IT Outsourcing Vs. IT Outstaffing

When hiring remote teams, companies always have options for what engagement model to choose.

IT outsourcing solutions, as well as outstaffing services, are no longer new in software development. How are they different? What are their pros and cons? When do businesses opt for outsourcing and outstaffing?

Organizations hire an outsourcing company when they decide to entrust the project development from the initial stage to its release. The only things they need to provide are the idea, requirements, and a budget.

Companies considering what outsourcing model to choose usually don’t have in-house development teams, so they need to staff it from scratch based on the project requirements. What’s more, they not only transfer team staffing functions to an outsourcing provider but also code development and project management, too.

What Is IT Outstaffing?

IT outstaffing stands for extending an in-house development team with specific specialists. When outstaffing, you hire them to work under your control. In most cases, specialists hired according to an outstaffing model work for a single client with the full-time dedication to the project needs.

With outstaffing, an extended team works on close cooperation with the client one, but they are managed by the client, not by the outsourcing company.

Why Do Businesses Use Outsourcing and Outstaffing Services?

Since the COVID-19 lockdown, the demand for outsourcing services has increased. What makes businesses transfer particular services to third parties? According to the study from Deloitte, there are five most common reasons for outsourcing, including:

• Reducing costs
• Greater focus on core business
• Solving capacity issues
• Improving quality
• Accessing the pool of talents and skills

As you can see, different factors drive outsourcing services. When it comes to a particular company, there’s no single reason why outsourcing works for them. They typically make their decision based on several reasons. For example, an organization needs to build and release the software development project within 5-6 months but doesn’t have an in-house team of skilled engineers. Opting for outsourcing services will be best for them due to fast staffing, thus reducing time and money.

Concerning the reasons why businesses order outstaffing services, they are similar to the ones related to outsourcing. Again, the major triggers for outstaffing are reducing costs and solving capacity issues as businesses turn to outstaffing when they lack specific expertise within their in-house team but don’t intend to hire full-time employees.

Outsourcing vs. Outstaffing: What’s the Difference?

Now it’s time to identify what makes outsourcing and outstaffing different. Here are four questions that will help compare these two types of services:

• Who’s responsible for code quality?
• Who is responsible for project management?
• Which is cheaper?
• Who takes part in hiring staff?

Pros and Cons of Outsourcing

Considering outstaffing vs outsourcing, you need to understand their pros and cons. Here are the key ones to keep in mind:

Outsourcing Pros

• Code quality and project delivery are the vendor’s responsibility. In case you’re a client who wants to focus on your business strategy instead of software development, it’s the right solution. According to the outsourcing model, the vendor is fully responsible for all the aspects, including project management and its quality.
• Costs are reduced as your vendor handles HR and equipment for the project. Outsourcing software development to an outsourcing agency, you don’t need to worry about administrative functions like hiring a team and purchasing equipment. As a result, you reduce development costs, paying only for the hours required to deliver the project.
• It’s a time-efficient model. Outsourcing is a good alternative to in-house development if you want to reduce time to market but you don’t have in-house capabilities.

Outsourcing Cons

• It’s more expensive than outstaffing. Though outsourcing is cheaper than hiring an in-house team, it costs more compared to extending the team. If pricing matters for you, you should select an alternative.
• The client can’t influence or control the development process. On the one hand, it’s an advantage for those who want to focus more on their business. On the other hand, if you prefer to take control over your project, outsourcing may not be suitable for you.

Pros and Cons of Outstaffing

Outstaffing Pros

• You can hire additional staff with no extra costs. Since an IT outstaffing company is responsible for payroll, you don’t have to pay salaries, bonuses, and provide benefits.
• You have full control over the project. Extending your in-house team, you continue to monitor and control your project on your own. Your vendor won’t influence the delivery.
• Hourly rates are lower compared to outsourcing. Clients take responsibility for code quality and project management, which results in lower hourly rates.
• You are flexible in the number of employees you want to hire. Compared to outsourcing, you are free to scale your team if necessary. You can also decrease your team if your project needs it.

Outstaffing Cons

• The client is responsible for project delivery. Again, it’s a flip side of the advantage we’ve mentioned earlier. If you aren’t willing to handle management tasks, you’d better consider hiring an outsourcing company.

What Would Be Best for Your Project?

Thus, there are two options to choose from when you need to hire software engineers and other specialists from outside. In general, if you have a team of in-house IT developers but need extra labor resources for your current project, then outstaffing will suit you better. Alternatively, if your organization is not technology-focused or you don’t have a well-managed IT department to deliver the project within the required time frame, then outsourcing is the best option for you.