Outstaff vs Outsource: What is the Difference Between These Models?

What could this choice mean for your IT operation and your business?

When it comes to extending the capabilities of your IT staff, there are many ways to define the choices before you. In the United States, they call it hiring a contractor. In Europe, many try subcontracting or offshoring. In Australia, it’s talent outsourcing.

Outsourcing companies provide professionals for IT projects, enhancing business capabilities without the need for in-house teams. They offer cost efficiency and effective project management, allowing businesses to focus on core functions while leveraging external expertise.

But no matter what term you use to define it when you have more IT development needs than your current staff can handle, you need to hire more help. Outstaffing involves hiring dedicated professionals who integrate into the client’s team, emphasizing collaboration and long-term engagement. This is when knowing what is outsourced product development and how it differs from “outstaffing” comes in handy.

Consider these recent statistics from Grand View Research, Inc. The company’s market analysis concluded that the global expenditures for outsourcing and outstaffing will reach $936.6 billion by 2027 – a rate that is expected to grow by 7.7 percent year over year until then.

So, let’s overview both models, outsourcing and outstaffing advantages and disadvantages, and more to help you make the right choice!

What is a Software Development Outsourcing Model?

In general, outsourcing is when you have an idea, but there is no way to implement it on your own. You don’t want to bother and establish a whole IT department; instead, you just want to come to another company with your idea and get an application or website ready, paying a certain amount for it. By onboarding a remote team, you can enhance project execution, achieve cost savings over in-house hiring, and have direct access to the work completed by offshore developers, allowing you to monitor their performance and project progress effectively.

What is an IT Outstaffing Services Model?

IT specialists and businessmen use the word “outstaffing” meaning that it is a type of remote employment where a company is responsible for all, or nearly all, of an outstaffed employee’s time. Managing remote developers involves treating them as integral team members, despite their physical absence, and requires effective selection and oversight.

This allows a client to “employ” a dedicated IT outstaffed team member. An outstaffing partner provides the necessary specialized expertise, enabling companies, especially startups and small product companies, to maintain control over specialized tasks. At the same time, the IT services provider acts as the official employer that pays benefits, bonuses, equipment, holiday pay, and employer taxes.

Difference Between Outstaff vs Outsource

Outstaff vs outsource – which path should you choose?

At ProCoders, we usually ask our clients to think hard about the kind of outstaff projects needed. Will you truly have enough work to keep one or more people occupied full-time, year-round? Do you have the capacity to bring that person in as a “vendor worker” or “contract worker” within your company? Do you want access to this worker as a manager, working with them and controlling their workflow daily as if they were a member of your ongoing IT staff? Then the outstaffing model might be for you.

Outsourcing will be the right option if you have occasional bursts of IT needs, whether to build a new app or shepherd the company through major software outsourcing and outstaffing transitions. Unlike in-house teams, outsourcing can create a divide between the internal team and the external team involved in the project, but it can also offer operational cost savings and reduced responsibilities, such as employee onboarding and retention.

In this case, your IT services vendor can quote you what it will cost to work with their IT resources for the duration of your project. The hiring company can delegate software development responsibilities to external IT agencies, allowing them to focus on strategic oversight while the outsourced company manages all operational details. They handle all the management of their team resources, with a client liaison that helps work with you on a business plan.

Purpose and Control

Outstaffing and outsourcing serve distinct purposes in the realm of software development. Outstaffing resembles freelancing but operates more similarly to in-house development due to the client’s management and control over the outstaffed developers. In this model, the client company retains full control over the project, managing the outstaffed developers as if they were part of the in-house team. This approach is ideal for companies that need to scale their development capabilities quickly while maintaining direct oversight of the project.

On the other hand, outsourcing involves contracting an entire project or task to an external service provider. The service provider takes full responsibility for the project’s delivery, from planning and development to testing and deployment. While the client company has less control over the day-to-day operations, they can still provide input and guidance on project requirements, timelines, and deliverables. This model is suitable for businesses looking to leverage external expertise and resources without the need for extensive internal management.

Team Management

Team management is a critical aspect of software development models, and it varies significantly between outstaffing and outsourcing. Managing data security concerns is crucial when sharing sensitive information and intellectual property with external teams. In the outstaffing model, the client company manages the outstaffed developers directly. This includes providing guidance, feedback, and direction throughout the development process. The outstaffed developers work as an extension of the in-house team, ensuring seamless integration and collaboration.

