are significantly higher than in popular outsourcing regions.
Related Article: How much software developers earn around the world - Access to a larger pool of talents. You can enjoy the benefit of collaborating with a team that is not physically bound to your geographic location.
- You invest less management time. Although the project management is left to you in some cases, in other cases, the vendor organizes the complete development and maintenance process. Of course, in this scenario, you are in regular communication with the project manager, ensuring the milestones are reached as planned.
- No sourcing and hiring hassle. When you find a good vendor, all the efforts targeted at sourcing, headhunting, pre-screening, and managing the candidate pipeline, in general, should be off of your shoulders.
Potential challenges
- Effectiveness estimation. Watching your project reaching estimated milestones from afar can sound intimidating. This can be particularly challenging during the trust-building stage. Therefore, it is crucial to define guidelines and check-in points at the very beginning of collaboration.
- Misunderstandings while communicating. Together with the effectiveness challenges, the overall communication is at the test in remote mode as well. With this in mind, it is of utmost importance to define communication channels and methods even before the collaboration starts.
Benefits and Potential Challenges of Outstaffing
Benefits
- Saving costs. The budget-friendliness may be even more evident in this business model, as you manage the software development team directly.
- No need to think about payroll and taxes. The vendor you signed the agreement with will take care of salary payments and related taxes.
- Control over development flow. Since you have direct communication with your team members, the speed of the project will likely increase, too.
- Access to talent pool anywhere in the world. Like in the outsourcing model, you will have complete freedom when deciding about the geography of the vendor and software engineers you want to work with.
Potential challenges
- Overwhelming work management. With all the responsibility of managing your remote team, it can be challenging at times. Yet, tech-savvy professionals in your in-house team can help you with the process creating before going for the outstaffing method.
- Misunderstandings in communication. Communication can be put to the test in this model as well. Same as with outsourcing, the suggestion is to clearly define communication channels and methods even before the collaboration starts.
The conclusion (from our experience)
Whether choosing an outsourcing or outstaffing model, there will certainly be a space for risk or challenge. Yet, one of the reliable ways of minimizing the risks is transparency and defining the guidelines proactively. Of course, as with every living thing, each collaboration evolves, and so the guidelines set at the beginning must be revisited and adjusted.
When you decide which option of the two to choose, drop us a line, and together we will find the best outstaffing or outsourcing solution for you.
