The Outstaffing Model: What It Is and Why It’s Better Than Outsourcing

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Software companies frequently skate on to thin ice in their pursuit of accelerating, scaling, and supporting innovation through technology. To turn a creative vision into a viable product, you must work with the right development talent, provide the team with a motivating mission, and execute like a fighter pilot.

But this first part of finding and retaining top talent is the real bugbear. Assembling qualified developers feels like a Herculean task because there’s such a small talent pool to choose from, especially if your field of vision is only local.

Outside of the abject scarcity of local talent, outstaffing is also becoming particularly popular due to the cost of local talent as well. High salaries (at least in America and Western Europe) mean the cost of using local engineers is infeasible for most small tech companies or those with a limited budget.

As a result, software companies must explore beyond their own borders if they are going to hire the best developers. Indeed, as the appetite for remote collaboration continues apace, more than 60% of developers are already working fully remotely.

And it is in this pursuit of development greatness that the outstaffing model becomes the bedrock of success. Time to drop the balloons–we’ve got a winner! 

But don’t confuse it with outsourcing, which as we will explain provides more downside than upside in comparison to outstaffing. Let’s dig in!

Need a high-performing outstaffing team? TurnKey is the expert.

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What is the Outstaffing Model?

The Outstaffing model is a method of hiring top-notch developers to work as an extension of your in-house team. Still, you don’t have to worry about the administrative hassle of employing them directly.  The outstaffing vendor or agency takes care of recruiting these awesome developers and legally employing them and deals with all taxes and payroll headaches.

In short, you get to manage and control the outstaffed teams as if they all worked at your company, but you aren’t responsible for the nasty bits that make actually employing folks a drag. That said, you, of course, need to pay the salaries of the developers as well as whatever fees are charged by the outstaffing company (and if the fees seem out of whack, call TurnKey!).

What is the difference between Outstaffing and Outsourcing?

What is the Outstaffing Model?

“Outsourcing” and “Outstaffing” models are frequently confused, misused, and abused.  Such lack of clarity leads some product groups to delay making decisions as they figure out what they really need and want in terms of extra development resources. 

The main difference between these two models comes down to who is in control.  With Outstaffing, the client manages the outstaffed team and has complete oversight on when and how they work.  The client is also responsible for hitting all key development milestones and timelines.

With Outsourcing, by contrast, the outsourcing vendor or agency is in charge of overseeing and managing all team activities, and is primarily responsible for the final product that the outsourced team delivers.  The client has input, but the Outsourcer is in charge.

Another key difference is that Outsourcing is typically project-based and short-term, and the customer has a lump sum payment that must be made upon deliverables.  Outstaffing is typically a longer-term solution where the client sees this as a permanent extension of their team. The client usually pays monthly based on whatever contractual terms were agreed to.

Key Advantages of the Outstaffing Model

Key Advantages of the Outstaffing Model

There are a wide range of reasons why software companies favor the outstaffing approach over outsourcing. Here are the primary ones (feel free to impress your friends with these at your next cocktail party):

#1. Super cost-effective

By implementing the outstaffing model, you save money on two fronts.  First, you have fewer recruiting costs than you would hiring locally-based developers since the vendor is responsible for finding and staffing your team.

Second, outstaffed developers typically have lower salaries (and taxes) than developers based in America or Western Europe.  Thus, your total costs for an outstaffed team are much less than if you tried to hire additional engineering resources closer to home.

#2. Fast speed to market

Outstaffing enables software companies to hire more developers without going through a lengthy hiring process or begging for money from the CFO.  This dramatically boosts productivity, reducing the amount of time needed to push out new releases or reach important developmental milestones.

#3. Highly flexible 

Outstaffing provides a great deal of flexibility since you can scale your team up or down seamlessly depending on the needs of the business.  You aren’t locked in or fixed in the same way that you are with Outsourcing or hiring locally.

#4. Total control

Outstaffing allows the client to manage and supervise all of the team’s operations and productivity.  They control when and how the team works and can change direction at any time.

#5. Separate line item on the budget

Some organizations have a budget that limits the number of locally-based developers and resources they can have to meet their goals.  So folks turn to outstaffing (which as mentioned earlier is cheaper, faster and often better) when they need to bulk up their development team but can’t fight the budget battle internally.

#6. A fix for long-term absences

Local employees on long-term leave or sabbaticals are another reason software companies consider using outstaffing services to handle their tasks until the employee returns. This ensures that the employee’s absence doesn’t impact the development team’s productivity and efficiency.

Does outstaffing sound great to you? TurnKey is here to hold your hand the entire way.

Disadvantages of the Outstaffing Model

Despite its many (spectacular!) advantages, the Outstaffing approach has a couple of drawbacks, including:

#1. Potential communication roadblocks 

Communication is essential in any team and plays a significant role in over-delivering against the desired development objective. Using offshore resources can sometimes come with cultural differences that may hinder communication.  But these shortcomings can be overcome simply by using regular collaboration tools like Zoom and Slack to connect daily with each outstaffed team member.

#2. The buck stops with the client

Outstaffing, as opposed to outsourcing, allows the client to directly monitor the performance and operation of the outstaffed workforce. Thus the client is ultimately accountable for any team success or any team failure.  Of course, this is also the advantage of outstaffing, so whether you find this point, a Pro or a Con depends on your perspective.

Does that sound like a lot to digest, or need more help with potential outstaffing challenges?  Check out our helpful guide on how to solve the 14 typical issues with offshoring.

