Outstaffing or Outsourcing: Which Is Better for Your Business?

When considering developing a new software product, one of the questions that will immediately come up is, “Who will build it?” The answer you’ll most likely get from any tech professional is that it depends on way more factors than you might think. 

Apart from hiring and assigning product development to an in-house team, you may consider other popular options such as outsourcing and outstaffing. Each option has advantages and disadvantages, and you must compare them wisely to choose the most effective one for your company and product. That’s where this article comes in handy. So, let’s start with the basics.

The Difference Between Outsourcing and Outstaffing

Outsourcing is a tech cooperation model in which a business delegates entire or partial development to a tech vendor. In this case, the vendor takes full responsibility for the result and deliverables as mentioned in the contract.

Outstaffing, on the other hand, is a cooperation model in which the business augments its in-house team with those professionals whose skills are necessary for development. In this case, the responsibility for the project’s final result depends fully on the business.

The responsibility for the final result isn’t the only difference between the two. Here’s a more detailed look at what you should expect from each.

	Outsourcing	Outstaffing
Duration of cooperation	Short-term	Long-term
Cooperation type	Project-based	Contract-based
Party responsible for task assignment, production monitoring, control	Outsourced team	In-house team
Party responsible for the resources’ choice and use	Outsourced team	In-house team
Party responsible for HR management	Tech vendor	Outstaffing agency
Payment type	Fixed project-based fee	Hourly rate
Business’s involvement in the development process	Limited	Extended
Communication between the business and developers	Led by vendor’s project manager (PM)	Direct

These differences reflect each model's approaches to product development.

In outsourcing, the company entrusts the tech vendor with the choice of developers, development type, and process management and expects to receive the agreed-upon result. 

In outstaffing, the company hires professionals with specific skills to cover the gap in their in-house team to complete the development on their own terms and pace. 

The question is, how to understand which one will suit your business? Let’s review the factors to keep in mind. 

5 Major Things to Consider Before Choosing the Cooperation Model

If you want to choose the most appropriate cooperation model and invest in product development wisely, here are five major factors to consider before signing the contract. 

Business type and current objectives

If your business deals with the business side of the software product (idea, market research, concept development, investor pitching) and not with the development, you will spend more time and money forming the tech department than you would if you outsourced the whole development process. 

However, if you plan on providing both business and development services, it makes sense to form an in-house team and hire the needed professionals to offer end-to-end product development services. 

Your Budget

Outsourcing the entire development cycle will always cost more than hiring someone to do specific tasks regularly. The outsourcing fees already include the cost of resources needed to deliver the results, while with outstaffing, you will be responsible for searching and paying for them yourself. That applies to office space, hardware, software, and maintenance.

Availability of the In-House Development Team

If you already have an in-house development team, you can start the project development immediately as they have the needed skills and qualifications. But here’s the trick: they probably already have a fair share of the workload, so giving them more tasks will only decrease their productivity unless you expand your team. 

This is where outstaffing will be a great option. On the one hand, you will retain the reliability of your tech specialists. On the other hand, you will be able to hire more developers faster and distribute the workload evenly. 

Desired Time-to-Market

Regardless of the development duration estimates you’ll calculate, you may add a few months to the estimate if you don’t have a team ready to jumpstart the process. The reason? 

The long hiring process, specifically in the tech sphere, where the median time to hire ranges from 44 to 49 days. And if you need a person with niche skills, it may be even longer.

But that’s if you have a talent acquisition team who knows where to find the right people. If you do it alone, having no experience in the process, you risk spending more days and money. The worst part? You’ll hire the wrong people, which will only prolong the development process.

Project Management Skills

The development success evenly depends on the quality of technical skills and the team’s ability to manage them. Since different projects require different development approaches and methodologies, you will receive the expected results if you manage your team and resources effectively. 

From this perspective, outstaffing will be a better choice if you don’t want to deal with project management from A to Z. However, if you have a skilled and experienced PM and a small team of tech engineers, then outstaffing would be a better cost-effective option. 

Of course, each situation is different, and you will have business-specific aspects to consider before deciding. Here are a few scenarios to guide your decision-making process.

Outstaffing or Outsourcing: Choosing the Right Model for Your Business

With the right cooperation model, your business improves its chances of receiving the desired outcomes on time. So when is it time to opt for outstaffing and when for outsourcing? 

	Outsourcing	Outstaffing
Your business deals with research, development, and production
Your budget can’t afford a full-stack in-house team long-term
You only need a few engineers with a specific skill set
Your in-house team’s workload is too much to undertake new tasks
You don’t have time to hire the IT specialists yourself
You want to control and manage every development process and phase
You lack development and production expertise

Even with all these things considered, you may still have some doubts — and that’s understood, especially if you know the potential costs of both cooperation models. In this case, it would be better to consult an agency providing these services. They usually have more experience in different industries and various-sized companies, so they can offer the best solution based on specific needs, budgets, and desired outcomes.

Wrapping Up

When choosing between outsourcing or outstaffing cooperation models, you need to carefully assess your business strategy, available resources, skills, and desired outcomes to select the best fit.

Generally, outsourcing is an excellent option for those businesses that don’t want to deal with development and production, don’t have an in-house team, or it’s too overwhelmed with the existing workload. Outstaffing is handy when you already have a dev team but lack specialists in particular technology or skill.

Since every project is different and general assumptions may not work for each, it’s best to discuss and consider the perspectives of those tech vendors who provide outstaffing and outsourcing services. As a result, you’ll have a detailed view of what solution will benefit your company the most.