If the backbone of your company is your software development team, you’ll need a strong, agile technical team that can scale and achieve common goals.
Many companies invest in remote software teams to fill their skills gaps, build relationships with skilled developers, or complete projects. The extended developer team model (EDT), sometimes called staff augmentation, brings remote workers and in-house teams together on the same project.
It’s a model of cooperation designed to cut costs while benefiting from the additional skills and the time of top developers.
Software teams may be nearshored (from a neighboring country) or offshored (from a different continent).
In this article, we’ll examine the three ways you can extend your software development team and the pros and cons of each, including:
Outsourcing and outstaffing
Reasons to Scale Your Dev Team
How do you know if your dev team needs extending? If your customer base is growing, your goals have shifted, or you need additional skills to meet technological challenges and developments in the market, you may need to scale up.
It’s not as easy as it sounds. Software developers have varied skills and levels of seniority, and companies are actively headhunting good developers. Your goals and HR competency may determine your method for scaling up.
Outstaffing and Outsourcing
Outstaffing or outsourcing software development engineers involves hiring a third party to develop custom solutions, usually for a project or specific purpose.
Outstaffing and outsourcing require a solid partnership, step-by-step planning and project management, and financial and legal agreements that govern the delivery of the outsourced or outstaffed team.
There are slight differences between outsourcing and outstaffing.
Outsourcing vs. Outstaffing
Outsourcing occurs when a business hires another company to carry out a project as a whole. Non-technical companies without in-house development teams usually adopt this approach. The contracting party isn’t involved in the development process and doesn’t lead the development team. The contractor has to deliver within the scope, deadline, and budget set by their client.
The agency or outsourced company will also take on all administration, including salaries, payments, sourcing, and repair of equipment, etc.
Outstaffing occurs when a company supplements its internal development team with additional, remote team members. The extended software development team becomes part of the organization and works with your existing team. Like outsourcing, the outstaffing provider will employ and source all the staff and assume all Human Resource Management duties. Still, in this scenario, the client will usually act as a team or project lead.
In this way, you can supplement any missing elements from your team without hiring or recruiting staff members.
Outstaffing and outsourcing work well if:
you plan to expand your project in the future, and your in-house team will be able to support it and update it as required once completed;
the project isn’t usual for your in-house team, and you don’t want to shift their focus unnecessarily;
you need expertise that is not present in your local market or within your current team;
your local market doesn’t offer reasonable prices or pricing within your budget for your required skills.
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The Benefits of Outstaffing and Outsourcing
With both outstaffing and outsourcing, there is less management effort required. The company isn’t obligated to recruit, administrate, train, or resolve HR activities. With outsourcing, there is no need for technical supervision by the contractor.
The outsourcing or outstaffing agency will take care of functions like:
Payroll and Benefits
Setting up physical workstations
Setting up home-working environments
You only need to provide access, and the team can get started.
Partnering with a professional outstaffing or outsourcing agency will almost always improve your return on investment. The latest, highest skilled technical staff can be employed offshore/remotely at low margins. It doesn't carry the cost and time investment of hiring in-house staff. Building an in-house team involves expensive recruitment, HR, legal, onboarding processes, and physical capacity and equipment.
The outstaffing or outsourcing agency carries the cost of taxes, office provisions, maintenance, and operating costs. Once the work is completed, the staff are released. There is no need to formally downsize or shuffle staff as you would with full-time employees.
Lower costs do not mean that companies compromise on quality either. Some of the best developers in the world are based in countries like Ukraine, Estonia, Poland and Vietnam.
Faster Time to Market
Using an outsourced or outstaffed team reduces the time spent on recruitment and setting up, but you can distribute tasks more efficiently to get more critical jobs done in less time. There is no need for your in-house team to juggle several low-priority duties in addition to your more pressing projects, freeing them up to complete the task at hand.
Outsourced and outstaffed teams are used to working on tight deadlines, and because they are laser-focused on your project, you’ll reach your goals in record time.
With both outstaffing and outsourcing, the company moves the cybersecurity responsibility and compliance to the agency. Using the agency adds better cybersecurity skills and improved incident response and management capabilities to your business.
Wider Talent Pool
The outstaffing or outsourcing agency has a constantly evolving pool of trusted software professionals at their fingerprints to fulfill your exact requirements. Background checks and interviews will already have been completed, saving your teams’ time and money as they aren’t tasked with finding the best staff for the job at hand.
