Making the Right Decision: IT Outsourcing VS Staff Augmentation. Issue #7

Companies often seek to optimize their operations and cut costs while maintaining or enhancing the quality of their products and services. However, world globalization allows business owners to use more than one path of in-house development, and organizations can use external assistance to fulfill their IT needs. Two prevalent strategies in this pursuit are outsourcing and staff augmentation (outstaffing).

Although they sound similar and share certain aspects, they serve distinct purposes and involve different approaches. Choosing the right course of action can be complicated and can impact how well your future project turns out.

In this issue, we'll explore the differences between outsourcing and outstaffing, helping you decide which model better aligns with your business goals.

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Exploring outsourcing, its purpose, and key features

Essence: Outsourcing is a well-established business practice where a company delegates specific tasks or functions to an external service provider. IT outsourcing presupposes delegating the entire product development to a third-party vendor in the same region or overseas (offshore outsourcing). The service provider is responsible for all stages that are a part of the development life cycle, from planning the development up to testing, delivering, and maintaining the product. Team management is on the vendor's side.

The primary objective of outsourcing is to reduce operational costs, access specialized skills, and concentrate on core business functions.

Key features of IT outsourcing:

Project Delegation

In outsourcing, you contract an external company to handle specific projects on your behalf. The outsourcing company is responsible for delivering the end product or service.

Result-Oriented

Outsourcing is outcome-focused, meaning you pay for the results or services delivered by the external provider.

Full-Cycle Services

It includes the entire project development lifecycle, from idea inception to after-launch support.

Risk Management

The outsourcing partner assumes the risks associated with project delays and cost overruns.

Scalability

Companies can easily scale their teams up or down based on project requirements.

Reduced Operational Burden

Companies often outsource non-core functions, freeing internal resources to focus on strategic and revenue-generating activities.

Cost-Efficiency

Outsourcing can reduce hiring, training, infrastructure, and operational overhead costs.

Limited Control

While you maintain control over the project's outcome, you may have less control over the day-to-day activities of the outsourcing provider.

IT outsourcing is suitable when:

• You have a complete project idea but need extra expertise to execute it.
• The project involves multiple development stages and requires comprehensive expertise.
• You prefer to transfer most project-related risks.

The tech industry is marked by its dynamism and constant evolution. To keep up with the rapid changes and innovations, companies often require additional IT expertise.

Engaging a suitable candidate and assembling a strong team to support the company's evolving ambitions is a significant problem in terms of growth in jobs with a smaller labor pool. Businesses are finding it harder and harder to overcome. However, by following proven practices of development outsourcing, you can avoid major challenges that companies have to deal with.

Exploring staff augmentation, its purpose, and key characteristics

Essence: Staff augmentation, or outstaffing, is a model where a company hires a remote specialist or a team to work on its projects. These specialists become integral part of the client's in-house team, collaborating directly with their in-house staff to achieve project goals. The primary purpose of outstaffing is to access specialized skills and expertise. The client company maintains control over the project while benefiting from the expertise and skills of the outstaffed team.

Key characteristics of staff augmentation:

Outstaffed Team

With outstaffing, you hire professionals who work exclusively for your company. They become a part of your team, collaborating directly with your in-house staff.

Resource Augmentation

Outstaffing allows you to augment your in-house team with remote professionals who bring specific skills and expertise.

Full Control

While the outstaffed team operates remotely, you retain full control over the team, project management, tasks, deadlines, and decision-making.

Direct Collaboration

Outstaffed professionals align their work with your company's objectives, contributing to your core operations and fostering a sense of integration.

Flexible Resourcing

Companies can easily adjust the team size according to project needs.

Outstaffing is suitable when:

• You require specific skills or expertise for your existing in-house team.
• You want direct control over project management and team collaboration.
• The project scope is dynamic, and you need the flexibility to adjust the team size.
• You have enough technical experience to choose the right candidates.

Choosing the Right Model for Your Business

The choice between outsourcing and outstaffing depends on your specific business requirements and project's nature, cost considerations, your level of involvement, and your long-term objectives.

Outsourcing is ideal when you want to delegate delivering a specific project to external experts, but you maintain control over the outcome.

Outstaffing is the preferred choice when you need professionals with particular expertise or skills to work as an extension of your team and want full control over the team and project. This model is common in software development, where remote developers join your in-house team.

In conclusion, outsourcing and outstaffing are valuable business models, each with its distinct advantages and use cases. Understanding the differences between these models is essential in making well-informed decisions that best align with your business goals and technology requirements.

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