In today's world, time is of great importance. What was relevant yesterday is no longer relevant today. Therefore, companies are constantly looking for ways to accelerate product development and bring them to market.
Competent IT specialists are needed to meet this need, and finding them takes a very long time. After all, there is a constant shortage of professional developers on the market.
That is why such models as outsourcing and outstaffing have gained popularity. They help solve issues with finding and hiring employees, as well as people, shortening the project implementation period.
However, there are many myths about these models. Most people do not fully understand their differences. As a result, it turns out that business owners are simply forced to turn to contractors who, unfortunately, do not solve the assigned tasks, but at the same time waste money and time.
Now, it's no surprise that when it comes to empowering your IT team, you have so many options to choose from. It is called hiring a contractor in the United States. For example, in Europe, many people work on subcontracts or offshore. Outsourcing talent is all about Australia.
Today we will try to arrange everything on the shelves.
We will help you to find answers to such common questions as "When outsourcing is not profitable", "What companies should avoid when considering outsourcing", "What is outstaffing" and many others. Are you ready? Then let's get started.
What is the IT Outsourcing Model?
The IT Outsourcing Model involves one company hiring another to develop complex software on a turnkey basis. In this case, the client does not participate in the management and control of the team. He does not hire employees, and the supplier is responsible for the final result. Speaking briefly, outsourcing is when a company delegates work that it cannot do on its own.
What is the IT Outstaffing Model?
For more clarity, let's look at the definition of outstaffing. This is one type of remote employment where an outstaffing company provides dedicated employees to perform tasks depending on your needs. They become part of the client's team. The customer is fully responsible for the personnel management process. However, he/she is not a direct employer. The IT out staffer is responsible for wages, bonuses, and finding performers. At the same time, the customer is responsible for the result.
Why companies prefer software outsourcing and outstaffing
The popularity of outsourcing and outstaffing
is growing nowadays.This is due to a number of undeniable advantages that these models provide. For example, you do not need to do a talent search. You get substantial savings in money, time, and much more.
If we turn to Grand View Research, Inc.
, we will see statistics showing that global spending on outsourcing and outstaffing will grow by $936.6 billion by 2027. In other words, a rate that is expected to grow by 7.7 percent each year until then.
In addition, access to sales markets is opened, where qualified personnel is much cheaper. For example, if you compare the hourly salary of specialists from Ukraine and the USA, you will be very surprised to see such a difference. If we talk about the price-quality ratio, then it is worth paying attention to Ukrainian developers.
Outsourcing vs. Outstaffing — Key Differences
Outsourcing vs. outstaffing is a never-ending topic of conversation. It is paradoxical, although many people confuse the terms. In general, there is a big difference between outsourcing and outstaffing.
The main thing to remember is that outstaffing involves having dedicated employees at your disposal. Project management and quality control of the final product are carried out by you. Developers accordingly become members of the team along with the full-time staff. Meanwhile, when the customer does not interact with the developers directly.
On the other hand, outsourcing refers to the case when a company (client) hires another company, i.e. a software outsourcing company, to perform a contract for the entire project: from planning to development and testing.
Let's summarize everything in the table:
Saying briefly, the main differences between software outsourcing and outstaffing are the scope of the project and the party responsible for managing the development activities. Outsourcing also means hiring freelancers and dedicated employees, and outsourcing can be recommended when turnkey services are required.
Pros and Cons of Outsourcing
- One of the key advantages of outsourcing a team is the ability to rapidly and reliably develop the required product. This means that the client doesn't have to deal with the hassle of hiring, spending significant time on recruitment, and waiting for several months to assemble a team. Moreover, there's no guarantee that an in-house team would possess the necessary expertise to handle the task effectively. In contrast, a professional outsourced team brings experience in developing products specific to the client's needs or within their niche. They may have experience in multiple similar projects, enabling them to commence work immediately without encountering errors or difficulties in the product, as they already possess the know-how to handle them proficiently.
- Another clear advantage is the cost-effectiveness of hiring in a country where developer salaries are lower. This means that the overall expenses can be reduced or the budget can be allocated more efficiently, even if the salary remains the same. Outsourcing teams already possess expertise in the specific niche where the client is building its product, so they won't waste time studying intricate details. As a result, the client avoids paying for mistakes that internal developers typically make when unfamiliar with a particular niche. While this may not always be apparent, it can actually save several months' worth of work.
- The outsourcing company is responsible for the final product. The service provider assumes full control over the quality of the code and the project as a whole. For this purpose, a well-established project management is functioning in its staff.
- You don't have to go through the whole process. You get a ready-made solution where all management is left to the service provider from communication to execution.
- The issue of hiring personnel is completely removed. When a company outsources, human resources issues are handled by the supplier. You don't hire employees, you don't pay taxes for them, and you don't collect salaries. You voice the needs, and the outsourcing company gathers the necessary number of professionals with the appropriate qualifications for implementation.
- Savings on office equipment. There is no need to buy additional equipment, rent space or buy the software.In general, all this is already included in the cost of services and is more profitable.
