May 26, 2022
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What is happening in the outsourcing market?
By the end of 2023, IT outsourcing spending will reach $1.3 trillion worldwide, showing steady growth. The reason behind these rates is twofold. On the one hand, the demand for technology keeps increasing. On the other hand, the shortage of IT talents is more significant than ever. According to McKinsey, 43% of organizations are experiencing a skill gap, and 22% will face it in the next two years.
These companies will need to find human resources at any cost elsewhere. Outsourcing and outstaffing are their top choices to consider. Learn more about what these models involve, how they differ, and what to choose in our article.
The outsourcing model involves hiring a software development company to carry out a project from the first stages till the launch. You, as a client, are not involved in the everyday problems and cooperate with the third-party’s project manager to make big decisions.
IT outsourcing usually looks the following way:
The outstaffing model means that a company invites software engineers from an external provider into its internal team. You sign a contract with a software development provider to get the necessary specialists avoiding recruitment, onboarding, management, and other HR-related processes. Nevertheless, you will need to handle task management and decide what part of your team, internal or remote, needs to complete particular tasks.
IT outstaffing takes the following steps:
When it comes to outsourcing, companies usually delegate accounting (37%), IT services (37%), and digital marketing (34%). Why do they do it?
Cost reduction is the first reason to outsource, with 70% of companies naming it. By hiring someone remotely, you can access the global market and cooperate with qualified professionals offering lower rates.
Besides optimized expenses, companies adopt outsourcing and outstaffing to find the lacking expertise. These models also allow you to speed up the product launch, avoid the timesome recruitment process, and focus on core business activities.
Even though both models have lots in common and help companies find tech support, the covered services and use cases differ. Check out the table below for guidance.
|Why||You need to build a product from scratch||You have an internal team but need one or several developers with specific expertise|
|Time||Takes time to assemble a team||Quick start|
|Management||A third-party provider fully manages the team||You manage developers as a client|
|Office facilities||More expensive||More budget-friendly|
Before choosing between outsourcing vs. outstaffing models, you should be aware of the strengths and weaknesses of each approach. Here are the pros and cons of outsourcing.
Leobit knows how to remotely organize a smooth working process.
Outstaffing is no better or worse than outsourcing. It’s just different. Here’s why you might want to adopt this approach and what limitations it has.
According to Clutch, companies with up to 50 employees (29%) are less likely to outsource than those with over 50 employees (66%). Smaller companies prefer more cost-effective options like hiring freelancers or outstaffing. They have a limited budget and run projects with a smaller scope which directly affects the collaboration model.
You should prefer outsourcing if you are a large or medium company that wants to delegate the entire software development cycle. You don’t have an internal engineering team and expect the provider to cover all the tech tasks.
Outstaffing is better for smaller companies that need software engineers, QAs, or other tech professionals to power their existing teams. You should prefer this option if you need to grow quickly, lack human resources for specific tasks, or have a limited budget.
Whether you are going to outsource or outstaff, the procedure of hiring a software development company is similar. You will need to research the available options and communicate face-to-face with the selected provider to ensure they can meet your requirements.
This recruitment process usually includes these steps:
Leobit is a full-cycle web and mobile development company supporting outsourcing and outstaffing models for a different scope of involvement. We can assemble a dedicated team for you, subcontract our software engineers, or complete fixed-price tasks. Leobit unites over 160+ software developers proficient in .NET, Ruby, Angular, iOS, Android, React, PHP, and a comprehensive range of other technologies from the Microsoft, Web, and Mobile stacks. Hence, finding a software engineer available for your project will take minimum time.
Outsourcing vs. outstaffing is not an either/or choice. You can adopt any model depending on your business needs and internal resources. Yet, as a rule, while small companies with internal teams benefit more from outstaffing, large projects call for outsourcing.
Hence, before deciding which way to go and choosing a software development company, you should analyze what you need: a dedicated team or specific software engineers.
Contact us to get help with the choice and find a reliable tech partner.
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