In contrast, the outsourcing model places the responsibility of team management on the external service provider. The service provider assembles and manages the development team, handling all aspects of project management, including resource allocation, scheduling, and quality assurance. The client company has limited involvement in the day-to-day management but can still provide input on project requirements and monitor progress through regular updates and communication.

Outsourcing Example

We at ProCoders have our own service that can fit your business requirements that’s close to outsourcing: discovery phase + dedicated development team.

The discovery phase is a critical step in your process. At this stage, ProCoders are making a development plan. We help to estimate your project as accurately as possible.

After compiling a discovery phase, we can select a dedicated team for you that will work under your supervision. A dedicated team facilitates faster product launches and aligns specialized skills with project requirements. ProCoders teams manage themselves, but you, as a client, still control the process: you have clear prescribed metrics for success, deadlines, and budget, so unlike classic outsourcing of software development, you have guarantees written in an official document.

One of the most prominent examples ProCoders has in our experience is the software development for Dryft. For the Discovery Phase, ProCoders worked with Dryft’s management for 4 weeks to conduct an extensive survey of requirements needed for each of the app’s functions, and weigh options for programming languages, plugins, platforms, and widgets. Once the right tools were identified, a work plan was assembled with an eye to speed and maximizing the budget.

After creating a favorable impression with our initial Discovery phase of Dryft’s app, ProCoders was hired for an additional activation. The ProCoders team worked with the UX/UI designers at Dryft to create an app that delivered on the user experience they were trying to achieve.

Outstaffing Example

One of the perfect outstaffing examples is ProCoders’ collaboration with AxisPoint/VSimple. When AxisPoint could not find enough local engineers in their home state of Kentucky, they reached out to ProCoders for help. ProCoders answered the call with an IT Staff Augmentation Services proposal that allowed the CTO management team at AxisPoint to manage the programmers ProCoders provided directly. This way, AxisPoint/VSimple saved both money and time on hiring.

Additionally, ProCoders offered the option of forming dedicated teams, a distinct offshore development model. These dedicated teams consist of high-quality developers managed by ProCoders, providing a structured and efficient solution. As the client’s satisfaction grows, these dedicated teams can evolve into a broader outsourcing arrangement, offering flexibility and scalability.

Outsourcing Pros and Cons

Advantages of Outsourcing

Code quality is the vendor’s responsibility

Vendors should be responsible for quality assurance and ensuring the coding fits your project parameters. Partnering with an outsourcing agency ensures a deep understanding of the client’s needs and preferences to deliver tailored solutions. No daily management outputs are necessary from you at a client level. And that’s a big plus.

Day-to-day management is not needed

Vendors provide you with turnkey service. They coordinate resources between all the IT talent working on your project, from your internal staff to their outsourced team. They manage schedules, quality assurance, deliverables, and communication.

Your vendor handles HR

Need more people? Or less? They handle scheduling and recruitment, as well as employee taxes, payroll, benefits, and so much more. Get only the help you need when you need it.

No hardware/software purchases are needed

Your outsourced IT team will need hardware and software to complete your projects, but those expenses will not be directly on your expense ledger. Your vendor will be responsible for all the costs of those expenses, and this will most likely be factored into the estimate for their work with you.

A wider, more interchangeable variety of resources is available

When you work on an outsourcing basis, it is easier for your vendor to bring in various specialists to your project for just an hour or two. When you outstaff, the vendors you choose are tied to your company’s work similarly to a full or part-time employee, so you have to stick with your resources. The flexibility that outsourcing offers can be a key deciding point for many clients.

Faster turnaround times

With more resources available at lower rates, it’s easier for outsourced developers to meet deadlines that might be impossible for your existing team to meet without overtime pay or sacrificing quality assurance procedures during crunch periods when a lot is going on in multiple projects at once.

Disadvantages of Outsourcing

Control is with the vendor

This is the flip side of our “pro” listed earlier. If you are a client who likes to have a hand in the day-to-day activities of coding, planning, and scheduling, outsourcing may not be for you. Outsourcing software development teams grants a third party direct control over essential business processes, which can lead to potential complications and challenges.

Outsourcing is more expensive than outstaffing

All that management and turnkey service comes at a price. In an outsourcing agreement, you must pay by the hour for the help of the workers and the outstaffing project management team assigned to coordinate your account. Many vendors may charge you a higher hourly rate for a simple project but may lower their rate when they know you are staying around for greater projects in the future.

You don’t have direct contact with all members of the team

This increases the probability of being cheated. This is because there is no direct communication between you and your outsourced developer or designer, so it becomes difficult for you to know exactly what they are doing or how much time they are spending on your project.

