New software projects often force businesses to make challenging decisions beyond their expertise. While some companies have dedicated IT teams that manage their software needs, maintaining such departments is a costly undertaking many simply cannot afford. Consequently, most businesses turn to one of two chief routes:
- Outsourcing: contracting an external team to handle the project
- Outstaffing: temporarily hiring outside specialists to work directly with the internal team
Let’s explore the distinctions between these two approaches.
While outsourcing and outstaffing aim to achieve comparable ends, each has distinct advantages and considerations, the most significant difference being your organisation’s level of involvement.
Outsourcing grants the external team a degree of autonomy because they manage the project independently
Outstaffing (sometimes known as staff or team augmentation) means blending outside specialists into your internal team. Essentially, you are taking on additional staff, and you will, consequently, need to manage their day-to-day work and priorities.
Therefore, your company’s needs and the amount of control and supervision you want to retain will likely determine which arrangement suits you best.
When Outsourcing Makes Sense
Outsourcing is the logical choice for businesses that don’t have an in-house IT team. Whereas the word “outsourcing” these days implies a move away from local talent in favour of cheaper overseas labour, this perception is flawed. It simply means to contract (work) out. Moreover, outsourcing isn’t about cost reduction — it’s about accessing a much larger talent pool, often leading to superior expertise and resources. Simply put, when companies work with the teams best suited to their project’s specific needs, it leads to higher-quality outcomes.
There are numerous outsourcing models, each requiring varying levels of involvement from your business; this allows companies to choose the line that best matches their project’s complexity and the amount of management they want to retain.
- Outsourcing a job or role. If, for example, your company needs a mobile developer to work on a project, it might make sense to hire a contractor (whether it’s an individual or a company). However, streamlining their efforts will largely fall on your shoulders in this type of outsourcing; the relationship will closely mirror that between an employer and a temporary worker.
- Outsourcing a project. Unlike hiring an individual contractor, as in the previous model, project-based outsourcing centres around the deliverables. This model typically operates more like a client <> service provider relationship, where the focus is on outcomes rather than daily management, and the external team manages the project from beginning to end.
- Alternatively, you might entrust the entire development cycle to a specialised company or organisation; you hand over every project stage, from design and development to deployment and post-production support. In this case, it’s essential to consider factors such as professional indemnity insurance to safeguard larger budgets, as well as the contractor’s portfolio, references, contracts, and any critical service-level agreements (SLAs).
The distinction between these two models lies in the scope of responsibility:
Project outsourcing: the service provider may only be responsible for specific tasks, such as software development, while other roles — like Quality Assurance or DevOps — remain the client’s responsibility; the client handles tasks such as testing and deploying the software.
Full development outsourcing: the external team manages all aspects from start to finish and covers the entire process.
- Outsourcing a business function or service. Whereas this may seem like the sort of sophisticated arrangement associated with large corporations that have extensive supplier networks, it can also be surprisingly effective for small to medium-sized enterprises (SMEs). For instance, if you run a catering business, it might be prudent to outsource non-core functions such as delivery or software development: the “focus on your strengths and delegate the rest” principle. After all, why invest in trucks and hire drivers when you can cultivate a reliable partnership with a professional provider and concentrate on your primary operations?
Additionally, outsourcing is an excellent way to explore new business opportunities, allowing you to test the waters before deciding to bring functions back in-house. Many IT startups prosperously adopt this model, contracting out the development of their minimum viable product (MVP) or other early iterations to external firms.
Non-technical businesses can focus on their primary activities while collaborating with a dedicated software company that can manage their software development requirements. Developers often favour this approach as it helps them ensure quality throughout every stage of product development.
For companies with existing IT teams lacking specific expertise — such as desktop developers unfamiliar with modern web frameworks or infrastructure teams skilled in managing on-premise services but lacking production-grade experience with AWS — outsourcing can be an invaluable solution that bridges that skills gap.
When Outstaffing Makes Sense
When a company has the necessary know-how but lacks sufficient development capacity, outstaffing can effectively address this obstacle. In this situation, businesses may seek a team extension or additional development resources, which can be especially beneficial for maintaining architectural consistency in software components. This model is particularly advantageous if a strong CTO is available to oversee the development strategy’s implementation.
Companies that choose the outstaffing model can temporarily expand their in-house teams with external developers. While the appeal of saving on benefits, insurance, and other overhead costs is understandably strong, outstaffing isn’t always more cost-effective than outsourcing.
When development issues surface, the hiring company is solely responsible for solving them, often without the immediate assistance of a specialised team, which can result in unexpected costs and delays. Moreover, effective communication becomes crucial, as project managers must give remote workers clear, precise instructions; failure to do so could jeopardise the entire project.
Make Informed Choices
Deciding between outsourcing and outstaffing can be a nuanced choice tailored to your organisation’s unique requirements. If your goal is to have a project completed from start to finish, outsourcing may be the most effective route. Conversely, if you already have an ongoing project and need further expertise, outstaffing could be the ideal solution.
Regardless of your chosen path, a skilled team can collaborate with you and help achieve your business objectives.
