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Difference between outsourcing and outstaffing

There is an old question regarding software development: which is better – IT outsourcing or IT outstaffing and what is the difference between the two? In other words, which would be the most efficient, hiring an external team abroad or ordering a full-cycle software development from the service provider. Well, maybe this question is not that old since outsourcing and outstaffing to remote locations like Pakistan is a fairly new trend in the IT industry, and it is not more than 10-15 years old.

Still, given that more and more software companies are turning to remote and cheaper locations to optimize their software development budgets, it is worth telling you in which cases outsourcing is your choice and where you would rather choose outstaffing.

Difference between the two

Let’s start by explaining what the difference is between software outsourcing and outstaffing.

Outsourcing model

An outsourcing provider usually operates on a project-based business model, which means that the client probably entrusts the outsourcing company with the entire project from A to Z. The client rarely has access to the development team itself, and the people who complete all the work on the project usually work on several projects at once.

Outstaffing model

Outstaffing is a form of telecommuting where a hired person performs all tasks for a company (client) and is officially employed by another company (outsourcing agency). The latter company acts as the employer and is therefore responsible for the wages, bonuses and equipment awarded to the employee, while the company that is the client gives the employee tasks and assignments.
Outstaffing model

The difference is that this service involves your software development service provider being responsible for hiring and maintaining a software development team that is fully at your disposal. Basically, you hire your own remote employees who are part of your in-house team. This remote software development team can be managed by your in-house people or you can also have remote managers.

So the main difference is that outsourcing refers to the entire project support, while outstaffing provides for hiring and maintaining individuals.

Benefits and pitfalls of outsourcing

Benefits:

  • All aspects related to quality and delivery are the responsibility of the service provider;
  • less management effort required from the client;
  • the service provider is fully responsible for all equipment and software needed to complete the project;
  • the customer does not have to participate in the recruitment process.
  • Disadvantages
  • the client can hardly intervene in or control the development process;
  • if the scope of the project is not well defined, the cost can be much higher than with outstaffing;
  • the rates for software development in outsourcing are usually higher than in outstaffing.
  • Now let’s look at how these compare to outstaffing to see the difference.

Pros and cons of outstaffing

Advantages

  • outstaffing provides the opportunity to hire good professionals without having to pay high prices and taxes;
  • significant flexibility in increasing or decreasing the number of dedicated employees you hire;
  • complete control over the software development process
  • full access to each of the team members;
  • outstaffing rates are the lowest compared to other business models.
  • Disadvantages
  • communication channels and process must be of high quality, or problems may arise;
  • all delivery issues are the responsibility of the client and their team.

What would be best for you?

Now that you know the difference, we can discuss how you can apply this difference in your business. Whether you need an IT outsourcing agency or whether it is better to go with an outstaffing company depends entirely on your needs.

If your company is not very technology-oriented and you don’t have in-house professionals to oversee the work of the development team, then outsourcing may be a better idea for you. On the other hand, if you have well-defined processes and good management to deal with the remote team, then you are welcome to stick with outsourcing. However, every case is unique, and it is always a good choice to consult with the experts first.

If you need an expert opinion on software development outsourcing or outstaffing, what is the difference between them, you are welcome to ask Qubit labs experts, we certainly know a lot about outsourcing and outstaffing, because this is our business.

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