Outstaffing and outsourcing is designed for long-term collaboration, direct communication, and transparency. Your staff will share responsibilities and communicate with the agency, increasing productivity and complementing one another’s skills and problem-solving techniques.
Not only do you benefit from additional staff working on your project, but your employees will also learn new things from professional developers that they may not otherwise have been exposed to.
With outsourcing or outstaffing, the developers are assigned to your project full-time. They don’t need to juggle multiple projects or in-house assignments. They are entirely focused on your project and worked together towards a common goal.
Outsourced and outstaffed teams work on varied projects and in various environments. As a result, they often know the best equipment to get the job done, and as a bonus, they often bring it with them!
The Disadvantages of Outsourcing and Outstaffing
Lack of Control and Insight
If a team is outsourced or outstaffed, there is little direct control over the software development team and processes. This means that no skills are retained by internal staff, and all the knowledge relating to the technical project is kept outside the organization.
Similarly, cultural differences can be tricky to manage with remote outstaffed, and outsourced teams. Communication gaps may emerge. On the other hand, diversity in organizations is essential, and outstaffing can help expose team members to different cultures.
Insourcing assigns projects or departments within the company instead of outsourcing an outside person or company. It utilizes resources within the company to perform tasks or achieve a goal, creating new processes on-site. Insourcing either hires a new staff member or recruits one from another department internally.
It works particularly well if you do not require a massive team extension. Insourcing is usually done in-house, but third-party resourcing firms can be brought on to perform the necessary talent audits, recruitment, and onboarding needed in some highly specialized fields.
If you do go this route, make sure that you write an extremely detailed job description and use a reputable recruitment agency to assist you.
The Benefits of Insourcing
Hiring staff in-house has many benefits. Here are some of the associated pros of hiring your software developers in-house:
Agility is vital in the tech world. Outsourcing contracts can take time. Finding your staff to work in-house reduces waiting times and allows companies to nurture their innovations and processes.
Over-outsourcing can lead to difficulties in monitoring performance because management is the duty of the third party. In-house hiring places the control firmly in the hands of the business.
As teams work together inside the same office, managers have greater insight into and control over everyday processes and activities. Decisions can be made quickly and proactively as they arise every day.
Many outsourced teams are remote-based. Having teams work in physical proximity can improve skill-sharing and communication.
Fostering a Team Culture
Improved communication can lead to a productive and positive working environment and culture, fostering employee retention and happiness.
Ideal for Start-Ups
Insourcing may be ideal for companies that aren’t handling vast volumes of business yet. Bringing things in-house gives your team time to gain a nuanced understanding of your company goals and day-to-day operations.
Freelancers and outsourced staff can offer broad know-how, but the internal team will come to know the company inside and out. They will become specialists in your industry, processes, and operations.
With internal hires, you have the final say in their salary and schedule. You’ll have real visibility into their availability and skills.
The in-house staff has skills that can be transferred to others as the company grows. Having superstar developers on your team can be a real differentiator for your company.
The internal staff has a real stake in seeing the company succeed. Unlike freelancers or outsourced teams, they are dependent on the company’s success for their livelihood.
The Disadvantages of Insourcing
There are some downsides to insourcing or hiring internally to examine, including:
Additional Resources Required
There are legal and HR procedures when hiring in-house that need to be followed. An in-house employee will require a workstation and assets that need to be maintained that an outsourced employee does not require.
In-house employees are also entitled to paid vacations, mobile phones, lunches, sick leave, maternity, and paternity leave that usually doesn’t come into play when outsourcing staff.
Time Intensive Process
Hiring a software developer in-house can take time and expense. Vacancies need to be posted, responses scanned and replied to, and interviews conducted. Job platforms can be expensive and recruitment companies even more so.
Skilled HR Team or Agency required
Software developers have varied skills and different levels of seniority. Recruiting the right developer requires technical knowledge and may even require candidates to conduct practical tests. Your HR team may not have the time or skills necessary to discern which candidates are best suited to the job.
It may be best to leave the hiring up to a recruitment agency that can sift through the responses and find the best developers for the job.
Labor Law Requirements
Full-time employees are protected by different laws that need to be adhered to. Underperforming full-time employees require performance management, disciplinary hearings, and lengthy and expensive termination procedures if their services are no longer required.
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Hiring Freelance Developers
Over 5 million freelance developers are working in IT-related fields in the United States alone. Many large Fortune 500 companies are regularly hiring freelancers to grow their operations.