It’s hard to keep an eye on all the processes involved in your project

You may find that your contractor is not doing what he promised, or worse, he might be overcharging for his services.

Recommended: Staff Augmentation vs IT Outsourcing

Outstaffing Pros and Cons

Advantages of an Outstaffing Model: Dedicated Team

Flexible hiring model

Outstaffing is the next best thing to having your own auxiliary staff. A dedicated software development team facilitates faster product launches and aligns specialized skills with project requirements. Staff resources are dedicated to you and your IT needs, while the vendor handles payroll.

You have daily control over the development process

The decision to outsource vs. outstaff often comes down to this. If you need more staff but can’t afford to hire them into your organization, outstaff development is the next best thing.

Full access

When people wonder what outstaffing is and why they would choose to work this way, the answer lies in having more day-to-day, hands-on management. In this outstaffing model, you work as the project manager. You coordinate resources. You handle the quality assurance of the development process.

Lower costs

Because the client is handling so much of the heavy lifting on management, the hourly rate of the outstaff team members is usually lower, and if you eliminate the hours of project management, your vendor usually adds the estimate. The savings can be significant if you’re up for the extra work.

The work is done quickly

When you hire an expert to do your programming, you don’t have to wait for them to learn the ropes of your business and get up to speed. The developer will know how to create programs compatible with your system, so you won’t have problems integrating the new app into your website or other programs.

Reliability

Finding a team that can be as reliable as a remote outsourcing company is hard. This is because the team you hire is not your employees but your contractors. As long as they are paid well and have incentives to work hard, they will never leave your side. They can set their own schedules and work from anywhere they want. You won’t have to worry about them leaving for another job or being too busy with other projects to finish yours on time or at all!

Search

You just need to send your requirements and get the CVs of those interested in your project. It wouldn’t be just freelancers you have found on the freelance platform, but real professionals who were already interviewed and tested by specialists.

Disadvantages of Outstaffing

Failure to provide good communication channels

With vendor staff often working remotely, or at least separately from the rest of your team, communication channels are important. Defining the project scope at the outset is crucial to facilitate effective communication and ensure that the outstaffing arrangement meets the company’s needs. As the client, you’ll have to ensure your outstaff team is fully part of your project management software system and their reporting is transparent to the rest of your corporate team. It is also key to setting clear expectations and staying involved daily, just like your corporate-based IT team.

Project responsibility lies with the client

Depending on the time you have to manage your IT outstaffing services, this can be a pro or a con. It’s up to you to decide—what’s easier to invest, your budget or your time?

Price

It can be higher if you want to collaborate with a company with lots of good feedback and a high reputation. This is because these companies have more customers than smaller ones and can afford to hire more qualified developers.

Hidden costs

To hidden costs, we can include:

• Overtime work. Usually, you sign a contract for a particular number of hours. However, if you need your developers to work overtime, you will need to pay for it additionally;
• Rate change. If you work with an outstaffing company for a more or less long period of time, mind that the rates may be changed. Nowadays, the economy is unstable, so rate change is common;
• Employee change. Some outstaffing companies may change an employee for your project without even informing you. Of course, it’s not common, but we decided that you should know that such situations may also appear;
• Senior = middle and middle = junior. This is the worst case that any client can imagine, but sometimes it happens too. Some outstaffing companies may charge you for a middle developer while actually providing you with a junior one. For it not to happen, you should always look through the company reviews and don’t hesitate to contact their previous clients directly.

In the case of ProCoders, we don’t hide our clients, and you can look at some of the projects we have already done.

Recommended:

• How to Estimate the Cost of Software Development
• Learn about the cost of developing an application on Flutter
• Outsourcing Software Development Costs

Industry Considerations in Software Development

When it comes to software development, companies must consider various industry factors that can impact their decision to outstaff or outsource. The software development process involves several stages, including planning, design, development, testing, and deployment. Each of these stages requires specialized skills and expertise, which outsourcing companies can provide to help navigate the complexities involved.

Outsourcing companies offer a range of models to suit different business needs. Traditional outsourcing models involve hiring an external service provider to manage the entire project from start to finish. This approach is ideal for companies that lack the internal resources or expertise to handle the project independently. By outsourcing the entire project, businesses can leverage the service provider’s experience and capabilities, ensuring a high-quality outcome.

