Some of the biggest names in technology are scaling quality, controlling budgetary spend, and redefining the contours of project management by offshoring software development instead of being tied to in-house teams.
Your company may be tethered to the US, but your software development team could be based in Europe or elsewhere. Software offshoring is an 85.6 billion dollar industry spanning the globe. Any initiative that moves software development offshore follows two distinctly different options – Outsourcing and Outstaffing.
Outsourcing vs. Outstaffing – How The Two Differ
In outsourcing, you hire a team of freelance professionals, set the parameters, outline your goals, and the team mentors the process and monitors the outcome until results are satisfactorily delivered. It’s like you’re telling a team that you want them to complete a specific task, and the team independently focuses on delivering results within a mutually agreed deadline. The outcome is mostly the responsibility of the development team.
In outstaffing, you directly handle a team of experts that dedicates itself to your project from conceptualization to completion while you exercise complete administrative control and creative supervision. It’s like tapping an external stream of expertise by hiring a team that works shoulder to shoulder with your in-house team, even as you assume full responsibility for the development process.
Two Significant Benefits Of Offshoring Software Development
You’re Tapping The Highest Levels Of Software Expertise At An Affordable Cost
The IT talent available in Europe, Asia, and the Asia-Pacific region is on par with the best tech graduates that the US produces. But there’s a considerable difference in remuneration levels, and for US companies it makes better business sense outsourcing software experts abroad that offer cheaper services compared to the local talent which tends to be expensive.
You’re Shedding Administrative Hassles And Management Headaches
It’s the dream of every entrepreneur or SME to focus on their core competencies and grow the business without being weighed down by the administrative burden of employee benefits, tax accounting, and pension contributions or having to focus on human resource policies that demand regulatory compliances. All such headaches vanish when you tap offshore software expertise that can be tied to the terms and conditions of a contract.
The Chief Advantages Of Outsourcing Software Development
- The developer becomes fully responsible for complying with the client firm’s specifications, and any defect in the product or services is addressed by the developer, not the client.
- The client firm minimizes the headaches associated with human resources development and is obliged to fulfill only the terms outlined in the offshoring contract.
- The client avoids the management and service costs associated with direct employment of local employees.
- Compared to the higher salary and allowances outlay associated with client countries such as the US and UK, outsourcing software development is cheaper and protects the client’s bottom-line.
- Outsourcing contracts guarantee results tied to specified deadlines and are more likely to deliver high-quality work.
Challenges Posed By Outsourcing Software Development And What You Can Do to Overcome Them
The developer will focus on providing the desired results within the specified timeframe, and the client may have little or no control over project management. To overcome this handicap, clients may like to escalate the level of monitoring during different phases of the project.
The hourly remuneration and management expenses (from the developer’s side) associated with the project tend to be higher than the outstaffing model. But in a holistic sense, it’s anyway cheaper than directly employing local professionals.
Because remote workers hail from differing cultures, clients may not always clue in on workers that are proficient in English. This can create communications problems and affect the quality of the output when client expectations get lost in translation. Insisting on higher proficiency levels in English is the only solution.
Because clients reveal sensitive company information and coding protocols, there’s the risk of information being leaked to third parties for monetary gain. This can be overcome by strengthening cybersecurity through a Data Processing Agreement (DPA), and a Data Loss Prevention System (DLP system) that defines access rights and the responsibilities of the client and the developer.
Going by the GIGO concept (garbage in, garbage out), the consistency and quality of the developer’s output depend a great deal on the skill level, so clients need to vet developers for experience, reputation, and skills before inking the contract.
Alexander Malinz & Igor Astapchik, co-founders of IT outstaffing company FortySeven, are of the view that Outstaffing displays the potential of revolutionizing the Financial Technology sector as evidenced by the stupendous success of Israeli startups. Check out their interview at techendo.com where they discuss their Israeli venture capital case study.
The Chief Advantages Of Outstaffing Software Development
- Working shoulder to shoulder with the development team guarantees a higher degree of control over the project, besides the opportunity to influence the outcome of the project in a manner that benefits the client.
