IT Outsourcing or IT outstaffing: Which is the right choice for your project?

IT Outsourcing vs. IT Outstaffing Which is the right choice for your project

Today, companies are increasingly turning to external vendors for help managing some of their IT projects, leveraging both on-shore and off-shore resources to achieve business goals. Specifically, this is especially true for custom software development, where you partner with third-party software vendors to enhance and expand the capabilities of your development teams. 

There are many ways to boost the skills and capacities of your IT team. You often hear the mention of IT outsourcing as well as IT outstaffing. Both models can help to achieve your goals in different ways. But what are the differences and how should you approach each of these models the right way? Let’s consider

What is the difference between IT Outsourcing and IT outstaffing?

To understand the difference between outsourcing and outstaffing and find out which model is best suit your project requirement, let’s talk about both in detail and see what their advantages and disadvantages are:

What is IT outsourcing?

To simply put, outsourcing is a partnership between you and a 3rd party IT vendor where you delegate your project requirements for the vendor to execute the project for you.

Depending on the type of outsourcing contract, the level of engagement may vary in different ways. You can choose to involve and participate as you feel comfortable. Thus, if you have an idea for a product but don’t have the right team of people, or appropriate level of technical skills, outsourcing can be the best option for you.

What is IT outstaffing?

Outstaffing is a type of partnership between a business organization and an external vendor that provides IT staffing services to the business. When comparing outstaffing to outsourcing, the former is a faster way to get new talent to your team. Let’s say you already have your own development team, but the team capacity, especially their own technical skills, is not enough to meet all your development goals. To speed up the project, you need high-quality skilled software engineers to fill in your team fast and this is where you choose between outsourcing and outstaffing.

In this case, outstaffing is a more suitable solution because it enables you to speed up the process and hire new developers to work alongside your current team in a matter of weeks. You don’t have to outsource the entire project to an outside vendor, just involve a number of external developers and get your project accelerated.

For example, let’s say you already have a skilled team of 10 software developers working in-house, but the projects are growing bigger and more complex for 10 developers to handle efficiently. To address the problem of IT resources shortage, you do some research and find an external agency that provides team extension services and brings new developers on-board so that your development team will be able to work faster.

The advantage here is that you are not the official employer of the outstaffed team members. You have no obligations to the outstaffed software developers except to manage their input to your project. You can expand the capacities of the team without worrying about all hassles like hiring and on-boarding as well as other HR matters. Here, the external vendor takes care of everything starting with job advertising, on-boarding, C&B, to sick leaves and days off.

It should be noted when comparing outstaffing and outsourcing that both options have their advantages and disadvantages. Here are the advantages and disadvantages of outsourcing and outstaffing:

Advantages and disadvantages of outstaffing.

Advantages:

  • Performance Tracking: You can track the backlog and see what has been achieved, which means you can track the results of each sprint and the project progress.
  • Cost Effectiveness: With outstaffing, you don’t have to worry about all the other expenses like taxes, salaries, days-off, etc. of the outstaffing team members. Additionally, you can choose to scale up or down, hiring a right number of people to help with the development process.
  • Flexibility: You can increase or decrease your team-size anytime as needed.
  • Control over the development process: you have full control over the development process as the outstaffed team members work as part of your in-house development team. The team will report back to you like your regular employee.

Disadvantages:

  • Managerial responsibility: As the owner of the development process, you will need to apply project management skills to effectively manage both internal and remote outstaffing teams.
  • Project risks: You need to choose a vendor that can provide stable and flexible outstaffing services. Here, the outstaffing developers will need to be able to work and stick with your projects long enough as needed. Otherwise, you risk losing experts in the development process, affecting project stability.

The pros and cons of outsourcing

Benefits:

  • Management issues: You entrust all of the development work to the software company. With outsourcing, you simply hand over the project requirements to your outsourcing partner and they take care of the rest. Therefore, you don’t have to manage the project yourself.
  • Participate in the expert selection process: Your vendor will select the best IT talents based on your project’s technical specifications, desired team structure and team composition. Depending on the engagement model, you can also optionally choose to participate in the selection of team members.
  • Commitment to the project success: Once the contract is signed, a reliable outsourcing vendor will ensure the service is delivered in accordance with the SLA.
  • Flexibility: As with outstaffing, you can expand your team and adapt it to the needs of the project. Depending on the engagement model, the vendor may be able to do this without having to require your involvement as long as it is within a reasonable budget.

