Hire a Development Team: Outsourcing, Outstaffing, and more

6 Jan · 8 min read

Hire a Development Team: Outsourcing, Outstaffing, and more

Looking to hire a software development team? Confused about whether to hire the developers in-house or outsource the software development team? You may have several such questions about outsourcing and outstaffing in your head, trying to figure out which hiring model is best for you. 

With the above being said, project outsourcing is booming all over the world and is in full swing. Companies are now more open to hiring freelance employees and external software vendors in order to fulfil their project requirements. As per the Research and Markets Report, the global IT outsourcing market is all set to rise to US$633.6 billion by 2027 with a CAGR of 2.6% (2020–2027). However, there are various ways you can get your project done. Let us explore each one of them in greater detail in this article. 

A) Types of Outsourcing models based on Location of the Outsourcing Partner:

Onshore Outsourcing

Onshore outsourcing, also known as "domestic or local outsourcing," takes place when an organization outsources its services to another company based in the same country. Companies prefer to adopt onshore outsourcing because major issues like quality control and security concerns related to the project can be handled more efficiently. For example, a tech firm based in Melbourne can work with an outsourcing company located in Sydney.  

Pros: 

  • Ease of communication
  • Enhanced security
  • More control over quality
  • Similar Time Zones
  • Smooth integration within teams
  • Convenience and easy transition

 Cons: 

  • Limited availability of talent
  • Cost is Relatively Higher

Nearshore Outsourcing

Nearshore outsourcing refers to delegating software development services to companies located in neighboring countries rather than the client’s own country. For example, companies located in the USA would prefer nearshoring to outsourcing companies located in Argentina, Mexico, or Canada. Companies often prefer nearshoring due to the reduced distance and convenient time zones. 

Pros: 

  • Little to no time difference
  • Cost Efficient
  • Better Coordination and Communication

Cons: 

  • Less convenience
  • More expensive than offshoring
  • Lower data security and privacy

Offshore Outsourcing

Offshore outsourcing is the practice of outsourcing some specific IT processes to another company located in a different geographical location. Companies often offshore IT services to countries where labor costs are significantly lower. This type of location-based outsourcing is extremely beneficial as it can boost the economy in both countries. A Germany-based organization working with a development team from India is what we will call an "offshore setup." 

Pros: 

  • Easy Availability
  • Cost Savings
  • Frees up in-house resources to focus on core business processes

Cons: 

  • Quality Control Issues
  • Language and Cultural Differences
  • Time Zone Differences
  • Risk of Data Leakage
  • Possible Delays

Multisourcing

Multi Outsourcing commonly termed “Multisourcing” is a type of outsourcing where a business outsources its IT services to multiple outsourcing partners rather than getting it handled by only one firm. It is becoming one of the fastest-growing models of outsourcing among software companies.  Multisourcing is completely different from traditional outsourcing or single-source outsourcing. Such type of outsourcing improves the efficiency of clients’ processes and offers a competitive edge to outsourcing partners. For example, a tech company based in Berlin can hire a marketing team from the same city (onshoring), a UI/UX designer from France (nearshoring), and a Sales and tech team from India (offshoring). 

Pros: 

  • Offers flexibility
  • Maintains a competitive edge in the market
  • Easy access to alternatives

Cons: 

  • Difficult in maintaining continuous communication
  • Can potentially lead to overhead costs
  • Ensuring security and privacy can be a major concern

Types of Outsourcing models based on Collaboration Model:

Collaboration-based outsourcing models are focused on the relationship between a client and a third-party vendor. Below are the types of outsourcing models based on collaboration:  

Staff Augmentation  

Staff augmentation is a type of outsourcing model where an external team or developer joins your in-house team to boost overall efficiency and strengthen your in-house team. As a client, you no longer need to worry about employee costs, onboarding, learning, and development, etc. For example, contacting an agency to provide you with a freelance content writer is an example of staff augmentation. 

