Outsourcing vs Outstaffing in Software Development. Everything You Need to Know!
Outsourcing is the delegation of your software development project to an outside team; while outstaffing is the augmentation of your internal development team with a remote or distributed team. This is the simplest explanation for these two terms in the software development context.
Effective team collaboration throughout the entire development lifecycle is crucial for successful project completion. But, the existence of a number of perplexing collaboration models makes it difficult for businesses and technology companies to choose the right model.
This blog is an attempt to explain two of the most important and popular delivery models: outsourcing and outstaffing. After reading this blog, you will have a clear idea of what these two team collaboration models are and which one suits your startup or business the best.
Let’s start by taking a quick peek into the growth of the software development industry which causes an intense demand for IT professionals outstripping the existing supply.
The industry background for outsourcing & outstaffing
The software industry is growing at an exponential rate. “The global business software and services market size was valued at USD 389.86 billion in 2020. It is expected to expand at a compound annual growth rate (CAGR) of 11.3% from 2021 to 2028.”
AS per Statista, most revenue will be generated in the United States (US$313.70bn in 2022). As per a McKinsey report, there is a threat to the competitiveness of Europe due to the relative lack of big software and software-enabled companies. There is an intensive need for Europe to become more creative regarding new talent sourcing.
Even in the US, the talent pipeline is not sufficient to meet the demand for skilled software engineers in the coming years. Increasing demand for new technologies with the pandemic deepened the talent crisis and widened the gap between talent supply and market demand. As per reports, recruiting qualified developers is going to be the biggest recruitment challenge in 2022. All this points to the war for software development talents, which is getting intensified day by day.
Many established companies and startups are moving towards outsourcing to optimize their software development budget. As the pandemic has blurred the difference between work from home, and work from office models, the inhibition towards remote or distributed development teams is vanishing. Outsourcing and outstaffing to remote and cheaper locations like India, Ukraine, Poland, and the Philippines are found to be more lucrative and cost-effective.
A core similarity of these models is that both outsourcing and outstaffing make use of external employees to perform the work.
What is outsourcing in software development?
In software development outsourcing, you commission an external offshore or nearshore company to execute your project from A to Z. In other words, you are choosing an outside service provider to carry out tasks that have been accomplished in-house.
The client will choose a third-party vendor once they are convinced about their capability to offer the required resources. The vendor will have qualified professionals, and the required tools, equipment, and infrastructure to support their work.
It is offshore outsourcing when you outsource to a region far away from your geographic boundaries, and it is nearshore outsourcing when you outsource to geographical neighbors or countries in proximity and with similar time zones.
Here is a tried and tested outsourcing solution called the Agile Projects model that has helped hundreds of global clients to entrust their software projects with a safe partner.
When should you outsource?
When you decide to outsource, you are ordering a full-cycle software development from a third-party service provider. Which are the situations that demand this decision? Let’s see.
- You are a startup with a great digital idea but with no in-house team to build it. It could be a mobile app, web app, or any other software project making use of emerging technologies.
- When you have intermittent spurts of IT needs
- When you want to undertake a project that requires your team to learn niche and new skills. For example: if you are to get into an IoT project in which your in-house teammates have no sufficient expertise, it’s better to outsource the project to a third-party vendor with IoT proficiency.
- When you want to focus on your core business functions, it’s better to outsource projects to prevent the diversion of attention of your internal staff.
- When you are a non-technical company without in-house competence, it is better to try this as you are practically buying a finished solution. It is wiser to hire knowledgeable professionals for a project that lasts a couple of months rather than taking the burden of in-house recruitment.
- When you don’t want to involve in team management, recruitment, and training of the resources.
Pros of outsourcing
- The client is freed from the headache of management efforts such as recruitment, administration, HR activities, etc. The outsourcing provider will do all these.
- The client need not do the technical supervision, successful project completion is the headache of the provider.
- As the outsourcing provider is an expert in the area with niche technology specialists in their talent pool, the finished product will be a superior one.
- The headache of ensuring code quality is completely on the vendor’s shoulders. They are responsible for quality assurance and meeting your project parameters.
- The client need not worry about providing the tools and infrastructure needed to complete the project. The vendor is responsible for these.