Downsides:

  • Limited Control: By outsourcing the entire development process to the vendor, you retain little control or influence over the development team. You can monitor progress and provide feedback to project managers, but you cannot directly manage the development team and process.
  • Customization of the codebase: Outsourced software developers apply their own programming methodologies and best practices as they see fit. This can make the code they write difficult to understand, even if it works perfectly. To solve this problem, professional software development companies organize knowledge transfer meetings for clear and proper understanding of the code.

All in all, when choosing between outsourcing and outstaffing, you need to understand the unique needs of your business and an experienced technology consultant can help you make the right choice. 

What are the benefits?

  • Outstaffing: By leveraging external IT talents, you can quickly extend your team’s capacities and technical ability to meet project milestones. You’ll be able to expand or scale down your team size at any time, improve talent retention and even receive support from an external HR team.
  • Outsourcing: the outsourcing team will create a complete development and implementation plan for the software solutions you need. Your outsourcing partner will deliver an end-to-end software engineering solution from ideation to launch and post-launch support. With the help of an experienced software development partner, you can speed up time to market, lower development costs and reduce delivery risks.

Having covered the basics of outsourcing vs. outstaffing, let’s take a closer look to find out the key differences between the two models. To distinguish between outsourcing and outstaffing, we break them down by addressing the four main questions:

What are your specific business problems that you’re trying to solve?

  • Outstaffing: The main objective here is to quickly fill in the technical gaps in your internal team. Find a number of dedicated IT professionals to work together with your existing team and enhance your team, speed up your project.
  • Outsourcing: Under the IT outsourcing model, you delegate your entire project to an external team who will take care of all the development tasks. Find a team of qualified software developers who can build, rescue, modernize, or maintain your project.

Your timeline for starting and completing the project

  • Outstaffing: With outstaffing, you can quickly hire the required number of IT professionals, especially if you partner with a provider that offers a significant talent pool. Within a few weeks, you will be able to get new people onboard to work on your project.
  • Outsourcing: A software development project starting from scratch is very likely to be time-consuming, as it takes time to complete stages such as product discovery, planning and design, as well as project estimation – in order to begin the development process. However, by carefully researching and working with the right vendor, you can achieve your project goals within a reasonable time frame and budget.

Project budget requirements

  • Outstaffing: when comparing outsourcing versus outstaffing, the latter is more advantageous from a budgetary point of view. You pay for the hours that outstaffed team members worked on the project, similar to your regular employees, only the outstaffed team work in a remote or offshore location.
  • Outsourcing: generally more expensive than outstaffing, but still much cheaper than in-house development. You usually pay for the total development costs of the project, from beginning to end, depending on the chosen pricing model.

How hands-on do you want to be throughout the process?

  • Outstaffing: the team is fully managed by the customer company (client). Specifically, you will manage the performance of the outstaffing team as if they were your in-house development team. However, you won’t have to worry about other matters such as salaries, taxes, sick leave, etc. – the vendor will take care of all that.
  • Outsourcing: The team is managed by the external software development company.

IT Outsourcing vs. Outstaffing: Which To Choose?

To answer the question of choosing between outstaffing vs. outsourcing, it’s important to understand that it’s not a question of what’s the best. It’s about what’s best for you and your company. Consider the followings:

  • Do you have the resources to ensure effective management of the vendor team’s day-to-day activities?
  • Do you have established processes and internal control for assigning and tracking project goals?
  • How easy is it to integrate new, external IT professionals into your internal processes and establish communication between external developers and in-house development team?

If the answer to at least one of these questions is no, you may want to consider outsourcing. It will be challenging to ensure the performance of the external team if you cannot effectively monitor their performance, or ensure that good communications and collaboration are shared between the teams.

If it is the case, you may need flexible, agile solutions that only a professional software developer can provide. However, if you answer yes to these questions, outstaffing may be a better option, especially if you already have an efficient internal team.

Trustify Technology is a reliable software development partner that excels at both types of services offering including IT staff augmentation services as well as full-cycle software development outsourcing services. Our team has been of tremendous help to businesses around the world and we are ready to help you manage your complex IT projects. Reach out to us today.