Outsourcing vs Outstaffing: Ensuring Success in Your Business Operations

Quick Go-Through – In today’s time, more organizations are opting for offshore software development. And why? Due to its several advantages. Outsourcing and outstaffing are two of the main offshore development models, often considered similar. But no, they’re not the same. And you’ll learn about the same in our blog – outsourcing vs outstaffing. Happy reading!

To turn your vision into a reality, you need the best people on your team. And professional IT (Information Technology) people are a bit challenging to find, and, if found, it's not that easy to keep them on your team. This is the reason organizations nowadays opt for outsourcing and outstaffing rather than creating an in-house team. As per the Grand View Research Report, we can expect the global cost for outsourcing and outstaffing to reach USD 936.6 billion by 2027.

Opting for external vendors has now become quite a significant trend in the IT world. But why do organizations search for professionals outside their team? Because opting for the best offshore software development company enables organizations to sink into the pool of new talents.

So, it’s a fact that opting for an external vendor can be very advantageous for your organization. But again, the main question - outstaffing or outsourcing? Outsourcing vs outstaffing is an endless debate. And organizations must choose between the two every time they are required to build some software project.

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There was a time when tech people debated a lot on outsource vs offshore, however, you need to understand that outsourcing, outstaffing, and dedicated teams are a part of offshore development. So, the real debate here is outsourcing vs outstaffing. And it's not all rainbows and sunshine when choosing between software development outsourcing and outstaffing.

So, wondering what's their difference and which will help with your needs: outsource or outstaff?

Well, this blog will help you understand the difference between outsourcing and outstaffing, helping you choose the ideal one for your business!

What is Outsourcing?

Outsourcing is a type of offshore development where an organization (client) hires another company, i.e. software development outsourcing company, and outsources their whole software project - from ideation to development to testing. This workflow is ideal for everyone, like business owners who work hard to bring their investment and want to take their business digitally.

When choosing the right software outsourcing partner, team management also gets easy and seamless.

As we now understand – what is outsourcing – let’s now go through the advantages of software development outsourcing.

Advantages of Outsourcing

Outsourcing has several benefits, and if done adequately, it will help you increase the performance of your staff by making them more proficient and enabling them to focus on their core responsibilities.

The following are the key advantages of software development outsourcing:

• Minimal Costs - It is much more affordable to outsource the software development team rather than looking for and hiring full-time employees (it's a tedious process). For instance, if you reside in the United States, you know that the expense of software development is quite high. In this sense, hiring developers from Asia or Eastern Europe is much more efficient and affordable.

• Access to Better Talents - When opting for software development outsourcing, you're not just limited to a single option, as you can hire software developers with unique skill sets and experience from around the world.

• No Need to Buy Hardware and Software - Since you outsource your development project, the software and hardware will be chosen by your contractor. Your outsourcing team will be responsible for the purchase of hardware or software, of course in cooperation with you.

• Rapid Start - As a protocol, software development outsourcing companies consist of different human resources. This is the reason their engineers can start working on your project immediately, making it an ideal option for organizations with strict deadlines.

Disadvantages of Outsourcing

Nothing is perfect, hence, there are certain limitations and risks associated with IT outsourcing, such as:

• Risk of Data Leakage - When you transfer your project data to an external vendor or third party, there's a risk of important data leakage. Therefore, it is vital to bargain for bona fide and genuine vendors with a good reputation and reviews.

• Communication Problems - This issue is faced by organizations specifically when there is a huge time difference and language barrier. This can lead to greater misunderstandings, badly impacting your work quality. To avoid such situations, you must master cultural differences for successful outsourcing.

We bet now you understand – what outsourcing is and how it can benefit organizations. Now, to choose between outstaffing vs outsourcing, it is imperative to understand – what is outstaffing as well. And the following section is all about it.

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What is Outstaffing?

Outstaffing is a type of offshore development where a client hires a contractor from any software development outsourcing agency to execute their development tasks. It is also true to say that when opting for outstaffing, the offshore developers become your remote in-house developers for the entire collaboration period with offshore companies.

IT outstaffing is an ideal option for clients who have a solid in-house development team and need a professional's expertise in a specific domain or want to save money on hiring a workforce. The members of outstaff team are only dedicated to a single client. Therefore, they do not jump from one development project to another.

This type of offshore development approach works seamlessly and helps scale software development teams. However, it's important to keep your HR department in the loop about your outstaffing development plan.

Advantages of Outstaffing

Let’s go through some of the key outstaffing benefits, such as:

• No Financial Issues - When opting for an IT outstaffing company to provide all software development services, you need not stress upon issues like salary payment, accrual, calculation, bonus payment, taxes, and other fees. The client only needs to make the payment specified by the contract.

• Elimination of Labor Conflicts - Since the employee must sign an employment contract with the IT outstaffing company, and not with the ordering organization. Hence, the employees don't have to participate in any labor conflicts at any time.

• Reduced Expense - In IT outstaffing, you need to manage your development team all by yourself, it is more affordable than software development outsourcing. Hence, providing it an upper hand in the debate - outsourcing vs outstaffing.

• Simplified Human Resources Management - The outstaffer organization takes care of all the documentation, from writing reports to approving sick leaves or vacations. Hence, IT outstaffing helps minimize the load on the accounting and administrative departments of the customer organization.

Disadvantages of Outstaffing

The following are some disadvantages of IT outstaffing:

• Great Responsibility - If you opt for an outstaffing model, you must be prepared to take more responsibility. Hence, it is suggested to have technophile professionals on your development team for more efficient management.

• Communication Problems - When working with an IT outstaffing model, there are times when issues arise on misunderstanding certain tasks. Therefore, it is crucial to set up and manage all the communication channels suitable for both parties. Also, you must understand the role of communication in the offshore industry.

