Outsourcing vs. Dedicated Teams: Staffing Model for Your Business
Understand the upsides, downsides, and the differences between outsourcing and dedicated teams.
When it comes to handling a company’s IT operations, there are two key choices to consider: outsourcing or a dedicated team. Both models have devoted fans and are quite popular in many industries.
Understandably, many business owners assume that both models are equally effective for every single project, but that is not the case because one size indeed does not fit all.
Before you can choose the right path, you need to consider all the pros and cons. You can do that by reading this article. We’ll also take a look at the difference between the two models. So, let’s get to it.
Outstaffing & Outsourcing: A Closer Look
Outstaffing is a form of offsite recruiting strategy where an outside firm offers the primary customer a dedicated team of IT specialists, such as web designers, programmers, software testers, or other assets to help with the whole process.
During the agreement, dedicated software teams work diligently on the project of the hiring customer. The employer has complete authority over the dedicated team or individual experts hired for the project. You can constantly communicate via phone, email, zoom calls, or any other way to provide feedback and use the resources of the dedicated team.
Outsourcing is a more general approach where you find a third-party provider to handle your operations, but you don’t have full control over choosing the experts for the job. The third-party firm makes arrangements for its own employees or IT infrastructure to deliver the services either at the premises of the employing business or completely offshore.
What Does it Mean to Outsource Software Development Services?
As the name suggests, outsourcing software development is a process where you bring in third-party experts to handle certain tasks or take over the entire project. Often companies turn to outsourcing because they don’t have the expertise, experience, or IT infrastructure to carry out the operation.
Based on size and project, companies can choose different outsourcing strategies. If they prefer to work with a company in the same country or city, they can choose homeshoring which gives them a chance to hold in-person meetings.
Nearshoring can be cheaper than homeshoring because the third party is in a foreign, but nearby, country, and there’s little time zone difference. The third major option, the most popular one, is offshoring where you drastically reduce costs but deal with time zone differences.
Pros & Cons of Outsourcing for Your Business
Just like any model or strategy, outsourcing can be a double-edged sword for your company if you’re not careful. Whether you plan on web development outsourcing or app development outsourcing, it’s better to evaluate the pros and cons first.
| Pros & Cons of Outsourcing | |
| Pros | Cons |
| 1. Saving money. The significant reduction in development expenses is what drives organizations to outsource. Businesses may develop and scale their operations efficiently and meet customer demand by cutting costs.
Plus, by hiring a third party to complete the project, businesses may reduce their labor expenses, such as insurance, training, vacations, and many other areas. |
1. Communication barriers. When you outsource software development to a service provider, you could interact with people from various cultural and linguistic backgrounds. You should initially overcome the language barrier to effectively convey the project’s objective and go back and forth with the team during the whore process. |
| 2. Faster time-to-market. Clients could accelerate their work and save a lot of time on orientation and onboarding because the outsourced staff is already skilled and knowledgeable in the devices and instruments needed for the process. This is especially helpful for huge multinational companies where the permits and decision-making process may take a lot longer than necessary. | 2. Possible Instability. In different tasks such as outsourcing web development, you may discover that there is a lack of consistency. It is crucial to specify your expectations in writing and to establish service-level agreements that can guarantee excellence. |
| 3. Sharing the risk. The liability for particular steps is transferred to the outsourced vendor when a company outsources certain parts of business operations. Because they are the experts, they are capable of handling the risks as they are in charge of all those associated with that process. | |
As you can see, outsourcing can save you a lot of money and time while reducing your risk exposure. On the other hand, misunderstandings, instability, and quality issues are not unusual in outsourcing arrangements.
What are the Risks for the Business in the Outsourcing Model?
Nothing is guaranteed in business, and that involves choosing an operating model. Just like any approach, outsourcing comes with a range of possible risks, but two are more realistic than others.
Control issues are most common in outsourcing. You have little to no influence over a company operation that was previously carried out by the internal team, but now is contracted out to outside firms. Any mismanagement by the vendor or communication failure can damage the outcome.
This is likely to happen in offshore scenarios where you cannot hold in-person meetings. But, you need to keep in touch via phone calls and online messaging so you can constantly provide feedback on the process.
Another major risk is data security. Data is a vital commodity in today’s economy, so it may be a risk to provide data to a third-party company. Data leaks are a major worry since many development projects deal with private information belonging to clients, including intellectual property. Therefore, it is crucial that companies considering outsourcing carefully weigh the risks to information safety and choose a reliable provider that values security as well as has all the tools required for proper support of their client’s data.
What Are the Dedicated Teams?
A dedicated team model is an arrangement between a customer and service provider in which the latter commits to regularly providing experts for specific projects. These experts are picked based on the client’s requirements for their knowledge and skill set. Here, you can take control of dedicated teams or allow the third-party provider to manage the team.
When the project’s scope cannot be clearly specified, dedicated software teams are ideal. The fundamental goal of this approach is to assemble a team that will make up for any gaps in your company’s expertise and experience.
