Outsourcing vs Outstaffing: Which one is Best for you?
Cooperation with external providers of IT services is a common way to handle growing projects. When a tech leader is tasked with delegating a set of software development activities, outsourcing is probably the first thing that comes to mind. However, in recent years, the market of IT services has grown to include several offshoots of the outsourcing concept. One such offshoot is outstaffing.
When it comes to the outsourcing vs. outstaffing dilemma, it’s important to know that both approaches are suitable for different scenarios and goals. In this post, we will disentangle the two approaches from one another, focusing on their definition, differences, and similarities.
What is outsourcing?
In the outstaffing vs. outsourcing dilemma, outsourcing assumes a “turn-key” approach to delegating software development activities to an external vendor. The client hires a vendor aiming to obtain a completed product or get a service (for example, Quality Assurance or cloud migration) without involving managerial resources on their side. It means that apart from providing project specifications, the client isn’t involved in the SDLC first-hand. In simple terms, they hand the keys to the castle to a vendor and wait for the work to be done. Such an approach causes a rift in the outsourcing vs. outstaffing paradigm.
What is outstaffing?
In a way, outstaffing is a response to the client’s exclusion from the software development process. With that in mind, we can define outstaffing as a way to personally influence software development activities when they are performed by an external team. As opposed to outsourcing, outstaffing assumes that the client takes part in every aspect of remote software development – from approving team members to establishing communications and assigning tasks. That way, outstaffing puts the client at the helm of the SDLC. The provider of outstaffing acts as a partner that helps access tech talent, build a team and retain team members.
To sum up this part, both software outsourcing and outstaffing offer the benefit of increasing the development capacity of an organization by providing a tech team. In many cases, it’s the approach to communication and team management that sets both approaches apart. Let’s take a closer look at several key aspects that differentiate outsourcing and outstaffing.
Outsourcing vs outstaffing: Process
As we mentioned earlier, the vendor of outsourcing uses their internal team to work on the client’s goals. Your role as a client in this model is down to providing project specifications and outlining the project milestones, deliverables, and time frames, which the vendor is bound to follow. The client has no say when it comes to SDLC and is excluded from the communication with the team as well as the team formation process. In fact, the client has no way to know what happens behind the scenes of their outsourced project. The client only gets access to the outcome of the team’s work, such as the code repository and IT infrastructure.
As opposed to outsourcing, outstaffing assumes that the client needs to keep an eye on the ball at all times when it comes to the SDLC. The tech team provided by the vendor works under the client’s direct management, using the engineering practices, communication style, and workflows prevailing in their company. Outstaffing is a great way to tailor a team and use it as you see fit. Such duties as talent recruitment, team member integration (and their retention), and building out IT infrastructure fall on the provider’s shoulders. That way, the client retains full control over the project outcome, without being distracted by other aspects of team management.
Outsourcing vs outstaffing: Access to the team
By outsourcing, you can build an external tech stronghold of your organization without staying in touch with the team that executes your project. Instead, the client typically receives updates through an account manager or project manager without being able to personally gauge the situation.
Conversely, outstaffing offers a different approach where the client has direct access to team members at all stages – from recruitment to management. Moreover, the client can use the team as an autonomous unit or integrate team members into their internal operations. In any case, it’s up to you as a client how to use the provided resources best.
Outsourcing vs outstaffing: Recruitment
When you outsource, recruitment won’t be a part of the process. It assumes that the vendor forms a team to work on the client’s project as they see fit – either by sourcing the needed talent from their bench, involving resources from other projects, or hiring directly. In any case, the outsourcing provider isn’t obliged to consult with the client when it comes to team creation.
Outstaffing shifts the onus of responsibility for the team quality from the vendor to the client. If you choose outstaffing vs. outsourcing, you will get to build your team in a joint effort with the vendor and handpick the best talent personally. Outstaffing vendors like nCube usually practice a strict selection process that includes multiple steps, from internal interviewing (including hard and soft skills interviews) to English proficiency and company culture fit interviews. That way, the client is able to pick the best-in-class talent pre-approved by the provider.
Outsourcing vs outstaffing: Pricing model
With outsourcing, you can count on a fixed budget for the project, as the number of tasks and time frames are defined in advance. The cost of the project is based on the complexity of the provided solution, urgency, and resources needed to complete it. If you want to change the course of the project, it tends to incur added expenses.
READ ALSO: How to Extend Your Software Development Team
Outstaffing, on the other hand, is based on a simple and transparent pricing model where you pay the monthly salary of provided developers plus a vendor’s fee that goes into team retention services. In outstaffing, you’ll know exactly how much time a team member invested in the project, which is typically a standard of 40 hours/5 days per week.
Software outsourcing and outstaffing: Similarities
As approaches to farming out software development, outsourcing and outstaffing have a lot in common. Both of them allow you to scale your team and access pools of talented developers. Here are some similarities you can find when comparing software outsourcing and outstaffing:
- Both are client-centric approaches
Both outsourcing and outstaffing focus on your scaling needs, helping you free up your core team from additional tasks and add more hands. So, when your squad is inundated with tasks, it’s a good idea to go with one of these approaches.
