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IT Outstaffing: Pros and Cons of This Model in Software Development

What is IT outstaffing

Many people mistakenly believe that outsourcing and outstaffing are substitutable concepts. This misconception is widespread because both methods imply the process where customers entrust certain work to remote employees.

In fact, both concepts name a specific type of relationship between the company and employees who do not belong to the company’s primary personnel. We have already told you about outsourcing model in our blog. Let us see today what is IT outstaffing and what this model’s advantages and disadvantages are when used in software development.

What Outstaffing Is and How It Differs from Outsourcing

Outstaffing presumes a kind of personnel “rental” from a third-party company. This type of employment is special because a company outstaffs a certain part of its legally registered employees to fulfill their duties and execute the tasks set by the customer company.

The mechanism looks like follows:

  1. A customer addresses a software development company and makes an application specifying what specialists, in what technology, for what time they need, and what tasks they want to solve.
  2. The contractor company finds job applicants and concludes a service agreement between both parties.
  3. A customer pays the company a fixed sum of money for each specialist and instructs the hired staff to fulfill the necessary tasks.
How outstaffing model works
How oustaffing model works

From a legal perspective, a specialist has labor relations with an outstaffing company but not with a customer company. While the outstaffing company provides services to a customer according to the contract, a customer company pays for them.

A customer manages a project. A team simply adapts the existing methodology, processes, monitoring tools, and communication approach. Commonly, a customer hosts repositories and automation means, managing them.

So, we can say that the main difference between the two types of services lies in the following: while a contractor outsources the project, they transfer certain functions of the company, but when they outstaff it, they transfer their employees to a customer to fulfill specific tasks.

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It is convenient to outstaff IT personnel because the company “rents” employees but does not bind them with labor obligations, namely: it does not conclude an employment contract, does not provide social guarantees, and does not deal with other things like that. A contractor concludes an agreement with a customer, according to which it hires specialists and motivates them.

Outstaffing vs Outsourcing: what's the difference

IT Outstaffing Pros and Cons

As in the case of outsourcing the project, outstaffing also has several advantages and disadvantages to know about. Here are the key ones:

  1. IT Outstaffing advantages:
  • Simple personnel hiring and management. Since an employee concludes an employment contract with an outstaffing company but not with a customer, the latter does not deal with these matters. This approach reduces the load on the customer company’s administrative and accounting departments.
  • Delegated financial matters. An outstaffing company deals with all issues related to wage calculation, accounting, and payments, as well as taxes and various fees. A customer only pays the amount of money stipulated in the contract.
  • Rapid expansion. It is possible to quickly hire the necessary staff for a specific project or plan to enter new markets in other countries with no need to register a legal entity there.
  • Cost reduction. Since customers manage the assigned teams themselves, the management costs are lower compared to outsourcing.
  1. IT Outstaffing disadvantages:
  • Communication issues. While working on the project, the cooperating parties may experience problems if they misunderstand some tasks. Therefore, it is crucial to set and maintain communication channels convenient for both parties.
  • Motivation problems. When the company hires regular staff and outstaffed employees, it may negatively affect the quality of the work performed. Outstaffed personnel may lose motivation as they lack certain benefits and bonuses provided for regular personnel.
  • Higher responsibilities. If you decide to choose an outstaffing model, get ready to take more responsibility. It is recommended to have tech-savvy experts in the team to manage a project more efficiently.

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When to Choose an Outstaffing Model in Software Development

An outstaffing model in software development is a progressive response to a business request when it needs to solve narrow technical tasks, quickly expand the team, and address several other issues.

This model will suit you if:

  • you have a separate task requiring peculiar skills unavailable among your company’s employees;
  • your project manager or team lead has the experience, skills, and qualifications to manage the external team, create a backlog, and control the process of its execution;
  • the process of getting access to infrastructure and development environment for remote team members is comprehensible, well-defined, and safe in terms of corporate security;
  • your company’s operation is set up: each company employee comprehends the tasks to be completed within the current stage, and you have all the tools necessary to set, perform, and monitor tasks.
  • your company and process participants understand and accept the peculiarities of building relationships with outstaffed employees.

When most of the items from the above list are true for your company, you can safely implement this model in your work.

However, you have to choose the optimal model for your business, depending on its primary needs, goals, and possibilities. Consequently, we recommend you seek advice from specialists before making any final decision.

Contact us, and the Lvivity team will answer all the questions you are interested in and help you choose the most efficient cooperation option!

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