Outsourcing Vs. Outstaffing in IT Industry

Outsourcing Vs. Outstaffing

Any business that wants to create an impact with its services and solutions needs to build the right product. This, in turn, requires working with an adept staff, in-house or remotely. Remote working is the new normal after we have successfully seen the results of what may be one of the biggest work from home experiments. 

When choosing to operationalize remote working models, organizations have to choose between outstaffing vs outsourcing. In general correspondence, both the working models are measured in the same basket, where they are different, but only a handful of similarities. 

This article will help you understand the core of outsourcing and outstaffing, know the difference between the two, ending with a list of the best countries for software development outsourcing. 

What is Outsourcing?

Outsourcing is like hiring mercenaries to fight in the war for you. You allocate them a task, promise to pay the money, and get results. In other words, you will hire a third-party organization that knows the work you want to be done, and they will take care of everything from A to Z. 

For example, the task is to build software or an application for your business. You will search for the right vendor and share the project requirements, ideas, and budget. Upon agreeing on the terms, the vendor will start working and deliver the completed product just as you require with the scope of some edits, of course. 

So, the outsource definition is simple. Receive a product or service from a foreign supplier replacing the in-house teamwork model. Outsourcing is a billion-dollar industry with global revenue amounting to $92.5 billion in 2019 and a projected growth rate of 8.25% between 2021 and 2028

Depending on the needs, companies that outsource can choose to work with one out of different outsourcing models. 

  • Onshore: This form of outsourcing involves delegating the work to a team of workers in the home country. Like if you live in the US, onshore outsourcing will be hiring a US-based vendor to work on your project. 

One of the reasons why companies would outsource software development companies would go for onshore vendors is their market knowledge. Additional benefits of onshore outsourcing include;

  • No language barrier
  • Time synchronicity
  • Cultural affinity
  • Easy to communicate over the phone or in-person

Apart from this, working with onshore vendors kind of puts you in the same boat as them in terms of the political and financial stability of the country. The major reason why companies choose not to outsource software development to onshore vendors is the high cost. This is where offshore outsource work models take the limelight. 

  • Offshore outsourcing: Why outsource to a company that will cost the same as hiring an in-house team where you can get the same product at a lower price? This is the major justification put forth by the proponents of offshore outsourcing. 

And it works! Offshore outsourcing involves hiring the product development vendor in a country other than the home country. So, while living and working in the US, you can hire a team to build your software from China, India, the Philippines, Ukraine, etc. 

Choosing an offshore outsourcing vendor is more difficult than choosing an onshore one. Mostly because you have got a large pool of vendors to choose from, and there is no single source to identify their ability and effectiveness to build the product. 

There are a couple of additional outsourcing models, including nearshoring and homeshoring.

What Is Outstaffing?

Remember the mercenary example? Well, outstaffing takes a different approach than hiring mercenaries. Here, you will call one guy who has his own army to fight with you. So, in terms of product development, you choose to hire an external team of tech professionals who will work as an extension of the existing team. Outstaffing is put into action for supporting the in-house team and manage the increased workload. The out-staffed team can consist of developers, testers, designers, etc. 

The hiring company can also ask for an increase in the team size and a reduction of the same when required. The general notion in outstaffing involves giving repetitive and standard tasks to the extended team. In contrast, the in-house teams take care of the more challenging and essential parts of development. 

The outstaffing team will stay in touch with the in-house team either directly or via a single point of contact on both sides. The two types of outstaffing solutions are;

  • Lease Outstaffing: When the extended teams are hired for a longer time period. 
  • Temporary Staffing: When the extended teams are hired for a short time period (1 to 12 weeks).

Why Do Businesses Prefer Outsourcing and Outstaffing?

Outsourcing and outstaffing are incredible work models that have clearly set new definitions of getting things done. Although we are only concentrating on IT development, outsourcing and outstaffing is being practiced in almost every industry and everywhere; it has brought benefits to the organizations. 

Why do companies choose to outsource work?

Outsourcing is done for various reasons. However, lower costs and less work headache emerge as the most prominent reasons for outsourcing. 

  • Cost-Efficiency: Cost savings without compromising the work quality is the primary reason given by companies that outsource. Lower cost is also the reason why companies choose to out staff. 

Outsourcing removes the misconception that companies can only find good developers and IT professionals in the US or Silicon Valley. Several organizations are working across the globe with highly talented developers and tech professionals related to the IT industry. 

