Outstaffing vs. outsourcing software development is a question as old as time in the IT circles. Sure, in the beginning, the in-house team should suffice. But ambitious projects have ambitious needs and, more often than not, the home team will fail to meet these needs.
At that point, most companies start looking at third-party vendors, both at home and abroad. According to the recent stats from Grand View Research, the combined outstaffing plus outsourcing market should reach a staggering $930 billion in 5 years.
So, should you hop on the remote work hype train before the cars are full and the train has left the station without you? That’s a question worth answering. But, before that, let’s figure out the difference between the two and proceed from there.
The Outstaffing Model
The term ‘outstaffing’ has been circulating the IT landscape since the 90s. At the same time, most people in IT are not quite certain on the exact definition. In plain English, outstaffing entails working with professional employees without necessarily adding them to your company’s roster. In a sense, you’re renting someone’s services rather than hiring them per se.
Following the outstaffing approach, you can rent individual professionals or entire companies’ services. Outstaffing is about delegating specific functions without transferring complete sets of responsibilities. With this method, you assign the outstaffed team direct everyday tasks that you cannot handle internally.
From the payment viewpoint, outstaffing can be separated into two categories: the ‘cost’ model and the ‘cost plus’ model.
The Cost Model
Going with the cost system, you pay one flat fee to the individual or the company. When you go with outstaffing services providers, the company pays its employees via that fee. It covers not just the salary but also any benefits, bonuses, equipment expenses, and more. In this case, these companies are free to disburse the money any way they want. Generally speaking, the company’s employees are paid a salary wage and are not privy to the size of that fee.
With this model, the biggest benefit is that you pay the exact same amount every month. In doing so, you escape the usual management burdens that come with administering an in-house team.
The Cost Plus Model
The cost plus structure is a less straightforward arrangement. Under this model, you have much more say in the payment matter. However, that also means you might see occasional ups and downs in expenses that you don’t face with the cost model.
Should you choose the ‘cost plus’ course of action, the team members’ salaries, equipment expenses, various bonuses, and overtime will be up to you to sort out. Of course, provided you go with an outstaffing agency, these responsibilities will fall on the agency’s shoulders. Still, rather than covering these payments with a flat fee, you’ll have to pay each professional’s expenses individually.
Defining the engagement rules and appraising the HR department regarding the outstaffing development plan can be a hassle. But you might also be able to cut corners or, at the very least, pay individual specialists what you believe they’re worth.
Outstaffing Pros
Flexible Hiring Opportunities
Hiring an outstaffing agency’s services is a lot like hiring an organized auxiliary unit. You can manage its resources any way you see fit, while the vendors handle the boring payroll responsibilities.
Control the Development Process
This is what the ‘outstaffing vs outsourcing’ decision usually boils down to. When you need more manpower but can’t quite afford to expand the main company, outstaffing services are the next best thing. Besides general management, you can have daily interactions with the outstaffed team and provide day-to-day instructions. You can also hardwire them into the development process with the in-house team.
Outstaffing Hands-On Management
Picking up where the previous section left off, outstaffing ensures more hands-on management opportunities. Aside from managing the team and the overall project, you can coordinate resources and handle QA (quality assurance).
Reduced Costs
Because the outstaffing agency covers the bulk of the management, you remove from the payment equation the many hours you normally spend on project management. Plus, since the outstaffing agency usually operates from South America, Eastern Europe, or Asia, you get a skilled team at a fraction of the cost.
Outstaffing Cons
Communication Issues
With the outstaffed team separated from the office crew, reliable communication channels become more important than ever. And, as much as tools like Zoom and Slack can bridge the gap, efficient long-distance management can be hard to achieve (and maintain) nonetheless.
Project Responsibilities
Outstaffing means that the project management responsibilities still lie with you. Needless to say, this can be a positive or a negative thing depending on how much time you have on your hands. Some will rather invest their budget, while others will prefer to spend more time on management.