Pros & Cons of Outstaffing (Dedicated Teams) for Your Business
Now that we’ve covered outsourcing in full, it’s time to discuss the possible upsides and downsides of dedicated teams for your operation. By looking at the table below, you may find some similarities to outsourcing.
| Pros & Cons of Outstaffing (Dedicated teams) | |
| Pros | Cons |
| Lower costs. Cost-effectiveness is one of the main advantages of dedicated teams. You receive a full-time crew for a fraction of the cost of hiring in-house programmers. Now because the cost of living in other nations is lower as well, you can hire a workforce that is equally as skilled—or sometimes even more—from those nations. | Recruitment takes time. In the dedicated team model, recruitment is typically done from the start, so creating profiles, finding candidates, conducting interviews, and onboarding all take time. If you require extra resources right away, this is not the ideal course of action. For instance, hiring an IT project manager may take about a month. |
| Easy management. The offshore team’s duties and priorities are entirely under your or the project manager’s control. This allows you to create a steady flow of communication where you can easily make modifications to the project without experiencing substantial delays. | Unclear pricing. It might be difficult to get a precise estimate of the entire amount you will pay a team once they have completed their service. It’s because you often can’t predict the project’s length and the changes that will be made along the way. |
| Close collaboration. It is challenging to have a close type of collaboration while working with independent contractors. It requires a lot of time and work. Plus, as the team grows, it becomes more chaotic and difficult to communicate your needs.
However, a specialized software development team can communicate with you more frequently and stay on top of the tight schedule because they belong to the same provider and operate as a single unit. |
Not ideal for the short-term. It’s possible to use dedicated teams for short-term operations. However, in that situation, their effectiveness is far from ideal. Nearly all of the advantages, particularly those related to commitment, close coordination, focus, and dedication, typically take time to develop.
Sadly, you don’t have time when you need a quick turnaround on a somewhat small project. Other software development approaches, such as freelancers or outsourced development firms that do not specialize in committed projects, will be helpful for an urgent one-time assignment. |
Similar to outsourcing, outstaffing can also reduce your expenses. It can also give you more control over the whole team and make it easier to communicate with the expert team. But, it may take some time to take off, something which you don’t have in short-term projects.
What are the Risks for the Business in the Dedicated Team Model?
No matter the size and industry of your business, you have to carefully study your model and do a comprehensive risk assessment so you won’t end up with a huge bill in the end.
When collaborating with dedicated teams, the following risks are among the most prevalent:
- No meeting budgetary and deadline expectations. Given the wide range of variables that affect the duration and expense of software development, this risk is the most prevalent one.
- Reduction in team productivity over time. People become tired of performing the same work over time, thus it is helpful to adjust your goals often. In other words, developing 10 features individually over a year is better than creating 10 features collectively over a year.
- The criteria regularly change. The dedicated team is unable to reduce this danger. The client must be certain of the outcome they want to achieve and stop changing the project’s specifications in the middle of its development.
Difference Between Outsourcing and Dedicated Teams
So, let’s see. We’ve looked at the definitions, upsides, and downsides of outsourcing and dedicated teams. As you can see, there are many similarities between the two, but there are also major differences that can impact your final choice.
Risk management is one of the key distinctions between the dedicated team approach and outsourcing. You need to be aware of every problem that could arise during project execution before you think about using dedicated teams.
Software engineers, for instance, may miss deadlines, in which case you will be entirely responsible. However, your vendor should promote effective cooperation by providing cozy workplaces, offering budget-friendly compensation plans, and making timely salary payments.
Communication is another point of difference. Typically, outsourcing providers provide you with existing teams whose members are familiar with one another. It helps you start software development procedures promptly and prevent communication errors.
With dedicated teams, candidates are selected depending on your needs. Simply said, you have complete control over recruiting every single person. It may take some time for each programmer to adjust. Although you should not anticipate a quick launch, a capable supplier may accelerate things.
Another point of difference is the amount of control. When you outsource, a project manager who is not part of your business often oversees the whole scope of work and oversees the people working on your project. Outstaffing, on the other hand, gives customers complete control and allows them to manage and supervise their expanded crew.
Which of the Models Will Optimize Your Budget and Save Money?
To be honest, there’s no clear-cut answer to this question. While outsourcing and the dedicated team model are both common in business practices, they are not really direct substitutes because each serves different types and durations of the project.
Cost-effectiveness is a main benefit of both approaches, but there are times when you may face unexpected costs. For instance, with dedicated teams, recruitment may take a long time and lead to additional expenses. However, outsourcing, regulatory changes, third-party negligence, and employee disengagement may all add to your expenses.
Thus, having careful planning and consultation with a team of experts is the only way to make sure you choose the model that brings the best result within the budget.
Conclusion
So, there you have it. These are the possible benefits, drawbacks, and differences of outsourcing and outstaffing for your company. While no strategy is perfect, both models can be valuable tools to help you advance your market share.
The choice between outsourcing and hiring dedicated teams depends on the specifics of your operation. If you wish to have more control over every step of the project, a dedicated team model may be better. But, if you want to save more time and get more flexibility, software development outsourcing is the way to go.
In any case, our experts are ready to guide you through every step of the process. You just need to contact us and let us point you in the right direction.
