Outsourcing vs Outstaffing: Which Should You Choose?

There is a question as old as time in the software development world: what is better – IT outsourcing or outstaffing and is the there a difference between the two? To put it in layman’s terms: which one would be more efficient – hiring an external team overseas or to order a dedicated, full cycle software development team from a company that offers such a service. Both have become a hot trend over the past 10 years or so even to some remote countries around the world. Given the fact that an increasing amount of companies are turning to both outsourcing and outstaffing in order to take advantage of top quality talent and cheaper salaries to get the most bang for their buck, let’s delve deeper into which one is right for you: outsourcing or outstaffing.

What’s the Difference?

The definition of outsourcing is handing over control of a project to another company which will then realize the project from A-Z. The client does not usually have access to the development team itself and the people who work on the project are usually working on multiple projects simultaneously.

Outstaffing is employing remote workers who are officially employed by another company,usually an outstaffing agency, to perform a particular job. Since such an agency is acting as an employer, they are responsible for all wages, equipment, bonuses, and anything else the worker is entitled to, while the client company only provides tasks and assignments.

The biggest difference with this service is that the software development provider is responsible for hiring and maintaining the software development team, yet, at the same time, it is at the disposal of the client company. What it all boils down to is that you are hiring your own remote employees who are a part of your in-house team. You can either have remote managers who oversee this team or your in-house managers can do it as well.

Pros and Cons of Outsourcing

On the pro side, all aspects of quality and delivery are the responsibility of the service provider. There is less management needed on the behalf of the client,  who also does not take part in the hiring process. Additionally, it is the service provider’s responsibility to make sure that all of the necessary software and equipment are available to ensure a comfortable working environment.  

On the flip side, the client rarely has the opportunity to intervene or control the development process. Costs can soar, in comparison with outstaffing, if the scope of the project is not clearly defined and the prices for outsourcing software development are usually higher than outstaffing.

Pros and Cons of Outstaffing

Perhaps the biggest benefit of outstaffing is that you have the opportunity to hire top-tier talent at a fraction of the price and without sky-high tax rates. You have a lot of wiggles in terms of the number of employees you plan to hire and you maintain full control of the software development process. In addition to this, you have full access to any of the team members and the rates for outstaffing are lower than any other business model. The combination of in-house workers and outstaffed workers is becoming increasingly popular now, especially among tech companies since it is very productive and rewarding. Very often it salvages a lot of projects and it is cost-efficient. The outstaffing model requires highly skilled managers that are capable of overseeing the project flow, providing for open communication, productivity, and task assignment.

The only cons are that delivery concerns are the responsibility of the client and, if the communication channels are not of high quality, it can be difficult to get everyone on the same page.

Which One Works Best for You?

Now that you know the difference, let’s discuss how this difference applies to your company. Such a decision should be solely based on your particular technological and business needs. If your company is not technology oriented and there are no in-house professionals to supervise the work of the software development team – outsourcing will be a better fit for you. Conversely, if you have the management necessary to handle a remote team and clearly defined processes, then you should stick with outstaffing. Again, each situation is unique and it is always a good idea to consult with a technology expert about your particular case.

At the end of the day, it all depends on your expectations and how much control you would have. If you want to be involved as much as possible, get to know all of the developers in person and build long-lasting relationships and partnerships with them, then you should definitely choose outstaffing. If you have very limited resources and time, then opt for outsourcing.

Steve Jobs once said: “Everything we claim to be is our ideas and our employees. I always thought that the right recruitment is a key to everything you do.” However, nowadays, we have to wonder whether or not he would have added that if the type of human resources you are looking for is not available in your particular neighborhood, then some of the most talented minds you are looking for are located thousands of miles away from your shores.

You have two options to choose from if you are looking to hire remote professionals. Both outsourcing and outstaffing can help grow your business and achieve particular benchmarks. With both business models, you will need to dedicate time with your specialists to avoid confusion and unresolved questions. This is especially true if your team is scattered over multiple time zones. Therefore, make sure to carefully analyze the pros and cons and choose the one best suits your needs.