On the other hand, outstaffing models involve hiring remote developers to work on specific tasks or projects. This model is particularly beneficial for companies with a solid in-house team that needs to augment their capabilities with specialized skills. By integrating remote developers into their existing team, companies can fill skill gaps and enhance their development process without the need for extensive internal management.

Understanding the Development Process

The software development process involves several stages, including planning, design, development, testing, and deployment. Project development within the context of outsourcing services requires active client involvement to align the project with business objectives.

In the planning stage, outstaffing allows the client company to bring in external experts to help define project requirements, create development plans, and set timelines. This ensures that the project is well-structured from the start, with clear goals and objectives. Outsourcing, on the other hand, involves the service provider taking the lead in planning, leveraging their experience and expertise to create a comprehensive development strategy.

During the design and development stages, outstaffed developers work closely with the in-house team, following the client’s direction and adhering to established standards. This collaborative approach ensures that the final product aligns with the company’s vision and requirements. In an outsourcing model, the service provider’s team handles the design and development, with the client company providing input and feedback as needed. This allows the client to benefit from the service provider’s specialized skills and resources.

Testing and deployment are critical stages in the software development process. Outstaffing enables the client company to maintain control over quality assurance, ensuring that the final product meets their standards. The outstaffed developers work under the client’s supervision, conducting thorough testing and making necessary adjustments. In an outsourcing model, the service provider is responsible for testing and deployment, delivering a turnkey solution that is ready for use. The client company can focus on other priorities, confident that the service provider will deliver a high-quality product.

Outstaffing vs Outsourcing: What Would Be Best for Your Project?

A dedicated team can be particularly beneficial for long-term projects, as it facilitates faster product launches and aligns specialized skills with project requirements.

There are many options to consider in the outsourcing vs outstaffing debate. But truly, all the pros and cons boil down to this. Outstaffing is better for clients with significant, long-term needs that need day-to-day control of their vendor team. Outsourcing is better for clients with shorter-term needs that necessitate turnkey service from their vendors.

Comparison Table of the Pros and Cons of Outsourcing and Outstaffing Services

Outsourcing pros	Outsourcing cons	Outstaffing pros	Outstaffing cons
100% responsibility on the developer’s side	Poor quality of the final product is possible	Customer control the quality of a product	100% responsibility for a result is on a customer
(Almost) no management work	Less control	High control	Additional management efforts
	Higher costs than with outstaffing	Lower costs than with outsourcing

How to Find an Outstaffing or Outsourcing Partner

If you’re looking for a partner for outsourcing or outstaffing, Central Europe, Estonia, Croatia, Portugal, and Albania can be good directions for this. A software outsourcing company can handle the entire development process, from team formation to project execution, ensuring expertise and project delivery. The key is to ask the right questions, such as:

• Does your team have a fluent command of English? This is the key to avoiding important miscommunications. At ProCoders, all of our developers are language-tested, as we only hire people who speak English.
• How many time zones separate you? To ensure you can talk to your team during reasonable work hours, your team should be no farther away than seven to eight hours. At ProCoders, we take that extra step, often starting our official workday for that client at 12 p.m., ensuring more hours are available for our team to work directly with a client’s staff.
• Can you provide references? Don’t let your vendor plead “client non-disclosure.” They should be able to send you a portfolio of their work and have clients who are ready to speak with you directly if need be. You can look through the ProCoders cases here.
• How do you handle billing and record-keeping? Your vendor should be able to work seamlessly with your accounting department and comply with all your country’s accounting laws.

Let’s get in touch and discuss all your needs!

Outsource vs Outstaff with ProCoders

If you’re on the fence about your ability to outsource vs outstaff, ProCoders can help you choose the information technology outsourcing services. ProCoders has access to a deep talent pool of programming professionals in various specialties and expertise levels. We can work with your team as an outsourced or outstaffed resource. We’d love to talk to you about your needs today and create a proposal specifically for your business needs.

Whether you need to create your project from scratch or give a boost to your existing product – ProCoders is always here to help. With our outstanding discovery phase service, which will help you find out all the issues before you will face them, optimize the budget and plan further steps, we have already saved a lot of businesses from failure.

ProCoders also offers dedicated teams, a distinct offshore development model that lies between outstaffing and outsourcing. These teams consist of high-quality developers managed by us, ensuring a structured and efficient approach to your projects.

As an IT vendor based in Central Europe, Estonia, Croatia, Portugal, and Albania, we have access to a deep well of programming talent in various specialties and expertise levels. The balance between quality and costs is the philosophy that ProCoders follow.