- Adaptation to needs. The outsourcing company responds quickly to emerging requests. For instance, your business needs to accomplish a small task that just takes a few hours. The supplier can provide a specialist without his/her subsequent involvement in the project.
- The client's complete dependence on the development team emphasizes the importance of carefully selecting a team with a proven track record and positive reviews. It is crucial to exercise caution and make wise choices when it comes to team selection, as there is always a potential risk of hiring an incompatible team, which may only become apparent after some time and the loss of both time and resources. Therefore, it is advisable to select teams based on reputable reviews from platforms such as Upwork, Clutch, Goodfirms, and DesignRush to reduce this risk.
- The client's complete dependence on the development team emphasizes the importance of carefully selecting a team with a proven track record and positive reviews. It is crucial to exercise caution and make wise choices when it comes to team selection, as there is always a potential risk of making the wrong decision.
- For smaller projects with a duration of up to a month, it may not be practical to seek out teams, as it can often result in higher costs without the client experiencing substantial benefits from collaborating with a team.
- In certain cases, communication may only occur through the Project Manager, and the developers may not be fluent in the client's language. Consequently, there can be potential losses in translation. It is crucial for companies to prioritize effective communication to ensure high-quality outcomes.
Advantages and disadvantages of outstaffing
- The best talents. Accordingly, you receive proven specialists who fully meet the company’s needs. You do not waste time searching and checking. All this is undertaken by the IT outstaffer.
- Cost reduction. All costs related to taxes and insurance are paid by the staffing provider. It's important to mention that there is no requirement to provide compensation for termination, which amounts to a substantial sum. Additionally, there is no need to cover expenses for equipment and other associated costs. You, as a customer, get a ready-made solution in the form of dedicated developers.
- The flexibility of personnel selection. You completely free yourself from issues related to personnel turnover, and you can also flexibly manage the size of the team. If suddenly you need to increase or decrease the number of employees, it will not take long.
- Reduced implementation time.
- Interruptions in communication. When working remotely, there is a risk of poor integration into the regular team. However, this can be avoided if you properly prepare for the adaptation process. Also, if the employees are multinational, you may face misunderstandings related to cultural differences. Nevertheless, this aspect is applicable to remote work in general. Thus, following the COVID era, this drawback has become less prominent for numerous companies and is only relevant to those whose team exclusively operates within a physical office space.
- The customer is responsible for the quality of the product. Management is carried out by employees on the client's side. This means that the responsibility for the final result lies with the customer.
Which model is better to choose?
To answer this question, you only need to consider your own needs, your available resources, and your business model in general.
In general, outstaffing is ideal if your IT needs are long-term. However, you have employees who can ensure proper control over the developers.
Outsourcing is always a good idea when there is a necessity for complex services or short-term tasks.
Let's say you have a vision to launch a project in the cryptocurrency sphere (like an NFT marketplace, for instance), you recognize the importance of initiating this venture within a week or two to seize the trend and attract a larger user base. However, you lack the time to search for developers and endure months of collaboration. In such cases, it is ideal to engage a proficient outsourcing team with prior experience in similar projects, enabling them to commence work promptly and deliver a high-quality product within a short timeframe.
Models of Cooperation at Peiko
If you need talented developers for your project, at Peiko, you have the option of choosing between 2 methods: outstaffing and outsourcing.
- Outstaffing model. At Peiko, we offer the option of hiring dedicated programmers on an outstaffing basis, whether it's full-time, part-time, or on an hourly arrangement. Our skilled developers are committed to long-term engagements and can be paid either on an hourly or monthly basis. We prioritize open communication and take care of all technical and salary-related matters. If needed, we are also willing to sign a non-disclosure agreement (NDA) to ensure transparency and confidentiality. Your main responsibility will be to maintain regular communication with our programmers and ensure timely payment of their monthly salaries.
- By choosing Peiko for your development outsourcing needs, you gain enhanced flexibility and numerous avenues to progress your future project. Moreover, outsourcing not only helps in reducing costs but also aligns with your project requirements and budget. It expedites the delivery cycle, enabling you to identify the suitable company and convey your specifications within fixed timeframes. This streamlined process ensures efficient progress and prompt results.
In a highly competitive field, business owners need to be very fast in developing and recruiting a team of professionals to be the best. Therefore, the demand for freelancers is increasing every day. This approach allows for rapid development without harming the quality of the work performed and the company's confident growth.
What is better outsourcing or outstaffing? This is a question that is always heard. A lot depends simply on the company's goals, the situation itself, etc. But the following can be said for sure. To get the desired result, it is necessary to carefully approach the choice of a partner. It should be a reliable company that really takes your needs into account. Weigh the pros and cons and you will find the right solution and implement your idea.
When hiring the right development team for your project, we strongly recommend that you consider the goals and specifics of your project and be realistic about your capabilities in terms of managing the development process.
Contact the Peiko team
and we will advise the best flow according to your project and business needs!