Outstaffing vs Outsourcing: 2 Ways to Extend Your Development Team

Choosing the right recruiting options is a common challenge for many startups and product development companies. Businesses constantly think about the best approach for their development, considering many factors like convenience, communication, money, resources needed and time. Even though there are several employment models, outsourcing, and outstaff are the two most popular ones. That is why choosing the proper model for your project can be difficult, and the difference may not be obvious at first glance.

Businesses try to find the best development provider sometimes opting to be under or overqualified, based on their budget and goals. Although both outsource and outstaff have their own benefits and drawbacks, the best solution highly depends on the needs of an organisation. However, every business has its own goal, process, budget and other unique factors, meaning CTOs should carefully consider what development approach suits them best. This guide will give you a deeper look at the overall function of outstaffing vs outsourcing while also showing the benefits and disadvantages of both solutions.

Outstaffing vs Outsourcing

Outsourcing 

Outsourcing software development is one of the most popular cooperation approaches that has quickly grown in popularity thanks to several wholesome benefits. For example, this approach has proven to be an efficient and flexible way to kick off a project. In addition, outsourcing significantly reduces the need for involvement and onboarding.

Most forms of outsourcing mean that a development partner takes over an entire project from the ground up. This usually includes recruitment, market research and delivering exceptional outcomes. Therefore, in this cooperation model, your company won’t need a development team having specialised technical skills in place.

Since the dev team you outsource to functions as a temporary team for a specific task or the entire project, your in-house team usually doesn’t need a development or recruitment team in place. Even though implementing this approach is usually time-consuming, it has been shown to have the highest value for startups and medium businesses looking for efficient and cost-effective development with less stress. 

Deloitte survey reported that approximately 70% of participants said that they use outsourcing as a cost-cutting tool. Another 40% of participants reported that outsourcing provides high organisational flexibility when working remotely.

Outstaffing 

Outstaffing refers to the form of outsourcing that takes professionals with unique skills from outside a business for specific tasks or short-term projects. Outstaffing means you already have your own in-house team or engineers with whom you have long-term contracts but require specific skills or experience for tasks or a project. To be more specific, outstaffing means an extension of your team for a limited period of time.

Outstaffing usually means hiring developers, designers and other specialists that already work in other companies. The client company hires these experts for a particular project or a task, though the outstaff specialists remain in their primary organisation. That means the primary employer is responsible for HR activities and the quality of specialists, allowing the outstaffed team to continue to work on projects for client companies. The client organisation is in charge of managing the project, directing it, as well as paying for the work.

Outstaffing is a preferred cooperation model among large businesses and short-term projects since it allows them to quickly recruit skilled personnel who also continue to work at their usual employment, reducing paperwork. This cooperation model is used because it reduces the time and money needed for the recruitment process, allowing client companies to fulfil the skill gap within a week and quickly kick off the project.

Essentially, outstaffing will suit any company that wants to expand the ability of its software development team to accelerate the development process. However, outstaff is best for short-term projects and specific tasks.

Pros of Outstaffing

Simple Hiring and Management

Since the client company concludes an employment contract with a company providing an outstaffing but not with a customer, the client does not deal with these papers and documents. Therefore, outstaffing allows for reducing the load on the client company’s administrative and accounting teams.

Delegated Financial Matters

An outstaffing company is responsible for all issues related to wage calculation, management, and payments, while also dealing with taxes and various fees. Therefore, a customer will only pay the amount of money that is listed in the contract.

Rapid Team Expansion

Finding the right candidates with specific skills is time-consuming. And time is essential when we talk about a highly competitive market. That is why companies look for the quickest ways of closing positions, and outstaffing is the way to go. When you use the outsaff model, the company offers you candidates depending on your needs and goals within a week (trusted providers). This means you won’t need to wait months to find the perfect fit for the project or task.

Cost Reduction

All benefits above also contribute to cost reduction. In addition, the client company is responsible for managing the project and the outstaffing team, so the cost that they will spend with the outsourcing model is much lower. 

Related: Explore our portfolio here.

Cons of Outstaffing

Communication Issues

While working remotely on the project, both parties may experience communication problems if they misunderstand some tasks. That is why it is highly recommended to look for an experienced outstaffing team that will be able to set and maintain communication channels.

