Outsourcing or Outstaffing – what’s the difference and what to choose?
Sometimes hiring in-house IT programmers can be a real pain in the neck – it takes a lot of time, money and when you think that you have found the one, all of a sudden he decides to quit your company on short notice. And you are right back where you began.
Then, you think of another way of hiring developers – freelance. You are browsing through multiple profiles of freelance programmers, you hire the best fit, but he does not complete your assignment in time and, eventually, a freelancer goes off the grid for good. You feel stressful, tired, you lost valuable time, spent a great deal of your company’s budget, and your ambitious project is on a tight deadline.
Nevertheless, there is a way to avoid these worst-case scenarios without putting all your projects and business at great risk. You can use outsourcing or outstaffing services for hiring experienced talents. Continue reading further to find out what the differences between the two are, what similarities they share, and what choice would be the best for you.
Differences between Outstaffing and Outsourcing
Outsourcing and outstaffing have been popular business models in the IT industry for the last several years, and a number of countries, like the USA, Canada, and the United Kingdom have been outsourcing a lot of their IT functions. Thus, to choose the best option between outstaffing and outsourcing, let’s start with their definitions first. Sometimes people do use these models’ names interchangeably, thinking that outsourcing is the same as outstaffing. As we will see below, this statement is not true.
Outstaffing is a business model by which a client can hire a team of remote IT professionals from a software development service provider. This model implies that developers are officially employed by a vendor, who is responsible for payment of wages, bonuses, taxes, arranging workplace conditions, and other benefits, like health and life insurance. Still, the hired team is fully dedicated to the client and all employees in this team are working on one project at a time.
Outsourcing, on the other hand, is a business model by which a client hands over some of his or her business processes to a software development service provider. In this case, an entire project is under the provider’s responsibility and supervision. The client has no direct control over remote outsourcing developers. A dedicated project manager of the outsourcing software development company is responsible for communication between the two parties.
Pros of outstaffing
Outstaffing can help you significantly cut costs. You don’t need to spend much money on finding the right match or matches for your company. As a rule, companies that provide such services already have a lot of developers to choose form. Thus, you do not need to worry about a lot of things – taxes, wages and other perks as they will be taken care of by your outstaffing partner money-wise.
The only thing you can spend your time on is finding the right outstaffing partner, which is much faster than finding the right in-house fit. You waste no time on hiring and on-boarding processes and you start your project immediately with new programmers.
Probably, one of the most important things in outstaffing is the possibility to control the entire development process. It means that you should have proper managerial experience and you know how to skillfully execute power.
If someone decides to quit your project or leave your partner for good, it won’t be as damaging as, for example, if they were your in-house employees. You will be provided with new programmers to start immediately. Therefore, it will not bring you any major inconvenience.
Cons of outstaffing
Communication might be an issue with outstaffing as your development team is not in your office and you can’t interact with them face-to-face. Still, if you can and know how to establish regular communication via different channels to meet your business needs, it won’t be an issue either.
More managerial tasks
Still, even if you have full control over development, it will take more time and effort to manage both the development and your remote development team.
Pros of outsourcing
Outsourcing has almost the same advantages as outstaffing. There is no need for you to spend money on other things other than outsourcing services, especially when your company is located in the USA, Canada, Australia or in the United Kingdom. Also, the development costs of outsourcing is much lower compared to managing an in-house development team.
When you fully outsource certain processes all whole projects to another company, are left with more time on your hands to devote yourself to another important thing for your business. With the help of outsourcing, you can easily unburden yourself.
Focus on Development
You don’t have to worry about on-boarding processes, as your outsourcing partner is responsible for them. You do not have any legal relationships with developers.
Cons of outsourcing
If in outstaffing you take full responsibility for the whole process of development of any business processes, with outsourcing the service provider is responsible for everything. But, it can be easily turned into an advantage, if you are not proficient in managing people. Thus, the outsourcing partner will know how to properly manage remote teams and business processes.
Communication can also become a stumbling block in your cooperation with an outsourcing partner. For example, they can be located in another country or even another hemisphere. However, even in this case, it can be turned into an advantage, as with the right communication tools, like zoom or any other means, you can easily connect to the service provider.
The two business models have their own pros and cons, but still, they share many things in common. For instance, outstaffing and outsourcing provide you with outstanding professionals who have sound hands-on experience in development. It means you don’t have to worry if your employees are qualified enough to execute a project, meet tight deadlines, and deliver impressive results. Of course, it crucially depends on the service provider that you selected. Having considered all the benefits and drawbacks of both models, there are some areas you should focus on to make the right choice :
- The English language – if you have decided to work with an outstaffing partner, be sure that your programmers have a good command of the English language. Indeed, it is quite important, as you do not want to have any miscommunication because of the language barrier. Or if you want to work with an outsourcing company, make sure that the responsible project manager can communicate freely to avoid misunderstanding.
- Overall experience (years in the market) – pay attention to how many years your partner is in the market. It will give you a perfect opportunity to understand if this company has enough experience in IT and managing teams. More years, a better experience. These companies have had their ups and downs, which is a good thing. Also, pay attention to case studies, which may provide you with an overview of what your partner has already achieved.
- Country – choose the right country for outsourcing or outstaffing. There are many locations to choose from, but pay attention to such factors as hourly rates and qualification of programmers. For example, India might have the lowest rates, but it does not mean that you can find reliable partners that can provide you with programmers with technical background and experience. The best option, in this case, is to select the best value for your budget.
- How companies treat their talents – you should also pay your attention if programmers of your outsourcing or outstaffing partner are satisfied with their employer. Companies with a high turnover rate are not reliable since there is always a risk of failures and missed deadlines. It reduces the risk of leaving your project and higher chances of them being satisfied with your project.
Defining all the advantages and disadvantages of outsourcing and outstaffing is already half the battle. You are equipped with the knowledge and you can be more confident in choosing not only the right model but the right partner either.
What model to choose – Outstaffing or Outsourcing
Nevertheless, if you still don’t know which model to choose – outsourcing or outstaffing, you should consider several very important questions:
- Do you have any successful experience in managing different things and achieving outstanding results?
- Do you currently have your own in-house team? Do you want to have new people in your team? Or you don’t have any and are not planning to hire in-house developers?
- How much control do you need to execute? Do you want to be fully in charge of all processes? Or can you delegate these processes to a partner that has the right experience and knows how to manage everything properly and without any hitch?
- Is your project short-termed? Long-termed? Or is it an ongoing process?
So, what would be the best option for you? It all depends on how you have answered the questions above. For instance, if you want to have full control over a development team and you know how to do it, your perfect choice would be outstaffing, but if you have no experience in this or you do not want to dedicate your company time on some business processes, you can definitely choose to outsource. As you can see, it all depends on your current state of the affairs, your budget and business needs
However, if you are still in two minds about what business model to choose, you can consult a company that provides both outstaffing and outsourcing services. Contact us to get more information about these two models and first estimations from our experienced software experts.