Key Advantages of the Outsourcing Development Model

Key Advantages of the Outsourcing Development Model

Below are the key benefits often cited with software development outsourcing:

#1. The client does not get bogged down in project management

With outsourcing, the vendor is the one who closely monitors and supervises the development team’s operations.  They report back to the client any issues that arise, but the vendor is fully answerable for all aspects of the management process.

#2. The vendor is responsible for project success

Outsourcing companies are accountable for the ultimate outcome produced by their development team. This means that clients can reject the finished work if they are dissatisfied with the team’s performance, which is not the case with the outstaffing model because the client is in charge.

#3. Wider varieties of specialists

Another advantage of outsourcing is that the vendor usually has a bench of specialists that can float in and out of the project on an as-needed basis.  This is harder to do with outstaffing, in which developers are usually full-time or fully dedicated to the client.

Common Disadvantages of Outsourcing for Software Development

Like Outstaffing, Outsourcing has its drawbacks too:

#1. More expensive

The cost of the outsourcing model is (usually much) greater than the cost of outstaffing since the vendor charges the client for not just developers but also project management, facility use, corporate overhead, and more.  Moreover, because outsourcing is more short-term based than outstaffing, the vendor typically charges an extra premium. 

#2. Much less workflow transparency

The outsourcing approach lacks transparency because the client provides the outsourced service provider with their specifications and receives the results at the end of the task period. The client usually only has limited knowledge of daily operations and how each individual developer on the team performs.

The Outstaffing Model: Key Risks To Manage

In general, the outstaffing model for software development poses some risks to be mindful of. The primary dangers are mentioned below, along with tips on how to avoid them.

#1. Product delivery problems

If not managed appropriately, the outstaffing team may deliver an end product that lacks the specified features or quality that the client desires. This can be a huge issue because rectifying it may take significant time and resources. 

The best method to avoid this issue is to define all the main development tasks in a single shared document with full descriptions. The document should be prepared in a language everyone on the team understands without ambiguity, and the manager should welcome and invite questions on an ongoing basis.  You should also monitor the team member’s performance to verify that each developer performs as expected.

#2. Finding the right culture fit

Another risk associated with the outstaffing approach is acquiring developers from the outstaffing vendor that are a good culture fit with your company.  Even if the developer is highly skilled, you need them to mesh with the rest of your onshore team so that everyone is rowing the development boat in the same direction and with the same intensity. 

For this reason, insist with your outstaffing vendor that you get to do final interviews for all candidates being proposed to you–and that you get final decision-making power.  This qualitative screening will tell you if this developer will be a good fit before you have to commit to having them as team members.

When Should You Choose the Outstaffing Model?

Some software companies struggle to determine when it is appropriate to use an outstaffing vendor.  This could be due to a difficult choice between software outstaffing and outsourcing or simply between outstaffing and trying to slog their way through finding and hiring extra developers locally.

However, the rule of thumb is that you should consider choosing the outstaffing model when:

  • Your in-house team cannot meet all the project deadlines assigned to the existing development team.
  • You don’t have the ability or budget to hire additional staff locally.
  • You need to quickly boost development velocity based on competitive pressures.

TurnKey: We’ve Got Your (Outstaffing) Back

TurnKey: We’ve Got Your (Outstaffing) Back

At TurnKey, we are committed to ensuring that you do not go through the same outstaffing mistakes and frustrations as we did when we were running product development at our own software companies. 

That’s why we came up with a unique model for outstaffing called Yourshoring. The Yourshoring model allows you to hire an extended development team built entirely around your needs. In other words, we help you create a high performing remote development team that is entirely tailored to your product requirements and vision, not ours.

In the Yourshore model, we custom recruit a team of fully dedicated devs with the right mix of skills to meet your specifications. We also embed the developers in your company’s culture to ensure they are fully aligned with your company’s goals.

And lastly, you don’t have to worry about all the administrative and logistical headaches of having an offshore team–we take care of all that so you can just focus exclusively on building

Final Thoughts

Hopefully this article has shown that Outstaffing is the bomb-dot-com when it comes to the ease of extending your development team.  Moreover, in most cases it proves much more cost efficient and productive than outsourcing.  It all comes down to your key needs and which model is best for you at that given time.

Ready to rock and roll on the outstaffing front? So are we. Let’s do this!


What is Outstaffing?

Outstaffing model is a method of extending your software development team with top level talent but you don’t have to worry about the administrative or legal hassle of employing them directly since the developers are hired through a third party vendor.

What are outstaffing services?

Outstaffing services relate to a vendor who provides software developers to a client on a long term basis and handles all the legal and administrative aspects of the developer’s employment.  These developers are then fully dedicated to the client, who determines what the developers work on and when.

What is the difference between Outsourcing and Outstaffing?

The main difference between these two models comes down to who is in control.  With Outstaffing, the client manages the outstaffed development team directly and has responsibility for hitting all key development milestones and timelines.  With Outsourcing, by contrast, the outsourcing vendor or agency is in charge of overseeing and managing all team activities, and is responsible for the final product that the outsourced team delivers.

Why do I need an Outstaffing model for Software Development?

Using an Outstaffing model for software development is a smart choice in many circumstances since it is much more cost efficient, it allows you to boost your development capacity and accelerate your speed to market, proves much more flexible over time and allows you to tap into a much broader pool of development talent.

September 10, 2022

TurnKey Staffing provides information for general guidance only and does not offer legal, tax, or accounting advice. We encourage you to consult with professional advisors before making any decision or taking any action that may affect your business or legal rights.

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