- The client can focus on their business without any distractions or delays while the project development process goes on smoothly
Cons of outsourcing
- Outsourcing is costlier than outstaffing, as you are paying for outstaffed professionals and for the project management team assigned to synchronize your account.
- The client will have no direct control over the team and processes
- The in-house knowhow will not get any improvement as you are delegating the task to an external team
When you don’t have the luxury of achieving software project success by drawing in from your “own” home resources, outsourcing your project to a third-party vendor from a faraway country is a prudent decision. You can see that the pros outweigh the cons and it is hugely beneficial if you are ready to drop the inhibitions of giving your project to overseas implementation. Getting a high-quality outsourcing provider is an underlying factor for success.
What is outstaffing in software development?
If the option of delegating software project responsibility is not your cup of tea, we suggest using outstaffing as your preferred collaboration model. It is nothing but using talented professionals anywhere from the globe to enhance your in-house team to accomplish your business goals.
Check out our meticulously crafted and proven outstaffing model known as Distributed Agile Model here.
When you are a startup, you may not have the financial sufficiency to hire a full-fledged in-house development team to meet your technology needs. But it is easier for them to get a few specialists from outside their geography cheaply.
They can explore the feasibility by contacting an outstaffing specialist and hiring a web developer. The hired person from the offshore location will quickly get integrated with the main office and starts getting things done in a fast-paced and efficient manner.
Now you have confidence and can go on expanding the team with QA, mobile app developers, etc. to make it a full-scale offshore software development team.
Here is an example of how we helped a Swedish ecommerce company in scaling their team. Starting from a single .NET developer and now to a full-fledged offshore squad, the team is closely integrated with the client’s in-house team sitting in Sweden.
Staff Augmentation is another outstaffing model wherein you strengthen your existing in-house team with a few extra specialists from a third-party vendor as you discover that you lack some resources to accomplish your project and it is expensive to get them from your location. A Dedicated Team is another outstaffing approach when you need extra hands for some regular IT services.
A company needs regular and varied IT services, e.g. maintaining and improving their application. However, just as in other cases, expanding the in-house team is lengthy and expensive, and redirecting people from other projects slows them down.
Hiring developers from an outstaffing vendor is a good choice in this scenario. The main company will send those tasks and payments for a certain number of hours per month and get the job done.
When should you outstaff?
- If you are a start-up or a fast-growing company facing a problem with scaling your team.
- When you can’t find additional staff quickly and you do have a strong recruiting staff.
- When you don’t want to add a permanent headcount to your rolls and other hiring and training expenses (and a lot of associated fixed costs like taxes, facility expenses, etc. ).
- When you want to have direct control over the extended or outstaffed teammates without the headache of human resource management.
Pros of Outstaffing
- Quick access to highly qualified but affordable techies
- Close and productive collaboration is assured as the outstaffed teammates are closely integrated with your existing in-house team.
- The client gets a direct hand in the pre-selection and screening process of the candidates, while the vendor will take care of the hectic tasks of configuring the development process and the distribution of the tasks among the remote team members.
- The client is relieved from the time-consuming duties of recruitment, training, administration, and all HR-related activities pertaining to hiring and supervising the extended teammates.
- Outstaffing is more economical when compared to hiring internally. It is even cheaper to outsource.
- The client’s in-house team will also stay benefitted as they can enhance their know-how by closely collaborating with external specialists.
- The client can scale up and down the team as per the changing project needs.
Cons of outstaffing
- Clients need to put in efforts to set up the development process, project planning, and communication along with the outstaffing provider to ensure both the teams are working closely integrated.
- Communication between the client’s team and the outstaffed remote team can go berserk if you are not associated with a seasoned oustaffing provider.
- The burden of solving implementation mistakes might fall on the client’s in-house team.
If you are looking for a simple and genuine solution to any of the scaling, project velocity, and product development issues, outstaffing is a great way out.
The gap between the demand and supply of software professionals is a reality. You may not get quick access to the required experts from your region. The straightforward solution is to either hand over your project to an external offshore team or to enhance your existing capabilities (if you have your own development team) by adding external members.
Both these collaboration models will help you gain as the outsourcing and out staffing company will have profound expertise in your project area with niche-skilled people readily available in their pool. Their expertise helps them deliver the project smartly, swiftly, and cost-efficiently.
How about having a talk with a leading provider of software development outsourcing and oustaffing? Let's Talk.