Software Development Updates

Offshore software development is the solution adopted by companies, from large-scale to startups. It has become one of the most prominent trends in the software industry. An offshore software development company is an external service provider located in a region where production costs are lower due to cheaper labor. Utilizing offshore development services is an effective way to access the global talent pool while staying within budget. The engagement between clients and external providers plays a crucial role in determining the type of offshore development model used. Two common models are outstaffing and outsourcing. In this blog post, we will explore outstaffing vs. outsourcing. We’ll discuss the fundamentals of outsourcing and outstaffing, their pros and cons, differentiating factors, scenarios for implementing them, and what is best for your business. 

1. Overview of Outsourcing

Outsourcing software development is a model in which a client company hires a particular software outsourcing company to handle their project development. This can involve outsourcing the complete development process or specific tasks within the project.

The outsourcing provider is responsible for the entire software development process, which includes planning, deployment, and maintenance. They are responsible for hiring and managing the software development team according to the project requirements. The client does not interfere in the day-to-day management or project management.

2. Advantages of Outsourcing

The COVID-19 pandemic brought a significant shift in the work culture. Companies started operating remotely, which resulted in a sudden rise in software outsourcing. Several benefits of the outsourcing model contribute to continuous growth. Let’s look at the three major outsourcing pros:

2.1 Cost-Efficiency

The IT outsourcing model is highly cost-effective. By outsourcing, the client companies avoid the expenses related to hiring, training, and maintaining an in-house team; therefore, there are no expenses associated with recruitment and onboarding processes. Additionally, clients have the flexibility to choose the outsourcing agency that best meets their requirements and budget. There are also no infrastructure and administrative expenses associated with hiring a remote team through outsourcing.

2.2 Access to Better Talents

With software outsourcing, client companies are not limited to the skills and expertise of in-house employees or the local job market. Instead, they can hire remote developers from across the world who possess specialized skills that meet their business requirements.

2.3 No Equipment Purchases are Needed

In this software outsourcing model, the service provider is responsible for determining the hardware and software needed for software development. This includes selecting the database and cloud server required for the project. The service provider estimates the associated cost and purchases the necessary infrastructure. Clients do not need to worry about infrastructure procurement and management.

3. Disadvantages of Outsourcing

There will be certain risks involved since an outsourcing partner is from a distant country for an in-house project. Let’s discuss them.

3.1 Limited Control

The client company gives the entire project’s responsibility to the outsourcing company. Therefore, you cannot interfere in any part of the development process or the team management, be it the hiring process, following protocols, compliance with development standards, etc. You are eligible to provide feedback, but it’s completely the choice of the project manager of the remote development team to implement it. As a result, some quality and security aspects can be overlooked.

3.2 Communication Problems

Outsourcing companies are generally situated on different continents from the client company, which can lead to differences in culture, time zones, language, work culture, etc. These factors create communication barriers that can affect the development process and overall productivity.

3.3 Difficulty Monitoring Processes

Ensuring that the service provider fulfills all the work commitments according to the contract can be challenging, especially in an outsourcing development model where transparency is often limited. Tracking the progress of the development task can be difficult as it requires reliance on the service provider for updates and metrics.

4. Overview of Outstaffing

The outstaffing model involves client companies hiring offshore developers to supplement their in-house teams and enhance their capabilities. If you already have an in-house development team but lack IT professionals with the specialized skills required for the particular project, you can collaborate with outstaffing companies.

The outstaffed team consists of dedicated professionals working exclusively for a specific client during the involvement period. Here, the client’s team is responsible for managing remote developers and handling all project management activities. Therefore, the client is at the center of the software development lifecycle in the outstaffing model. Meanwhile, the outstaffing partner handles employer-related processes, such as payroll, leave management, etc.

5. Advantages of Outstaffing

The following are the detailed benefits of the outstaffing model, which will help you understand its importance:

5.1 Flexible Hiring Model

Outstaffing offers the flexibility to scale your team up and down according to project needs. There are no long-term commitments or permanent hiring, unlike traditional hiring. The clients are solely responsible for deciding schedules, task delegation, when and whom to hire, involvement level, hiring period, etc.

5.2 Access to Top Talent

Hiring domain experts or niche developers for a shorter period of three to six months can be challenging through in-house hiring. Outstaffing companies hire top-tier developers with in-depth knowledge and relevant experience to build a market reputation. By partnering with a trusted outstaffing partner, client companies can obtain dedicated expertise based on project and industry requirements at any stage of the software development process. This approach not only saves time but also improves the operational efficiency of the in-house team.

5.3 No Legal Hassles

Clients are not responsible for the employment or HR policies of the outstaffed team members. They do not need to manage the legal complications associated with hiring and terminating remote employees. The client can adjust the onboarding and offboarding process for external developers according to your team’s requirements.

6. Disadvantages of Outstaffing

The outstaffing model offers several advantages, but there are some challenges that client companies should be aware of before taking outstaffing services. Here are some of the key limitations.

6.1 Communication Challenges

Outstaffed professionals work remotely from a distant location, possibly having different time zones and work environments. Therefore, there can be communication gaps between in-house and remote development teams. Also, the absence of a project manager within the external team may result in remote developers deviating from the project scope, which can break the synchronization of work processes.

6.2 The Project is Your Responsibility

The client team is solely responsible for project management and delivery throughout the project. The outstaffed team works under the guidance of the client’s project manager and focuses on the specific task for which they were hired. It is essential to track the work of remote developers through proper task management software. This will help align their work with expectations and bring operational transparency.

