The modern job market is highly flexible and even volatile. Poor quality or exorbitant cost of the workforce in a certain location doesn’t spell the death of all entrepreneurial endeavors there. Business-savvy employers are no longer constrained by the country borders and still less by the city limits in their headhunt for skilled personnel capable of tackling specific tasks for them, resorting to hiring expertise from any corner of the world, aka outsourcing.
While this approach is gaining traction with an ever-widening number of companies across various industries, it proved to be a real godsend for certain domains, and the IT sector is one of them. Last year, offshore and nearshore practices in software development topped $4 billion in value and are likely to display an over 1% annual increment within the next three years. In this industry, enlisting the help of outside agents is effected via two cooperation models – information technology outsourcing and outstaffing.
Searching for professional IT staff? Check out our staff augmentation service page.
The difference between IT outsourcing and outstaffing
IT outsourcing services are conventionally provided on a project-dependent scheme when the customer enters into a contract with an IT outsourcing company to accomplish an assignment on an end-to-end basis. Once the task is delegated to the vendor, the dedicated development team works totally on its own to complete the project within the stipulated period. Typically, such companies furnish outsourced IT support to a number of customers, working on several projects on the fly.
IT outstaffing (aka staff augmentation) mostly presupposes joint efforts of the in-house personnel and outsiders who work under the supervision of the client company. The latter provides the work front, while the outsourcing agency pays the employed workers salary and bonuses (to say nothing of the equipment to be used for doing the job). Such outstaffers are a kind of rescue posse who step in to fill the breach when you realize that you lack specialists with requisite expertise on your regular payroll or you are just short-handed (which is not that rare given the current epidemic situation).
Thus, the major difference between the two models boils down to the difference in responsibilities you delegate. By outsourcing the project, you eventually receive a turnkey product whose quality and operability are entirely the responsibility of the hired developers. With outstaffing, the vendor is responsible only for the personnel it “leases,” but it is the employer who should make the most of their services.
How are you to know which approach will work for you?
Outsourcing vs. outstaffing: Looking for the best fit
There is no universal recipe that will tell you what model to opt for. Each situation is unique requiring individual consideration. Being an experienced vendor in the realm of outstaffing and outsourcing IT services, DICEUS recommends taking a closer look at resources at your disposal.
If your company has no software department but can fork out a considerable sum to accomplish a one-time project and totally rely on outsiders to see it through, outsourcing will suit you to a tee. But if you are just understaffed to complete one or several assignments and can seamlessly accommodate and manage third-party actors to work in close cooperation with your regular team, outstaffing should be your choice.
On balance, weighing up all IT outsourcing pros and cons, we can claim that outsourcing should be pursued by non-tech organizations and startups with no IT specialists on their roster, that have to accomplish a single-shot turnkey job with a definite duration. Outstaffing suits better the companies that look for hands and brains to augment their in-house team and work under close control of their managers.
To make the right choice between IT support outsourcing and outstaffing, you should be aware of the general principles according to which each model operates.
How does IT outsourcing work?
There is a universal algorithm that you should follow when building cooperation with an outsourcer.
- Allocate the necessary budget
- Find a competent IT outsourcer
- Submit them a PRD (product requirements document) that contains clearly defined priorities concerning those requirements
- Brief the vendor on all details related to the oncoming project (its estimated cost, scope, timeline, etc.)
- Hold regular meetings with the team working on the project to have a finger on the pulse of the progress and discuss changes that may emerge
- Evaluate the result and give feedback on the service received
At their end, the outsourcing company must:
- Study and elaborate the PRD (if necessary) and come up with a sequence of steps pursuing definite goals that each team member is to take to accomplish the task
- Select experts that the project requires and provide them with relevant resources, equipment, and work environment
- Keep in close contact with the client, update them on the basic milestones and issues (if the latter arise)
- Exercise quality control of deliverables
- Deliver the completed product
How does IT outstaffing work?
If you opt for outstaffing, you will have to undertake a quite different series of steps to achieve a result.
- Hold a selection campaign to find IT experts who will be a perfect fit for your team (both in terms of hard and soft skills)
- Articulate the requirements to the final project to ensure every employee is on the same page
- Furnish all requisite software and environments for a smooth working process
- Train the onboarded team members (if necessary) and provide workload to your freshly assembled crew
- Exercise ongoing management of the personnel or monitor the performance of the outstaff project manager (if you hired one as a part of your new team)
- Give regular feedback on the performance of the onboarded employees
- Assess the quality of the deliverables and introduce changes if necessary
Once you have selected the most appropriate cooperation model of cooperation with third-party agents, your main task is to ensure the successful project outcomes. To do that, it is vital to pay attention to many niceties.