The Outsourcing Model
As far as the worldwide IT sector’s concerned, outsourcing has also been around since the dawn of time. Looking at the past 30 years, the IT companies in the West have relied on outsourcing work as much as they’ve relied on in-house talent.
Without muddying the waters, the outsourcing model delegates the entire project to remote vendors. The necessary equipment, resources, and qualified personnel is the vendor’s responsibility.
As straightforward as it may sound, ‘outsourcing’ is also an umbrella term. When you unfold this umbrella, its canopy reveals onshoring, nearshoring, and offshoring methods.
Onshoring, as the name suggests, refers to delegating the project to a firm within national borders. Also known as homeshoring, onshoring lets you avoid the usual outsourcing pitfalls like the language barrier or a time zone disparity. And, as long as you choose a company from a less expensive city/region, you can save a pretty nice sum as well.
Nearshoring, as you’d expect, means outsourcing the project to a crew that’s in the same time zone (give or take 1-2 hours) as you. The difference with onshoring is that this crew is usually from a different country. Still, considering the close proximity, the shared cultural crossovers should simplify and streamline communication nonetheless.
Offshoring, as you can guess, moves the project to a distant (5+ hours) location. More often than not, that location would be home to more favorable economic conditions, vast talent pool, and less professionals. Plus, as much as it can impede immediate communication, the time zone difference can also enable uninterrupted tech/customer support.
Outsourcing Pros
Code Quality Responsibility
Outsourcing software development puts the quality assurance responsibilities on your outsourcing partners. Therefore, making sure that the coding fits the project’s parameters is on the outsourcing agency. At a client level, you can tackle other objectives and leave the day-to-day management to the outsourced team.
Freedom From Management
When all is said and done, the outsourcing company should provide a turnkey service. While they’re busy managing schedules, ensuring deliverables, and establishing successful communication, you can focus on the big-picture items.
Less HR Hassle
Does the project need more people than initially thought? Nothing you should be concerned about. Besides the payroll, taxes, and different bonuses/benefits, the outsourcing company also handles scheduling and recruitment. Concentrate on the broad-scope goals and leave the HR hassle to them.
No Hardware/Software Concerns
Again, you leave the entire project in the outsourcing agency’s hands. That means the same hands will have to make sure that its team’s hardware and software needs are met. All you have to do is cough up the dough.
Resource Variety
Unless you’re running an enormous (1,000+ employees) enterprise, there’s a pretty good chance you’re working with a limited resource pool. By outsourcing the project, you can diversify the human capital. You can also get help from multiple vendors, picking and choosing specialists from varying IT sectors.
Outsourcing Cons
Less Control
Like to have a hand in the project’s day-to-day coding, planning, and scheduling tasks? In that case, you might want to stick with outstaffing since outsourcing won’t give you that option.
More Expensive
The freedom from management and the turnkey service that outsourcing companies provide come at a cost. Choosing the outsourcing route also means covering the cost of the project management team. As always, comfort and convenience cost extra.
What’s the Right Fit for You?
Does your company have enough internal sources to manage a team of third-party developers on a daily basis? Can you assign and follow up on the project(s) without any outside assistance? How easy is it to loop outside vendors into the project management software system that you guys use? Can the so-called home team work and communicate with outside programmers with relative ease? As long as you cannot reply with an unequivocal YES, we would recommend looking into outsourcing. The turnkey convenience that we’ve described above will work wonders for you.
At the same time, can you spare the additional financial resources that outsourcing always requires? Are you flexible enough to let outside vendors take the reins and control the project in its entirety?
No? Then you’ll benefit more from the long-term control that comes with outstaffing.
Whatever model you choose, Wonderment Apps will be able to help. At Wonderment Apps, we have the talent, experience, and resources to realize both outstaffing and outsourcing needs. Need hand-in-hand collaboration with Wonderment Apps’ development team? We got you covered. Want to leave the project in good hands without bothering with its day-to-day activities? We got you. The choice is yours. The choice is Wonderment. Contact us!