That doesn’t mean that it is simple or easy. The proliferation of freelance workers can make recruitment challenging to navigate on your own.
The Advantages of Hiring Freelancers
Freelancers can be cheaper to hire and manage than hiring full-time employees. Full-time employees require insurance, paid vacation, retirement plans, and other benefits. Unless you are hiring remotely, there will also be overheads and general admin costs.
It’s also much easier to find a freelancer within your budget because you have a vast pool of local and international workers to choose from. US-based developers may charge more than your budget allows, but there are many talented developers in the wider EU or Asia that can deliver a high standard of work at a much lower hourly rate.
Filling the Skills Gap
Developers are hard to find. Many companies use freelancers to fill specific skill gaps. Think of high-demand programming skills like Java, Python, React, Node.js, or Laravel. Using a niche freelancer to complete the required work or assist developers who need to upskill or train can significantly accelerate your project.
Freelancers can be hired at a fixed cost, or even hourly, or on a retainer. If you want to scale up temporarily (or on a more modest scale), freelancers can pick up the slack alongside your internal team.
Access to Top Talent
Some of the top developers in the world working in dynamic environments won’t leave their full-time job but would be willing to work for you on freelance terms. You can hire highly specialized experts from virtually anywhere. It’s imperative if you are working with a programming language that very few developers are skilled at.
Some of the top developers in the world can be found in Ukraine, Estonia, Poland, Vietnam and China. Globalization and tech tools make it easier to find top talent without paying exorbitant fees.
If you require additional resources for a particular project or assist during a rush, you can scale up very quickly by supplementing your internal team with a few freelancers. If you are building an MVP in a short period and do not have the time or capacity to train new staff, a freelancer might be the ideal solution for you.
If you are unhappy with a freelancer or your project comes to a close, you can terminate your contract quickly and professionally with very few or no further obligations.
The Disadvantages of Hiring Freelancers
There are some downsides to hiring freelancers as well. Before making a decision, it’s essential to consider the potential pitfalls.
Different time zones, different preferred communication tools, and even language barriers can make it difficult for teams to coordinate with freelancers. Freelancers will have worked across various organizations with other processes, and they may need additional onboarding and training. This can hurt team culture.
Working with remote freelancers can present additional security challenges. They aren’t using the company’s server, wi-fi, or devices, which could be tricky to monitor. Data access, authentication, and storage need to be monitored and managed. Businesses have to make sure that freelancers are offboarded properly to keep company tools and systems secure.
Freelancers know that they won’t be part of the company for long and might not care about its success to the same degree as in-house staff. It’s critical to choose freelancers that are professional in their conduct. Going via an agency might be a good option. Freelancers might move from company to company, but they are dependent on their reputation with the contracting agency for their livelihood.
Choosing Between the 3 Options
Now that the three options have been examined in full, you may wonder which option is best for you. Before deciding, it may be helpful to ask yourself a few questions.
What Is the Central Problem?
Determine what your extended software development team needs to achieve. How long will it take to complete the project? Will it be ongoing? Establish the time frames and requirements.
Why Are You Pursuing This Project?
Are your current staff overworked or underskilled? Are you hoping to expand a specific project or feature? Determining whether you need more hands-on-deck or outsourcing a particular function to someone else temporarily to alleviate pressure on the team is critical. If you are expanding the company and may need more developers in the long term, perhaps you should consider hiring additional staff or outstaffing to retain the essential skills you need.
What Are the Effects of This Problem on the Bottomline?
Working out how much you stand to gain or lose by hiring or outsourcing more staff versus maintaining your current team can help you make the right decision and set your budget appropriately.
To recap, there are three ways of extending your development team
Outsourcing or outstaffing augments your team with remote software engineers provided by an agency;
Insourcing hires staff to work for your company in-house;
Freelancers are independent or agency-contracted software developers that can be hired on a part-time or project basis.
Thanks to digitization and globalization, companies now have more options than ever before when it comes to staff. Highly skilled and even niche developers can be hired from anywhere globally for any length of time or requirement.
Whether you outsource, outstaff, in-source, or hire freelancers depends on your needs. Don’t be boxed in by budgets or geographies. You can find the right solution that fits your needs today.
If you don’t know where to outsource software development, we are here for you. Plexteq is a company that has been in the business long enough to provide outsourcing and outstaffing software development services with the best results. Contact us to set up your extended software development team in Ukraine or Estonia.