IT Outsourcing vs. IT Outstaffing: real pros and cons

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Despite the obvious differences, people still confuse IT Outsourcing and IT Outstaffing models. Therefore, we decided to shed light on the matter and find out your thoughts regarding each cooperation model.

IT Outsourcing or Custom Software Development

Outsourcing perceived by some people as an unreliable business model. Companies that offer outsourcing services have refused to use this term, having come up with a better name — Custom Software Development.

Outsourcing can be summed up in simple words: one of the business functions transferring to a third-party vendor. This can be development, testing, tech support, accounting, financial management, and other functions.

Perfect fit when a company or startup doesn’t want to or doesn’t have a need to hire tech specialists on a full-time basis. Often outsourcing is a short time cooperation model, especially, comparing to outstaffing.

IT Outsourcing Pros

  • no hiring, no management efforts;
  • you don’t take part in the development and coding process on the whole; code quality depends on outsourcing provider and its experience;
  • perfect fit for small companies or for those who don’t need to implement software development solutions/products constantly;
  • ability to choose an outsourcing company that specializes in the required field: web or app development, Quality Engineering, and Testing, DevOps, etc;
  • fast and short.

IT Outsourcing Cons

  • lack of control and team management: you do not know what exactly is happening and how the project is progressing;
  • code quality: the quality may be lower than you expected;
  • hidden costs (nontransparent cost model): outsourcing costs are higher on average than outstaffing; it should be discussed upfront to avoid additional expenses;
  • security (Intellectual Property Protection): sharing IP assets with an outsourcing company may lead to some risks; we don’t say that outsourcing is for 100% a leak of data or any valuable assets but it happens and you should be prepared.

IT Outstaffing or Your Offshore-based Team

In all of the European IT market, you can find different names such as:

  • Extended Development Team
  • Dedicated Development (Software Engineering) Team
  • IT Outstaffing Services
  • Offshore-based Development Team
  • IT Staff Augmentation Services
  • Your Development Team in the offshore/nearshore country

You might have noticed that tech teams providers use the word “Your” to indicate that this is your team but operating in another country.

A dedicated team is a good option if you have a long term project or you want to participate in the choice of developers, team management, coding process, and finance management.

IT Outstaffing is a long term business model: the minimal cooperation period is 1 year.

IT Outstaffing Pros

  • an offshore team works under your direct supervision; you have full control over the software development process;
  • the development team will be exclusively recruited for you by IT outstaffing provider and only you can make a final hiring decision; interview process follows your company policies and practices;
  • outstaffing provider* doesn’t have access to your code, data, or any IP information;
  • you’re flexible enough to change the number of team players;
  • transparent pricing model without hidden fees: oftentimes called “Cost+ Model”

IT Outstaffing Cons:

  • need to choose a proper location for building a tech team with access to wide talents pool: Ukraine, Poland, Romania, Slovakia, India, Philippines, etc
  • need to choose a reliable partner (outstaffing vendor) in the offshore;
  • need to configure a communication process and channels with your team: both online and offline.

It Outstaffing provider — a company in a country with a vast tech talent pool, responsible for building software engineering, tech support teams and other specialists upon client request.

Outstaffing firms cover plenty of services while building and supporting development teams for their clients:

  • recruitment, HR, team retention activities
  • administrative services
  • legal, finance support: bookkeeping, payroll, accounting
  • business travel support
  • facilities and purchases
  • dedicated Account Manager support
  • and others

A cost model is transparent, so you are aware of and control each planned expense.

If you need a consultation or want to build own development team in Ukraine, contact us to explore all possible options.

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