Pros: 

  • Easy to Hire
  • Access a global talent pool
  • Highly cost effective
  • Saves you from training cost

Cons: 

  • Security risks
  • Cultural and communication barriers
  • Workflow adaptation
  • Quality risks

Dedicated Team

The dedicated team model is when an agreement takes place between a client and service provider to establish an entire team in order to handle the client’s project from scratch until completion. The main objective behind the dedicated team model is to have the right team with the right expertise on your project. However, maintaining continuous communication with a dedicated team can be challenging due to cultural and language barriers. This can lead to several misunderstandings throughout the project leading up to its final delivery.

Pros: 

  • Complete control over the project
  • Higher scalability
  • Project priorities can be changed at any point in time

Cons: 

  • Language and cultural barriers
  • Time zone differences

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Project-Based Model

In the project-based model, the third-party service provider manages the whole project, right from the start until the final release of the product. It is somehow similar to the dedicated team model, except for the fact that project management is also handled by the service provider. Companies consider this the most convenient approach to outsourcing, as they do not need to worry about project management, deployment, and various other technicalities related to the project. 

Pros: 

  • Full-cycle project development
  • Access to more services depends on the outsourcing country
  • Availability of project experts (including developers, project managers, designers, etc.)

Cons: 

  • Language barriers
  • Time zone differences
  • Limited control over team and project

Compared to other outsourcing models, the project outsourcing model offers you less flexibility and control as every aspect of the project is handled by the outsourcing company. You need to be wise enough to make an informed decision, as this type of outsourcing calls for 100% reliance on the outsourcing partner. 

Types of Outsourcing models based on Pricing:

While you outsource your software development to a service provider, picking the right pricing strategy is undoubtedly a tough nut to crack. All you need is to be well-informed about your decision when it comes to making the final choice of a service provider based on expertise, a great company culture, and an affordable pricing structure. Below are some of the popular pricing models for IT outsourcing: 

Fixed-price

In the fixed pricing model, the client and service provider agree on a fixed budget based on the scope and requirements of the project. Every aspect of the development project is managed by the service provider. Such a pricing model takes place based on the time and resources required to complete the project. There is very little room for addition or modification in such a pricing model as this model ensures high predictability over time and budget. 

Pros: 

  • Avoids going over budget
  • Dedicated deadline and project delivery
  • Ease of management
  • Transparency

Cons: 

  • Planning can take a longer time
  • Not appropriate for complex projects
  • No flexibility
  • Modifications during risk management can ruin the pricing structure

The fixed pricing model is best for companies that have small projects with limited features, a limited budget, and clear requirements. 

Time and Material Model

Time and material model is determined by the actual time spent by the service provider on the entire project. Companies prefer this approach as employees get their expected compensation based on their dedication to the project. It simplifies the lives of both the client and the outsourcing partner because this model is more focused on results rather than ruthlessly spending money. 

Pros: 

  • High flexibility to changing requirements
  • Better control over the project
  • Ensure proper budget management
  • Better quality service than a fixed pricing model

Cons: 

  • Low control over budgeting
  • Uncertain deadlines
  • Requires more attention

Companies with more complex and long-term projects are a perfect fit for this type of pricing model of outsourcing as they may change in scope and project requirements. 

Conclusion

In the end, it all ultimately depends on the scope, budget, and requirements of your project. Be well-versed with the project outline right from the beginning to make an appropriate choice for the outsourcing partner. Give each outsourcing model discussed above a quick read to determine which one best complements your project and will produce the desired results. 

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Amplifyre’s unique matching system makes your work easier by matching you with the right outsourcing partner based on the requirements of the project. The data-driven matching system analyses your requirements based on six key dimensions: project type, budget, industry, technology, culture, and organization. The matching system offers you the three most compatible teams from their vast pool of software companies in no time to find you the best outsourcing partner. 

                                                                   Hire your Dream Team NOW! 

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