6.3 Quality and Security Concerns

Time zones and cultural differences affect the communication between in-house and remote teams, hampering the monitoring and tracking of the daily activities of remote employees. Consequently, it may be challenging to ensure that developers are adhering to standard procedures and protocols, which can lead to concerns about the quality of their work.

Additionally, sharing sensitive and confidential information with remote teams may pose risks to data privacy, integrity, and compliance with intellectual property rights (IPR) regulations.

7. Differences Between Outstaffing vs. Outsourcing

Now that you understand the basics of outsourcing and outstaffing concepts. Before selecting any model, it’s important to evaluate its pros and cons, pricing structure, the market footprint of the external providers, and many more. Now, we’ll discuss the differences between these two offshore development approaches and try to draw a line between them so that it’s easy to make a clear decision.

7.1 Outstaffing vs. Outsourcing: Control and Management

In the outsourcing model, the client transfers control of certain services to a third-party company. This includes decision-making, resource allocation, team management, and project management rights, which are all handled by the outsourcing provider. This helps the client company to focus on core business functions and rely on the external provider for non-core activities within the service level agreements.

Outstaffing eliminates third-party direct control over product development and management. Here, the client or hiring company directly manages the external team. The outstaffed team collaborates with the hiring company’s team, adhering to their rules and specifications. The client closely monitors the tasks performed by external developers to ensure they meet the expected standards and are completed in a timely manner.

7.2 Outstaffing vs. Outsourcing: Required Technical Expertise

In software outsourcing, the client company conducts a comprehensive analysis of its requirements before assigning the entire project to an external development team. The outsourcing provider then hires the appropriate professionals to form a dedicated development team for task execution. Therefore, the client’s team requires limited technical skills for requirement analysis and the formulation of development tasks.

However, outstaffing involves supplementing an in-house technical team with required expert developers from outside the organization to complete a project. The in-house team must be technically proficient to collaborate effectively with the remote developers. These remote employees are just extended members of an existing technical team.

7.3 Outstaffing vs. Outsourcing: Flexibility and Scalability

Outsourcing can be less flexible because it involves modifications to the contracts or service agreements once they are signed. These contracts may be too rigid to accommodate changing demands. Any necessary changes can lead to increased operational costs and may require contract renegotiation. This process often results in scaling issues. Renegotiation with the outsourcing partner to address scaling requirements can result in delays and add administrative overhead.

Outstaffing offers significant flexibility and scalability. Clients can adjust the team size and roles according to the project needs at any time to align with project requirements and changing needs.

7.4 Outstaffing vs. Outsourcing: Integration and Collaboration

The outsourcing company manages the entire software development process independently, with minimal involvement from the client company in any tasks. The outsourced team regularly updates the clients on work progress and project status. This arrangement leads to limited interaction between clients and the remote team, resulting in less integration and collaboration.

In the outstaffing model, the dedicated team maintains regular communication with the in-house development team. This includes daily meetings, collaborative sessions, client calls, and project reviews, all of which promote close collaboration and integration. Constant communication and coordination are essential for building a cohesive team that works together to achieve the same project goals according to a predefined strategy.

7.5 Outstaffing vs. Outsourcing: Cost Control

Outsourcing involves hiring an external team to handle the entire software development process. This approach often leads to higher costs, as the pricing structure is predetermined and generally cannot be changed.

In contrast, outstaffing is typically more cost-effective. In this model, clients engage offshore developers to complete specific tasks, paying them on an hourly basis.

8. When to Outsource?

Consider the following scenarios before opting for software outsourcing:

• The project does not require continuous oversight and long-term client involvement.
• Cost savings are a priority.
• Lack of proper infrastructure for product development.
• Large-scale enterprises with the capacity to pay for talent outsourcing.
• The in-house full-stack development team is preoccupied or unavailable according to project demand.
• Projects with strict deadlines.

9. When to Outstaff?

Consider the following scenarios before opting for outstaffing services:

• If your ongoing project requires a dedicated team with specialized skills.
• If you need to enhance the capabilities of your existing team without traditional hiring.
• When team scaling is required without long-term hiring commitments.
• If you desire complete control over project management.
• For projects that require consistent and long-term support.

10. Outstaffing vs Outsourcing: Which to Choose For Your Business?

When considering outsourcing and outstaffing software development. Each model has its own benefits and limitations. To decide the most relevant option for your business processes, conduct a thorough analysis of your project requirements and business objectives. This decision is not a one-size-fits-all approach. Similar projects may require different offshore models depending on the specific needs of each business.

Selecting an inappropriate model may bring significant consequences over time. Examine different aspects of your project after taking a considerable amount of time, and then make the decision.

11. Final Thoughts

Outstaffing is often preferred over software outsourcing due to its flexibility and minimal complexity. However, outsourcing still holds significant relevance in the software development industry. Both approaches have their advantages and continue to be relevant. We’ve tried to explain all the relevant topics most straightforwardly, enabling you to make an informed decision about whether to choose outstaffing or outsourcing for your project.

FAQS

What’s meant by the term outsourcing?

Outsourcing is a popular software development practice in the IT industry where companies hire a third-party company for the entire software development task on a contractual basis.

Which option is more effective for a long-term project?

Software outsourcing is increasingly recognized as a more advantageous alternative for managing and executing long-term projects.