Outsourcing Software Development vs. Outstaffing: What’s the Difference?

Is it outsourcing or outstaffing?

When a company decides to leverage offshore software development services, it can often get confused by the terms “outsourcing” and “outstaffing,” eventually facing the tough question: what’s the exact difference between these two models

In the previous article, “Blockchain Software Outsourcing: 5 Reasons To Say YES to Outsourcing Developers in Blockchain”, we discussed outsourcing software development and its benefits.In this article, we’ll delve deeper into outsourced development and compare it with IT outstaffing in terms of several criteria: time, management efforts, costs, and the challenges associated with each model.

Let’s start by taking a closer look at outsourcing software development services.

 

Outsourcing Software Development

According to Crunchbase, there are around 10 000 outsourcing companies around the globe, and IT outsourcing market volume is predicted to reach US$777.70bn by 2028.

Outsourcing software development is a form of offshore software development where a client hires a software development company to handle the entire project – from planning to designing, development, and testing.

Software outsourcing is also a perfect fit for companies that need end-to-end assistance in rebuilding their projects.

Unlike outstaffing, outsourced specialists do not become part of the client’s team. Instead, they are a remote, highly skilled team of developers and other professionals hired by the outsourcing company to complete the client’s project. Often, this team may work on several projects for different clients simultaneously.

How Much Time Does It Take?

On one hand, like any specialists you hire, the outsourced team will need time for the discovery phase to evaluate the project and its requirements.

However, hiring an outsourcing company also saves time on setting up the process. Since the company specializes in offering high-quality software services, it already has communication and delivery processes set up and polished with its previous clients.

What about the Management?

The significant advantage (or disadvantage) of software services outsourcing is that all the management lies on the shoulders of the outsourced development company you hire. You can have regular sync calls with the project manager of the outsourced development team, but you won’t be deeply involved in the development process.

This reduces the burden of controlling all the operational aspects of the project and allows your in-house team members to focus on other projects. 

Besides, because the team is fully responsible for the project’s management and fulfillment, it is 100% committed to smooth communication and delivering high-quality results. 

You can <learn about more benefits of applying for bespoke software development in this article>.

Is Outsourcing Software Development Costly?

Since outsourcing software development involves delegating the entire project to an external team, it typically costs more than outstaffing. However, this higher cost is compensated by the expertise that the outsourced team brings to the table. 

Moreover, outsourcing is cheaper than maintaining a permanent in-house team, offering significant cost savings in the long run.

Seems like outsourced development is a perfect fit. Is that all you need to know before applying to an outsourcing company? We recommend considering these challenges of software outsourcing because, like any solution, it comes with certain risks:

No Management = Limited Control

Outsourcing software development means great relief from the burden of handling and tracking the entire development process. Everything is in the hands of the outsourcing company. However, if you prefer to be involved in every step your team takes, be prepared to relinquish control over every aspect of your project.

The same level of control can also extend to the code base of your project. In order to safeguard your code against potential security attacks or data theft, certain companies may limit your access to the code during the building phase.

Hidden Costs

As mentioned earlier, hiring an outsourcing company is cheaper than hiring and maintaining an in-house team. However, as with outstaffing (we’re gonna talk about it later), some outsourcing companies may charge additional (unexpected) fees for project management, administrative support, etc. If you want to be sure that there are no hidden costs about outsourcing software development, we’d recommend that you discuss them with the outsourcing company at the very beginning of your collaboration.

Security and Data Privacy Issues

While signing an NDA with an outsourcing company ensures that all code produced by the outsourced team belongs to your company, there’s always potential for security and data leak risks when involving a third party in the development process.

To safeguard your project, establish security and data privacy measures, provide clear guidelines on data handling, limit access to sensitive data to authorized employees, ensure data encryption, and monitor network activity.

Now that you understand what outsourcing software development means, let’s dive deep into outstaffing.

 

Outstaffing in Software Development

Outstaffing is an alternative form of offshore software development where a client hires a specialist to perform specific development tasks.

The hired professional becomes an employee of the outstaffing software development company. However, unlike outsourcing, outstaffing means that this remote employee becomes part of the client’s in-house development team.

Outstaffing is suitable for clients with a strong in-house team and a developed project who are looking for a niche expert to extend the project. It’s best for seasonal work, and it won’t suit those who want to build the entire project from scratch.

How Much Time Does It Take?

The process of hiring an outstaffed specialist is generally quite similar to hiring a new in-house developer. However, outstaffing offers the advantage of time efficiency since you deal with a candidate pre-screened by the outstaffing agency. What you need to do is evaluate whether the candidate aligns well with your team.

Moreover, unlike hiring a new in-house developer, where you have to integrate them into the project, onboarding an outstaffed specialist is typically faster as it is handled by the outstaffing company.

What about the Management?

There are essentially two ways to manage an outstaffed developer. On one hand, it is more common for the client to take full control over the development process of the outstaffed specialist. This means you will be the one assigning tasks, checking the quality of their implementation, and tracking all results. 

On the other hand, there is a possibility that the outstaffing team will offer you its project manager with whom you will communicate and articulate all project requirements. The project manager will, in turn, be in touch with you to keep you updated on the project’s progress.

Is Outstaffing Costly?

One of the main reasons why companies choose outstaffing is its cost-effectiveness compared to outsourcing and hiring in-house developers. Since the client already has an in-house team, the salaries of these employees are not considered when calculating the outstaffed specialist’s salary. 

Additionally, outstaffing saves money spent on candidate search, as the outstaffing company provides the employees.

Now that you know the particularities of outstaffing in software development, the next logical question is about the risks you may face while outstaffing developers. Let’s take a look at the most common ones.

The Development Management Is in Your Hands

If you decide to manage a remote outstaffed worker, this comes with both advantages and disadvantages.

On the one hand, you fully control the project’s development, know literally everything what is happening there, and can interfere and improve it at any stage of the development progress. 

On the other hand, if you decide that the building process should be under your supervision (especially if you don’t have a project management experience), brace yourself for all the responsibilities you will have to take on. From assigning tasks to monitoring the whole process, a project’s management can be found difficult by those who have never done or have not enough time to do that.

Shorter Hiring Period? You Still Need to Choose Your Developer

Don’t assume that the entire hiring process is handled by the outstaffing agency. While the outstaffing development company does select the best candidates from its pool, you still need to evaluate whether the chosen candidate fits well with your team. If you lack a technical background, finding the right developer could be challenging. In such cases, outsourcing software development might be a more suitable option for you.

Beware of Hidden Costs 

As mentioned earlier, outstaffing is the most cost-effective solution for those considering offshore development. However, there’s always a possibility of hidden costs that you should consider when opting for outstaffing software development. These costs might include fees for recruitment or training of the outstaffed developers. 

Additionally, any overtime work or changes in rates are the responsibility of the client, not the outstaffing company.

 

Wrapping It All Up

Outsourcing and outstaffing are two distinct models of offshore software development with their respective advantages and risks.

The selection between outsourcing and outstaffing hinges on the unique needs and goals of the project, including such factors as the project’s complexity, timeline, budget, and the level of control desired by the client.

At the end of the day, outsourcing software development is primary about completing the whole project, while outstaffing centers on the team extension and working together on a project for the long run.