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Outsourcing vs. Outstaffing – Pros and Cons

Victoria Puzhevich
Published: June 7, 2022

When hiring software development teams there are several engagement models to choose from (outsourcing, outstaffing, dedicated team approach, etc). Businesses that opt for outsourcing usually don’t have in-house development teams, or the team is relatively small to complete the project on time. So they need to seek for and transfer the full project development and management to an outsourcing provider. However, when a company has its own in-house development team but lacks relevant expertise or technology stack, it can add additional resources from an external provider to expand the team while staying in control of the project.

Software development outsourcing has been in the public eye for decades. According to Statista, IT outsourcing accounted for a combined revenue of 351 billion U.S. dollars in 2021 and due to the COVID-19 lockdown, the demand for outsourcing services has increased even more. Whereas outstaffing is a comparatively new concept. Both business models have much in common, providing significant benefits and substantial cost savings.

Here are the most common reasons for IT outsourcing:

  • Reduced costs
  • Concentration on core business activities
  • Maximized Efficiency and Productivity
  • Improved Quality

Here are the core pros of using IT outstaffing services:

  • Full control over the development process
  • Significant cost savings
  • Improved Agility and Scalability
  • Access to the pool of IT resources

Nevertheless, outsourcing and outstaffing should not be mixed up, as they can be applied in different situations and pursue various business goals. Let’s check out each of these models to find out the difference between them, so you can choose the one that perfectly suits your needs.

How Software Outsourcing Works?

Hiring an outsourcing software development provider is delegating  the entire project to a particular outsourcing company. Outsourcing IT development does not necessarily mean working with a company abroad, it  can be carried out either at the same location, nearshore or offshore depending on the size of cost savings the client wants to get.

Learn more about the best outsourcing destinations in 2022 here.

The client gets the following benefits as access to skilled expertise, reduced overhead, flexible staffing, significant cost savings and many more. This model works as illustrated below:

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According to the IT outsourcing model, nearly all communication and project management on the development process is handled by the Project Manager of the outsourcing organization. The client rarely has access to the entire development team and the team members can be involved on several projects simultaneously.  In the end the client gets a turnkey project. The final cost of the project may go beyond the allocated budget depending on the engagement model chosen.

Often, companies need more than just to complete only one project or they need an ongoing development due to the size of the project. They may need to deliver long-term large projects or a set of projects bound together. In these cases, an offshore software development center (ODC) model might work better. Learn how outsourcing and ODC models are different here.

How Outstaffing Model Works?

Outstaffing is extending your team with remote employees officially working at your outstaffing provider location. Basically, you hire a team 100% dedicated to your project and working as a part of your in-house team. The client will have full control over the IT team or an individual during the whole contract period. Usually this model results in high-quality code and fast completion of the project with no extra charges.

Sketched, an outstaffing model looks like this:

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In contrast to the outsourcing model, you have a choice to manage this remote team by yourself or hire remote project managers.

Outstaffing vs Outsourcing: What to choose?

When it comes to the question of which model to choose for your project, the outsourcing or outstaffing one, let’s give the answer to the following questions:

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

The illustration below compares the main features of each model.

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When it comes to a particular business, several reasons should be taken into account when choosing this or that model. For example, you are a start-up and need to develop a software development project within a tight deadline but you lack in-house resources. Opting for outsourcing services will be the best option for you due to fast team ramp up, accelerated development time and slight management efforts.

Businesses turn to outstaffing when they lack specific expertise within their in-house team but don’t intend to hire full-time employees. For example, you develop your own product and have a large team in place but due to market changes need to incorporate IoT or AI, ML features however, you do not have such experts in-house. The fastest solution will be to outstaff your team with such experts from an outside company like SCAND.

As seen, there are two options to choose from, which one is closer to your company depends on the needs. In general, it goes as follows:

  • If you already have a team of properly managed in-house IT developers but you need extra hands for some project, then an outstaffing model will suit you best.
  • If the company needs a tech solution but is not technology-focused, or it is a start up, an outsourcing model can be a good choice.

The Bottom Line

We have described the two options to choose from when you need to hire software developers and other IT experts. In general, if you have an in-house team but need extra hands for your current or upcoming project, then an outstaffing model will suit you best. If your company is not technology-focused or you don’t have a well-managed IT department to deliver the project within the required timeline, then outsourcing is the best option for you.

To conclude, it is important to say that each business case is unique, so when choosing between the outsourcing and outstaffing models, expert consultation would be your best choice.

At SCAND, we provide both outsourcing and outstaffing models and can help you to define which model suits you most. Feel free to contact us with any questions!