- New expertise you may lack in-house
Implementing recent technologies, such as Artificial Intelligence, Augmented Reality, IoT, Blockchain, or Cloud requires experts your company doesn’t have in-house. In light of fierce competition for this type of talent, you may find yourself struggling to source such experts locally. Both outstaffing and outsourcing expand the radius of your talent search to include offshore and nearshore regions, which is a great way to add the needed skills.
- Cost saving
Both outsourcing and outstaffing are aimed at reducing the exorbitant cost of building and maintaining an in-house staff. These approaches let you skip such costly aspects as recruitment, HR, overhead, legal, employee bonuses and team retention and invest further into marketing and brand promotion.
Outsourcing vs outstaffing: Differences
In this part, let’s take a look at the areas where outsourcing and outstaffing part ways.
- Responsibility for the final product
This one is the bedrock of the outsourcing vs. outstaffing dilemma. In outstaffing, SDLC falls on the client’s shoulders. The client has direct access to the team and manages its daily activities as well as sets the course of the entire project according to their vision. Outsourcing offers a different approach where the vendor is solely responsible for the quality of the provided work. Which way is more beneficial for you? It’s up to you to decide depending on your in-house managerial capacity.
- Involvement in the SDLC
In outsourcing, you won’t be a part of the SDLC and will rely on the provider when it comes to the quality of code produced by their team. With outstaffing, you can have the benefit of retaining full control over your team and managing the development process as you see fit.
- Personal connection with the team
When you outsource, recruitment is beyond the client’s control, whereas in outstaffing, adding a team member to the client’s squad is impossible without the green light from the client. Thus, an outstaffing provider builds the team in a joint effort with the client, whereas in outsourcing, the client never knows who works on their project.
- Predictability of the outcome
When it comes to outsourcing vs. outstaffing, the latter approach guarantees a safer landing. This is because an outstaffing client can be sure that only professionals work on their project, as they interviewed and approved the team personally. Outsourcing bears more risks when it comes to the quality of the outcome, as the client fully delegates the team formation to the provider and cannot be sure if the team members have all the needed skills to meet their goals.
To outsource vs to outstaff: How to pick the best approach
Analyze your goals. The principal difference between outstaffing vs. outsourcing often boils down to who will run the team. If your goal is to build a product without personal involvement – outsourcing is a more reasonable step. On the other hand, if you want to strengthen your internal team with the skills you lack within your organization, outstaffing is a more fitting solution. Many of our clients (including doTerra, CrossEngage, AstraZeneca, Life360, etc) chose outstaffing vs. outsourcing, as it’s more comfortable for them to be included in the SDLC first-hand.
Define your timeframes. Outstaffing is a great way to jumpstart a project and meet tight deadlines. You just need to define the roles and a vendor will backfill the vacancies and help you integrate remote team members efficiently. The outstaffing vendors usually have a network of talent to let you get off the ground in a matter of weeks. For instance, we at nCube can build your team in 2-4 weeks thanks to our access to 100,000+ engineers. With outsourcing, it takes more time to dive into product development, especially when you need to go through such steps as product design, MVP, development, testing, and more.
Decide on the best pricing model. Outstaffing is considered to be a more budget-friendly and transparent approach when it comes to cost. The client sources developers through a vendor in low-cost zones and pays per hour of their work, plus a service fee. In outsourcing, the price is defined by the vendor for the entire project in advance, so it can be hard to find out the kind of resources used in the work and their rates. Both outsourcing and outstaffing are less costly alternatives to in-house teams.
Define your managerial capacity. When it comes to the management of external teams, outsourcing vs. outstaffing are polar approaches. In case of outstaffing, the client (or someone on their side) will manage the remote team and ensure that the SDLC goes in the right direction. With that in mind, you need to see if you have internal resources for team management if you choose this approach. When you outsource, you won’t manage the team, as the vendor handles the SDLC. In both approaches, the vendor handles payroll, team retention, overhead, and other remote team-related expenses.
Define if it’s possible to integrate a remote team. Outstaffing is a good way to go for projects where it’s easy to weave external talent into your company processes. If you feel that you cannot integrate new team members seamlessly, it’s best to consider handing off to project to the outsourcing provider.
Outstaffing vs outsourcing: nCube’s approach
We at nCube help companies worldwide source tech talent from Eastern Europe and LATAM for their teams. Together with the client, we build tech squads within a custom approach that includes thorough internal candidate screening, client interviews, and seamless team member integration. We focus on building clear workflows and communication processes with new remote units while taking care of team members’ payroll, overhead, IT infrastructure, and general team happiness. That way, we focus on the key benefits of outstaffing, which lets the client have a personal connection with the team thanks to direct access to team members. Contact us to find out more about our approach.