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Common Myths about Outsourcing and Outstaffing 

Over 23 years of providing end-to-end software engineering services, experts at Radixweb have come across multiple misconceptions regarding software development outsourcing and outstaffing models. So, let's debunk some myths about outstaffing and outsourcing:

• Outstaffing Is Simple

Some individuals are skilled either in management or technical skills. However, business owners often undervalue the complications of hiring an IT outstaffing company. They find it easy to communicate, assign, and manage tasks of the remote employees, and at the same time can manage their business outcomes. Well, it's not that easy!

• Offshore Organization Manages Developers

No, it's not true, the clients themselves are responsible for tracking all the assigned activities, accounting, communicating with a dedicated development team or a developer, and managing the progress.

• No Need for Actual Communication

Remote software developers are a significant part of your development team. This means open and transparent communication is crucial for both sides. In fact, in the case of development teams that work remotely, communication is the key.

Good communication is the bridge between confusion and clarity. - Nat Turner

• All Offshore Development Models are the Same

As part of the tech world, we all know that offshore product development provides a great edge in the competitive market. However, many people still don't understand the difference between offshore software development outsourcing and outstaffing models. But you need to understand that whatever offshore model you choose can impact your project significantly.

• Every Outsourcing Agency Has an Expertise

When clients hire an IT staff augmentation company, they anticipate certain expertise and knowledge. But not every software development outsourcing company comes with expertise. So, to avoid getting bamboozled, you should check out their case studies, ask for reviews from previous clients, and test-drive a team.

We’ve discussed the basic aspects of outsourcing and outstaffing. So, let’s now dive into the heart and soul of our blog – outsourcing vs outstaffing – and understand the basic difference between outsourcing and outstaffing.

Outstaffing vs Outsourcing: The Basic Difference

Understanding the difference between outsourcing and outstaffing will help you choose the ideal offshore development model for your organization. Let’s begin with – outsourcing vs outstaffing.

Required Technical Expertise

Technical expertise is an important parameter when discussing outsourcing vs outstaffing. In the case of software development outsourcing, you need to analyze your project requirements correctly and generate the development tasks appropriately. And your hired software developers further take on all the responsibilities as they are proficient in different types of software development. On the other hand, when you opt for IT outstaffing, you need to be prepared to manage the teams and also require some exceptional technical skills.

Payment Process

When deciding on outsourcing vs outstaffing, you need to understand that in the case of software development outsourcing the customer organization oversees the payment. On the other hand, in the case of IT outstaffing, there are regular salaries provided to employees.

Team Management

Talking about outstaffing vs outsourcing, team management in the case of software development outsourcing is done with the help of a project manager. On the other hand, in the case of IT outstaffing, the clients themselves need to manage the extended team.

Overall Expense

Thinking of the overall expense when comparing outstaffing vs outsourcing, software development outsourcing can be a bit more expensive than outstaffing. It is costly because the entire development work from distribution to control is handled by the software outsourcing partner you select. Whereas IT outstaffing is less costly because the client is responsible for the majority of the processes like management, task assignment, etc.

This was all about the basic difference between outsourcing and outstaffing. We hope now you can make your decision on – outsourcing vs outstaffing. However, still, if there’s any confusion, you should go through the following section.

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Outstaffing vs Outsourcing: Which to Choose for Your Business? 

When finding a software development company that provides the best offshore development, organizations need to consider the efficiency of end outcome and price of service. Whether you choose outsourcing or outstaffing, both offer you rapid and reliable results, considering your business objectives. However, when you should opt for software development outsourcing and when you should prefer IT outstaffing, totally depends on your business needs and requirements.

Imagine - your project analysis is ready; it would be best to outsource it to the expert team. And if you're new to the whole concept of offshore development, you can do a little research sort of thing and explore the market to experience transparency. Hence, the software development outsourcing model is based on collaboration and often ends up in a long-lasting, successful partnership.

In a situation where you need to monitor the performance and efficiency of your remote workforce and take more responsibility, then IT outstaffing is the perfect approach for you. Hence, when you hire dedicated developers, you complete all the missing elements of your development team and manage all the tasks you assign them.

Cost of IT Outstaffing and Outsourcing Services

Software development outsourcing is a bit costlier than IT outstaffing. Why? Because it involves additional expenses, such as:

• Vendor Charge
• Developer’s salary
• Overhead expenses
• Product delivery risks

Moreover, you also need to hire business analysts and project managers.

Talking about IT outstaffing, it reduces several costs, leaving to spend on two major aspects - vendor charge and developer’s salary. However, the cost for both outsourcing and outstaffing can be reduced if you choose the right offshore development locations for hiring your experts. Also, it is not easy to calculate the average costs of outstaffing and outsourcing because the expense can vary from expert to expert, country features, vendor fees, and additional costs.

ConclusionOutstaffing and outsourcing share several aspects. They both are the approaches for any organization to hire and get help from external organizations. However, the basic difference is that software development outsourcing is all about hiring an external provider to execute entire projects, processes, and team creation, and IT outstaffing is all about hiring individual team members. If your company acquires the required tools, talent, and roles, IT outstaffing is the best option for remote help. Otherwise, the best option is to hire a software development outsourcing company.If you’re on the fence about deciding on outsource vs outstaff models, Radixweb can help you. As a trusted software development company, Radixweb can collaborate with your team as an outstaff or outsource resource. So, whether you want to build your project from the ground up or enhance your existing product, our experts are always here (and happy) to help. We're known experts in working with both outstaffing and outsourcing models.Reach out and let us help your organization choose the offshore development model that best suits your business requirements.