Outsourcing vs. Outstaffing Models: What is the Difference

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.

What Does IT Outsourcing Involve?

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:

• You find a company you want to cooperate with
• You discuss the terms of the project, your technical and business needs
• The outsourcing provider does the recruitment for you to assemble a dedicated team
• The team takes full responsibility for the tech part while you only orchestrate the process

What Does IT Outstaffing Involve?

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:

• You find a software development agency
• You voice your tech needs and whom you need
• The provider offers candidates from their internal pool to complete your team
• You manage the overall task distribution between the internal and remote teams while the provides takes care of smaller managerial processes

Read about What is IT Staff Augmentation and How to Use This Model

Why Do Businesses Delegate Some Processes to Third Parties?

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.

Outsourcing vs. Outstaffing Differences

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.

	Outsourcing	Outstaffing
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

Outsourcing Pros and Cons

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.

Pros

• No need to recruit, administer, train, or manage the team in any other way
• Smoother cooperation between team members
• The software development provider takes responsibility for the final quality of the product
• Ability to focus on strategic business processes while the software development provider does the tech part
• Access to the latest technology since the hired company is a specialized engineering services provider
• Lower costs compared to hiring locally
• Access to the global pool of engineers and other tech talents

Cons

• Suitable for mainly medium and large projects
• Outsourcing is more expensive than outstaffing
• It takes more time to outsource than to outstaff
• Less direct control over the SDLC
• No internal software development expertise gained

Outstaffing Pros and Cons

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.

Pros

• The outstaffing provider hires, onboards, and administers the remote part of the team
• You enjoy direct control over the software development team
• Opportunity to tap into the global talent pool
• No need to sign complicated contracts and commit long-term
• More affordable than outsourcing
• Takes minimum time to get going

Cons

• Need to align your internal processes with subcontracted employees
• Requires additional management
• Not suitable for developing projects from scratch

Which Model to Pick for Your Project?

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.

Outsourcing

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

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.

How to Find and Pick a Software Development Provider

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:

1. Browse the web or ask for recommendations to create a shortlist of companies.
2. Check the reviews of the selected companies, their collaboration models, tech stack, and case studies to make sure they do what you need.
3. Focus on the most suitable company to have a talk with and keep several backup options.
4. Discuss your expectations and needs with the selected provider and ask what solutions they offer.
5. If you are satisfied with their approach to outsourcing/outstaffing, pricing, skills, etc., initiate the recruitment process.
6. Communicate with the offered software engineers and other specialists before hiring them.
7. If all is well, start the cooperation based on the chosen approach.

Read How to Hire a Mobile App Developer Guide

Leobit as your IT Outsourcing and Outstaffing Partner

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.

Since we have years of outsourcing experience, we know how to remotely organize a smooth working process. Learn more about how we cooperate and check the completed projects.

Final Thoughts

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.