Making outsourcing and outstaffing great: Useful cues
1. Start with goal setting and scheduling
Whether it is outsourcing or outstaffing, you should clearly envisage the goal of the quest. Do you need expertise your in-house team lacks? Do you want to cut down on development costs? How long should your cooperation with the onboarded team last? After you know the answers to these questions, pass on to shaping the project objectives to communicate to the vendor.
Your partners should be supplied with a complete list of requirements, expected deliverables, and a timeline to tackle the task. The more information the contractor will get, the more accurate their estimation of the duration and the cost of the final product will be. Also, the vendor should realize what tech stack they will have to choose to create the product that you commission.
The same holds if you look for outstaffing services since your partners should be aware of the assignment you have in mind for them to offer you the most qualified specialists with the best expertise in the field.
2. Prioritize finding the right vendor
While making it, you should consider several important factors:
- The vendor’s portfolio
- Competence domains
- Cooperation models
- Former clients’ reviews
- Specialized guides’ ratings (such as Clutch and GoodFirms)
Other important considerations include cultural background and work ethic as well as the language barrier or time-zone discrepancy. These often serve as communication obstacles that impede cooperation.
When you have narrowed your shortlist to a couple of companies, hold interviews with them. It is crucial to augment your staff with individual employees since talents, not the organization, will do the job for you.
3. The lowest bid is a dirty word
However tempting it may sound, disregard the vendor who offers the lowest charges. Quality can’t come at a bargain price, so choosing such a bid, you are most likely to compromise key performance indicators (KPIs) of your future product. Naturally, no one speaks of forking out a prodigious sum but skimping will cost you more, after all.
4. Rule out a fixed-price offer
At first sight, knowing in advance how much you will have to pay gives a sense of safety and control because all financial risks and upcharges are supposed to be handled by the outsourcer. But relieving yourself of all financial worries, you face other concerns with a vengeance.
First of all, changes and amendments to the initial plan are unavoidable. Once they crop up, you will have to enter into frustrating negotiations about whether the fixed-price deal embraces them. If they turn out not to, project cost overrun is imminent.
Second of all, vendors tend to include possible risks into the fixed price, so you will end up paying more (sometimes up to 50%!) anyway.
Third of all, the stipulated sum will limit creativity and improvement efforts since vendors will try to go to all lengths to fit into it instead of focusing on the quality of the product.
5. A contract is a must-have
A surefire recipe to regulate all possible technical, financial, management, communication, and other moments is signing a detailed contract. This document must cover all details of the future project, settle legal issues, stipulate refund policy, define conflict resolution processes, but allow for flexibility in solving problems.
6. Easy does it
If it is your first experience of cooperating with a vendor, it is better to start with a small-scope assignment. Once you make sure you are satisfied with their performance and style of work, you can think of more significant projects.
7. Correlate payment to milestones
Don’t pay the whole sum up-front. A more sensible option is to advance a third of the total price and tie the rest of the sum to the completing definite milestones (typically, 3 or 4). In this way, deadlines are more certain to be met as expected.
8. Coach the in-house staff
This tip is essential if you opt for outstaffing. By explaining potential benefits to your regular personnel, you will foster acceptance and reduce resistance to the appearance of new temporary employees, thus enhancing the efficiency of the workflow.
9. Emphasize communication
Communication is a coal-and-ice issue in cooperation with remote teams. Once it fails, the project is doomed to defeat. To prevent such a development, you should establish effective rapport channels both sides are comfortable with, determine the frequency of communication sessions and progress reports, and settle possible issues with the difference of time zones.
10. Provision for a follow-up
It is prudent to include a support clause that specifies the possible cooperation of the parties after the project is completed. In this way, you will make sure you won’t have to look for another vendor to correct or improve something when your product has already been launched.
Guaranteed software project success with a free 30-minute strategy session!
Over the last decade, remote employment has developed from a nascent novelty into a universal trend in many realms. What is the future of outsourcing and outstaffing in the IT industry? The outburst of the global pandemic has served as a powerful propellant for the spread of IT remote employment that is likely to rise for years to come. The successful embracing of either remote cooperation model largely depends on the choice of a reliable outsourcing company that can meet deadlines and deliver a high-end product at an affordable price.