Motivation Problems

When the client company hires both regular staff and outstaff employees, it may have a negative impact on the motivation of the outstaff team. That is because a low-quality team with poor experience may lose motivation as they lack the benefits and bonuses that the client company provides for regular personnel.

Higher Responsibilities

If you have chosen an outstaffing model, it is better to be ready for higher responsibility. That means you will be in charge of failures and the result compared to the outsourcing model, where the team deals with issues and questions that arise during the process.

Pros of Outsourcing

Get More Experts

Even though you probably have an amazing in-house team, the modern market is developing rapidly. That is why outsourcing specific tasks to professionals with relevant skills and experience can give you a competitive edge on the market and reduce costly mistakes.

Get Things Done Faster

One of the key reasons small businesses tend to use the outsourcing cooperation model is that it will help speed up the whole process. That is because outsourcing allows you to focus on more valuable business needs while the company will create the team, handle all questions, resolve issues and deliver your product right into your hands.

You Can Share Some Risk

In contrast to outstaff, outsourcing cooperation also helps you share some risks. One of the primary factors in any project is risk assessment and analysis. By outsourcing the process to experts in their respective fields, you will be able to plan and mitigate potential risks.

Reduced Costs

In contrast to creating an in-house team, outsourcing is much cheaper. Not only can it help save money and time spent on recruitment, but it also increases the profit compared to shorter overheads.

Work Around the Clock

One of the key benefits of the outsourcing model when working overseas is the substantial differences you might face in terms of time zones and holidays. Even though it may cause several challenges logistically, overcoming those issues will allow your software development to run even while you’re asleep.

Related: Explore more about us and our services.

Cons of Outsourcing

Lose Some Control

As it may be expected, when you pass the development work to an external team or a company, you will lose control of how those tasks are being done, monitored and how issues are resolved. However, when hiring an experienced company, you will clearly see the process at each given moment.

Might be Hidden Costs

Even though outsourcing is considered cheaper, you should also know that some companies can lie about the real cost. Nevertheless, this won’t happen when you hire a trusted provider with good reviews since the company will provide detailed information about the process.

Security Risks

In the digital transformation era, you may worry about the security of processes and technologies the outsourcing company uses. If the team lacks protection, your data can be damaged or stolen. Again, make sure you have chosen a trusted development provider.

What is a Dedicated Development Team Model?

A dedicated development team refers to a cooperation model in software development. It represents the long-term collaboration between a client (an outsourcing company) and a service provider (a dedicated development team). 

That means dedicated team members are working exclusively on your project, just like your in-house teams. In contrast to an in-house team, a dedicated software development team usually works remotely, full-time, reporting directly to the client. This collaboration model is best for projects that do not have strictly defined scopes or requirements.

What is a Team Extension Model? 

Team extension is another popular cooperation model for software development is the process of finding IT specialists with the right expertise and culture fit for various development projects. Using the team extension model, you can hire one or more specialists who have specific skills or experience required for a particular project. However, you will need to manage such team members, usually having help from your outsourcing partner. 

What is the Difference Between Team Extension and Dedicated Team?  

	Dedicated Team	Extended Team
Communication	Partially External	Internal
Hiring	Made by an outsourcing company	Your task
Management	Made by an outsourcing company	Your full control
Cooperation	Self-managed team	Engineers are part of your team
Flexibility	High	High
Services	Based on your needs	Limited

How Can We Help?

Interexy is a trusted app & web development company that provides a vast range of services. We offer both outsourcing and staff augmentation services for software development services alongside a dedicated team for your project. Thanks to our in-depth experience in over 15 industries, where blockchain, NFT, healthcare and fintech are the key ones, you get qualified engineers and designers with unique skills and relevant experience. 

Final Thoughts

Since the development world is moving alongside global digitalisation, more and more businesses are looking for the best ways to develop an app or web service. That is why outstaff and outsourcing have quickly become the two most popular ways. Knowing differences and their types can give you a clear picture of what approach will suit you best. If you have any questions, book a free call with our experts!

FAQs

What is the difference between outsourcing and outstaffing?

Both cooperation models involve remote work, yet outstaff is hiring experienced professionals from other companies to work on your project, while outsourcing means passing the software development process to a third organisation.

What is a dedicated development team?

A dedicated development team stands for the team of experts (developers, designers, copywriters, QAs) that are put together to work on the project.

What is the team extension model?

Team extension refers to the process of finding engineers with the right expertise and skill set to join your team for a specific project.