Be it a seasoned enterprise that is intending to go digital or a startup conceiving to disrupt the industry with another innovation, they face the lack of skilled IT workers. Since hiring is a laborious process, not all ventures want to take it up. But there is a solution, the outsourcing and outstaffing business models allow expanding the development and quality assurance team of IT companies without direct hiring of staff, making life of business owners easier.
It is no secret that almost all US-based and many European businesses employ software development companies located in Ukraine or India. One of the biggest companies such as Google, Facebook, and Alibaba hire remote employees, and why shouldn’t you do so?
Outsourcing and outstaffing has already become the norm in the software development industry, and choosing between these two is tricky. We will help you make the right choice by explaining what these business models are.
Outstaffing: description, pros and cons
Outstaffing is sometimes treated as a part of outsourcing, but this is not right. Outstaffing means cooperation with a dedicated remote team under a long-term contract. The remote teams offer software developers and/or testers to cooperate with the in-house team, performing the tasks assigned for them. The dedicated team is usually employed by a third-party company responsible for remuneration, insurance, taxes, equipment, software licenses, etc. This way, you pay for the working hours only.
At first glance, it is nothing more than the participation of a contractor in a business process. The difference is that the external vendor should be carefully selected to fully meet the needs of the customer. In general, the outstaffing model is as follows:
- As a customer, you define the requirements for the developers/QA testers.
- The outstaffing vendor provides the list of their professionals.
- You interview the shortlisted specialists and select the best ones.
- Selected developers / testers become a part of your team and perform assigned tasks within the project.
The advantages of outstaffing:
- flexibility in hiring auxiliary staff and payroll handling
- full access in daily hands-on management
- lower cost thanks to taking the management work and avoiding the charge of it from the vendor
- no employees officially as the outstaffing firm acts as the employer of remote team
The cons of outstaffing:
- 100% management work
- possible communication challenge if employees don’t know English well enough
- more responsibility on your side with more control
Outsourcing: description, pros and cons
Outsourcing as a business model is more project-oriented, when a customer outsources the entire project to a third party. The contractor provides all necessary resources (personnel, equipment, experience, etc.) to complete the project. When it comes to outsourcing IT services, a client has very little access to the development team, so the same team can work on multiple projects at the same time.
In simpler words, outsourcing means vesting a project to a foreign company with the necessary resources, experienced team, and equipment. With the growing importance of information technology, various industrial companies are working with vendors that offer high-quality software and other services at a relatively low cost. However, the main function of outsourcing is the use of all resources to the fullest extent and developing new business goals.
The pros of outsourcing:
- lower development costs to employing in-house developers
- the full responsibility on the job is on the developer’s side
- the management work is almost absent
- increased efficiency
- variable capacity
- increased focus on the strategy/core competencies
- access to skills or resources
- increased flexibility to meet changing business and commercial conditions
- lower investment in internal infrastructure
- access to the innovation, intellectual property, and thought leadership
- possible incomings from the transfer of assets to the new provider
Some of the risks of outsourcing include:
- slower turnaround time
- lack of the expertise or knowledge in the business or niche
- language and cultural barriers
- difference in the time zone
- lack of control
According to Statista, the app development and maintenance (over 50%), data centers, IT infrastructure, and support services are the most common third-party functions. The market of outsourced services reached $85.6 billion in 2018, according to the same portal.
Many people believe that outsourcing means partnerships with foreign companies (usually from low-wage countries), but this is not always the case. Independent outsourcing companies are transferred from one company to another.
How to decide what’s better for your company?
Many companies choose offshore software development teams based on the price of their services and the quality of delivery of the final product. Outsourcing leads to innovative, pragmatic and well-executed results in business initiatives. But when do you need to outsource and where do you prefer to choose outstaffing, completely depends on your needs.
Outsourcing is ideal for short-term software development projects. In case it’s a standalone software project, it allows getting the job done. If your company is not primarily focused on technology and you do not have a project manager to control the work of remote teams, outsourcing is a deal. But if you did not work previously with an offshore team, look through the transparent markets and the reviews over the sites like Crunch.
As to the long-term projects, opt for an outstaffing model, or employ a dedicated team. Outstaffing is better for technology-focused businesses with clearly outlined processes and experienced management. No worries about data leakage, just make sure to draw up the comprehensive NDA agreement. If you want to remotely monitor your employees’ performance and take more responsibility, you need an outstaffing too. Hiring dedicated specialists will fill the gaps in your team and give you full control over the work assigned to them.
Outsourcing case study by Crunch
One of our outsourcing projects includes the cloud-based solution aimed at improving the health services. The challenge was to build a data-driven SaaS solution that would improve the quality of the provision of healthcare services.
Solution
The solution is a complete platform for healthcare professionals to manage the entire patient life cycle and all business activities. The features included the following:
- The powerful document management feature to store patient records and customize electronic SOAP records.
- The financial management functionality to keep record of revenues and expenses and provide real-time profit analytics. Also, it allows keeping the history of all transactions.
- Prescriptions and booking of doctor appointments to help establish and organize workflows. A cashier and POS system help make transactions, create invoices, and generate reports of each transaction.
Other features include the staff management, warehouse management, e-pharmacy, e-prescriptions, and more.
The solution is highly customizable and allows making changes to specific features, as well as migrating the data of customers to the cloud.
Results
The solution helped healthcare providers optimize their processes and make decisions more quickly and effectively, and also benefit from a data-driven approach.
How to find the best outsourcing company?
The outsourcing of software development or QA services should help eliminate unnecessary difficulties and focus on the core business. The outsourcing company should fully understand the specifics of your business and, if necessary, provide additional services or expand existing ones.
The flexibility of services is also one of the most important aspects when choosing an outsourcing company.
The SkillValue findings state that Ukraine ranks 5 with their programmers with an average score index 93.17% in the world. The competition for talent is low in this outsourcing destination because of the large supply of talents. At the same time, the competition on the IT job market keeps qualification standards high, furthermore, Ukraine seems to be much more affordable than the neighboring IT outsourcing hubs in Eastern Europe. In the case of a big team and long-term cooperation this hourly rate difference can make a considerable saving.
So, if you are in search of a reliable and open-minded team to outsource or outstaff your projects, just drop us a line and we will help you find the most suitable solution for your business! Book a free 20-minute call with Crunch specialists to discuss and estimate your project today.