  • Less Work Headache: A budding entrepreneur who needs to focus on building his brand and product will find outsourcing the development work a big relief. If not for this, the same person has to hire a full-fledged team of required professionals, given them a place to work, and set up the entire payroll system. 

In this scenario, the entrepreneur is busy dealing with all the auxiliary aspects when the core business logic is ignored. These are the reasons why do companies choose to outsource work. 

Why do companies choose to outstaff their work?

Outstaffing is a bit different than outsourcing, as we have already learned. Similarly, the benefits provided by outstaffing solutions are also different. The lower costs of development and easy management advantages applies to outstaffing too. 

In addition to this, there are a few other reasons for outstaffing.

  • On-demand rapid staffing: Outstaffing is all about flexibility. You can ask to increase the team if the workload increases and decreases the same at any point. The hiring companies can benefit from this type of arrangement and optimize the work schedules according to their requirements. 
  • Control the Outcome: With outstaffing, the organization has control over the outcome of the tasks delegated. You can dictate the terms of the ongoing work and control the intricate details of the development works. 
  • No Payroll: Even though the out-staffed team is an extended team, you are not liable to pay them and provide other employee benefits. Because you have chosen to out staff the work, the additional does not pass as employees of the organization. 

Depending on the requirements and benefits provided by each working model, you can choose to move ahead. 

Difference Between IT Outsourcing and IT Outstaffing

Another important aspect of outsourcing and outstaffing is understanding the differences between them. Knowing the differences is essential to choose between outstaffing and outsourcing. One part of the differences between them is visible by understanding the unique benefits. Here’s the second part. 

  • Work Culture and Organizational Setup

To some extent, you can mold the work culture and organizational setup of an out-staffed agency. You have the right to do this by virtue of building an extended team of IT professionals who will be working with your organization. Even though they are not directly connected to your organization “on paper,” how they work is still a reflection of your organizational culture. But with an offshore outsource structure, you cannot dictate how the vendor works and works on the development process. They are free to choose their organizational setup and build the work culture they want. 

  • Management Structure

Companies that outsource do not have to worry about constantly nudging the vendors and getting an update. However, the vendors may take it as their prerogative to provide periodic updates on the work. Alternatively, they may or may not even have a dedicated project manager, which can impact the project outcome. 

For IT outstaffing, the onus of managing the team is on the vendor or the one person whom you have contacted initially for the task. So, their management structure is predefined, and you can also ask them to change the same as per your requirements. 

Outsourcing and outstaffing are quite distinct from each other, and the implementation of each model depends on your requirements. If you want to work in a close-knit team and want to extend the abilities of the existing team, outstaffing is a better option. 

On the other hand, if the focus is on building the core business logic that is pertinent to the growth, the IT development work can be outsourced where you won’t need to interfere in every task but expect the best results. 

Best Countries for Software Development Outsourcing

The process to choose the best countries to outsource software development is based on a few aspects. 

  • Cost of working
  • IT development expertise
  • IT infrastructure
  • Communication

Other than this, there are a few other factors like cultural differences and time zone gaps, but that is only relevant in some cases. Based on these aspects, below is a list of the best software outsource countries you must look at. 

  1. India (Average Salary – $12,177/year)

As one of the largest English-speaking countries in the world, India is the first choice of several organizations looking to outsource software development. 

  1. Ukraine (Average Salary – Between $650 to $2558/year)

Ukraine has the largest repository of C++ programmers in the world, and they have built a thriving software outsource industry. 80% of the IT workforce knows English. 

  1. China (Average Salary – Between $3089 to $83880/year)

China is home to the fastest growing IT companies, and it is also a widely English-speaking country. One of the issues with China is that it has lax IP enforcement norms. 

Conclusion

After going through the article, we can easily conclude that outstaffing vs outsourcing is not a battle, rather it is a matter of choices of what you require and can manage. Both the work models have different setups and processes. 

Outsourcing gives you more freedom to take care of the other tasks, but outstaffing demands your active involvement. Consequently, with outsourcing, you need to find the ideal team and trust them to do their work responsibly, but with outstaffing, you can control the team’s workings to ensure the desired result. 

So, while choosing between outstaffing vs outsourcing, make sure to understand your requirements first and then work on the pertinent selection process to choose the ideal vendor to out staff or outsource software development.
Outsourcing Vs. Outstaffing
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