- The costs are lower for the client compared to outsourcing because the outstaffing team will be managed by the remote team, and clients won’t be burdened with long-term employee-specific expenses.
- The client is legally protected because the outstaffing team members are answerable to the remote team management, and all manpower related issues aren’t the client’s headache.
- Outstaffing provides significantly higher client savings than outsourcing. This’s mainly because the client retains significant control over each and every aspect of the ongoing project, and is free to adopt cost-saving measures over the long-term.
Challenges Posed By Outstaffing Software Development
The development team comes equipped with a higher skill profile and greater expertise than client managers. Guiding such a group and micromanaging a high-tech project calls for a higher degree of proficiency on the part of the client’s team handlers. Retaining a professional with the requisite skills profile is the solution.
Because clients have greater managerial control over the outstaffing team, clients will also have to bear the responsibility for project outcome. But the results more than justify the risk and these risks are manageable.
Just as in the case of outsourcing, communications problems posed by remote workers can be tackled if care is taken in ensuring the team’s proficiency in English.
Outsourcing Or Outstaffing – How Do You Decide Which Suits Your Style of Working?
Now that you’re better placed to understand the pros and cons of outsourcing and outstaffing, deciding the ideal option depends on the kind of company that you’re helming and your long-term goals.
You’re A Technology-Centric Client, But You Lack In-House Experts Capable Of Supervising A Remote Development Team
Outsourcing would be a better option. Spend some quality time researching and identifying the remote team that has the expertise to deliver your vision. Be crystal clear in outlining your expectations, and get the desired results minus the headaches of man management.
You’re A Company With Reasonably Good Infrastructure And The Managerial Competence To Handle A Remote Team
Outstaffing would be a good option. See if you can get a panel of experts to evaluate remote teams, so you get feedback on the team’s skill profiling and experience before deciding which team is the right fit. With clearer oversight, you’ll be better placed to ensure that the ongoing project yields the best results.
A Checklist To Help You Zero In On The Right Outsourcing/Outstaffing Partner
OK, so you’re crystal clear as to what differentiates outsourcing from outstaffing, and you’ve decided which team style suits your company’s work ethos. But locating the right partner is no less a headache, so here’s a checklist to sped up decision making:
Probe Language Skills: Differences in culture and nativity create barriers in effective communication, and the team that can’t communicate properly becomes a liability. Poor communication skills can severely impact work quality and compromise project goals. So be serious about hiring workers that are fluent in English.
Choose Team Location Wisely: If you and your remote team are separated by a time zone difference of 5 to 7 hours, it’s workable. But if you’re based in the US and the team happens to be in India, how you juggle the 11-hour time variation could create problems. If you can’t avoid such a scenario, onboard team members to Slack for communication and Kanbanize your project with Trello.
Double Check Certifications: Remote teams need to be experienced in workflow organization, productivity-boosting, and time management, qualities that can be evaluated. Clients would be well served if they probe industry certifications, especially those of companies such as Google and Microsoft.
Review the Brands They Worked For: Nothing speaks more clearly and purposefully than a review of past client testimonials. Remote teams that have handled well-known brands are significantly more capable of improvising, adapting, and overcoming challenges.
Unambiguous Service Terms and Transparent Payment Protocols: Transparency lubricates mutual cooperation and coordination. Ensure that the terms of the contract are crystal clear on roles and responsibilities, and there’s accountability for team members.
Ensuring Data Safety: When you’re sharing sensitive information with remote teams, you risk a data breach that could bring on catastrophic consequences. Ensure that you share the same page with the remote team when it comes to fulfilling the cybersecurity protocols that we’ve earlier discussed. This is especially true if you’re working in the EU because the General Data Protection Regulation (GDPR) compliance is a must.
Whether you acknowledge it or not, outsourcing or outstaffing is the technologically efficient way of equipping yourself to lead change. Just consider the benefits – you’re maximizing team productivity, you’ll be propelling breakthrough innovation, and more importantly, you’re gaining the competitive edge that zooms you on the growth curve to heady success. Whether it’s outsourcing or outstaffing, being hands-on equips you to follow best practices, overcome major challenges, and make the most of emerging opportunities.