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Outsourcing & Outstaffing in 2023: Benefits, Myths and Study Finds

Global changes, such as the Covid-19 pandemic and technological progress, have significantly impacted the world’s technological landscape. So the IT industry, in general, and especially outsourcing and outstuffing software providers, constantly monitor and respond to these changes, and our company it’s not an exception. 

Accordingly, the satisfaction of companies from cooperation is growing, which generates an associate $1.3 increase in demand for IT outsourcing. It’s foretold that by the tip of 2023, the market can exceed a trillion. At the same time, 65% of organizations conceive of increasing their IT outsourcing efforts within the next two years.

If you’re fascinated by developing your company, you should get familiar with these transformations. So read this article to discover all the field changes to understand better if outsourcing or outstuffing services will work for your business.

Outsourcing vs. Outstaffing: What is the Difference?

Let’s first look at the difference between outstaffing and outsourcing. 

What is Outsourcing? 

Outsourcing is an agreement in which one company hires another company to be responsible for planned or existing tasks. The outsourcing company has a fully controlled team, requiring no major management interventions on the partner side. Sure, a partner can intervene in the work process, but most development processes occur internally, so the partner offers insights after seeing some results of product creation.

Outsourcing Model

Outsourcing is the best solution when you have an idea but there is no way to implement it on your own. When you don’t want to bother and establish a whole IT department. Instead can come to another company with your idea and get a ready solution and a top-notch team. 

This scheme of work is perfect for, 

– For startup owners. For example, you need to file an MVP to receive investments, or you just received investments and want to spend them wisely to make an application, website, or other product. 

The outsourcing team not only helps to execute the project from A to Z but also will help you with dividing your project into milestones or phases, provide suggestions on how to execute one or another feature, choose the right stack, and will lead you to step by step through the turning your idea into life. 

We have many projects in our portfolio that were released through the outsourcing model. One of them is the Feature App – a social media for influencers that helps to stay in touch with your audience and interact with them. The app’s owner had only the idea of his future startup, and we helped him go through the process from creating the logo to the market release. Moreover, we dived deep into the gist of the project and thought over all user flows, formed the MVP functionality, and after that, once the client got funds from the investors, we proceeded further with a full-fledged product.

Feature App

– For startup founders who want to start the software development process as soon as possible but want to avoid diving deep into the technical details of the projects. 

– For small companies that want to try out new ideas because, with outsourcing, you can simply test your idea and later decide whether it should be developed further or not.

– For owners of a business that already works and brings you money but wants to make it more digital or implement new features.

What is Outstaffing?

In case of outstaffing, you ask some outsourcing agency to provide you with one or several employees to join your team and follow your management. They remain on the payroll of the partners, but you have more or less full command over their tasks. This means they become an extension of your team.

Outstaffing Model

When you compare outstaffing vs. outsourcing, you’ll find that outstaffing can feel like you’ve expanded your staff without the headaches of taking on long-term employees.

Why Businesses Prefer Outsourcing and Outstaffing

There are many reasons for the growth of “outsource vs. outstaff”: the expense of hiring permanent IT staff and a shortage of qualified workers.

Why do companies look for IT talent outside their organizations? Cost, primarily. Using an outside vendor saves benefits and overhead on employees and base salaries for IT workers when you combine outsourcing with offshoring to countries with a low cost of living.

When companies were asked why they were using outstaffing or outsourcing for their IT talent, they responded:

– Expertise. You may need specialized expertise that your company doesn’t possess in-house when you outsource those tasks. You get access to skilled professionals who can do the work quickly and efficiently so you can focus on other aspects of your business.

– Fresh ideas. Companies are increasingly looking at ways to improve their performance in terms of quality and efficiency. They want to find new ways to do things better and faster than they have been doing before. Usually, companies choose outsourcing or outstaffing software development, but many spheres are also popular for this. For example, marketing, recruiting, etc.

– Deadlines. Businesses prefer outsourcing and outstaffing because they need someone who can meet deadlines and deliver on time. For example, if a project needs to be done by tomorrow morning, it would be better to hire someone else who can get it done overnight than waste time trying to do it yourself. This way, your company will not lose money due to missed deadlines.

– Fast scaling. Businesses are always racing to scale their operations, expand their market share, and grow their customer base. They want to do this as quickly as possible without compromising quality. That’s one of the reasons why they outsource or outstaff their IT needs.

– Budget saving. Outsourcing teams often allow paying less than in the case of direct hiring. Many firms in this market work in diverging countries. As a result, you may choose from a wide variety of choices.

– Outsourcing reduces the workload on the in-house team. It allows focus on more vital tasks. According to YouGov, approximately 34% of British B2B companies outsource IT support. It is the highest percentage among other services. 

– Access to talent pool from other countries. According to Computer Economics, 60% of organizations outsource application development.

– You don’t have to engage in management: regulating any form of a team is usually a challenging task. In the case of outsourcing, the partner company takes care of this as it has its team of managers to regulate all the critical activities of the workers.

Senior managers also diverge on the benefits of outsourcing

Outsourcing tech talent is becoming essential for success, but the benefits are perceived differently across roles and organizations. For example, commit found that while HR leaders see the top benefit of outsourcing as cost savings (48%), CTOs perceive outsourcing as a key to quickly scaling (42%). However, regardless of the role, the greatest concern over outsourcing talent is the quality of work (56%).

Key Findings Key Findings

Now that you know a little more about outsourcing and outstaffing, we want to show you a little more statistics based on the Commit study finds.

Supported mainly by remote work, software development outsourcing has snowballed even before the pandemic. The number of startups going for tech outsourcing is expected to increase even further, according to the 2022 State of Tech Staffing report by Commit. 

The Israeli company expects a 70% jump in outsourcing for software development at startups. In 2021, startups outsourced 17% of software development, will outsource 21% in 2022, and are slated to outsource 36% in 2023 if trends continue to hold.

“As remote work becomes the norm, many companies have taken this opportunity to hire anywhere in the world. They can see that it’s fueling unprecedented productivity and growth, as they have become accustomed to virtual meetings and cloud,” said Commit.

UI/UX designer is among the jobs being outsourced the most at 34%. Software developers are a close second at 31%, while QA at 28% stands as the third most outsourced job. Commit found that outsourcing is influenced significantly by funding rounds of startups, especially for software development jobs.

“As startups move from MVP to gaining revenue, and they have raised their Round A, which is typically a large amount of money, they can’t keep up with demand and need to turn to outsource to meet the pressure to deliver” Commit explained.

The company illustrated this with the following:

It is important to note that outsourcing software development is a two-way street regarding the advantages it offers to professionals and organizations. Scalability of team size, according to CTOs, is the top advantage (42%), followed by efficient utilization of time (39%) and higher productivity (~30%), respectively.

Benefits of Outsourcing Software Development According to C-Suite Executives

Benefits of Outsourcing Software Development According to C-Suite Executives | Source: Commit

Once again, the need to outsource software development varies according to the funding stage of the startup. For example, a Round B startup outsources software development primarily to save time and scale or resize teams. A seed-funded startup outsources software development to reduce risk, save costs, and scale-up teams.

Top Benefits of Outsourcing Software Development by Funding Stage

Top Benefits of Outsourcing Software Development by Funding Stage | Source: Commit

Outsourcing for software development at startups is expected to increase by 70% between 2022 and 2023, according to new research from Commit, the global tech services company focused on custom software and IoT solutions. Furthermore, 99% of senior technology and HR leaders recognize the benefits of remote teams, with 3 of every 4 (75%) seeing an increase in productivity from their remote staff, a clear indication that concerns about remote teams are all but gone.

“The increasing gap between supply and demand for developer talent, along with emerging trends like the growing gig economy, more remote work, and the great resignation, are driving a need and opportunity to outsource skilled talent rapidly,” says, Max Nirenberg, chief revenue officer and managing director of Commit USA. “This is especially true for startups, who now face enormous growth potential but struggle to scale quickly and efficiently.”

Common Myths About IT Outsourcing 

Our team knows a few myths are associated with outsourcing projects, which can sometimes discourage organizations from choosing this work model. However, IT outsourcing can deliver great results and be highly convenient if handled and set up correctly.

– Bad experiences 

Some companies have already had terrible outsourcing experiences that deter them from taking on outsourcing projects again. Our team faced such a situation. One of our clients had a horrible outsourcing experience. However, analyzing what went wrong and doing more precise vetting helped us avoid failures and deliver excellent results. 

– Struggle with a delegation

Some businesses also struggle with delegation and believe that an external organization can’t do its best and care for its project. This notion is a complete fallacy, as good companies will not risk their reputation. At Sweetcode Lab, we always aim to deliver the smartest solutions and high-performance products to satisfy our clients. Doing due diligence can come a long way and ensure the success of your collaboration. 

– Language barriers

Another common misconception is language barriers. Our team members work worldwide, so from time to time, we encounter this myth. But our team and most reputable companies have English-speaking staff and always establish great connections with clients.

– Time difference 

Global project teams are a fact of life for many of us, and our team is not an exception. And since most of our clients are located in the USA, sometimes they have a question – could the time difference be a problem and an obstacle to the successful implementation of the project? 

Sure, in business, communication is key. And for us, time zones are not a challenge. On the contrary, it’s an advantage as long as we stay balanced. The success of any project depends on its ability to meet our client’s expectations and needs best and evolve with them.

How do we work in balance, covering clients’ needs?

Our team takes into account the time difference and schedules meetings for a time that can accommodate everyone. For example, while our clients watch their dreams on their nights, we work to make them come true! On the clients` mornings, they can see the updates and discuss them with our team on the fresh head. 

In this way, we manage to effectively use the time difference and adapt to the work schedule of our clients.

The rest of the time, we work together across different time zones, using Slack, Zoom, and Google Meet to all stay connected. 

Freedom of time and place boosts productivity, and there’s always someone online.

To sum up,

We hope this article has answered the critical point of what outsourcing & outstaffing is, said more about common myths and their solutions, and given you core study finds.

The number of startups opting to outsource software development is expected to increase by 70% in 2023. So, if you are interested in such work solutions, we want to outline again that outsourcing works for projects where you’re sure about the long-term results and don’t have your team. The outstaffing perfectly functions when your company needs professionals to cover an open position. 

Sweetcode Lab is a trustworthy partner that values its clients and delivers the best results. Our team focuses on UI/UX Design, Web and Mobile Development, along with complete support for startups, small and medium-sized businesses, and enterprises.

Whether you’re looking to develop a mobile app that will stand out from your competitors, map out a high-end user journey or create a brand that will gain your customers’ trust – our team of experts has you covered!

We’ve helped to build a number of startups in various industries from the ground up, and we know how to make YOUR business idea succeed.

Ready to start your project with us? We are happy to hear you out at hallo@sweetcode.pro to receive a quote and talk about your project.