Why we love IT outstaffing model

Outstaffing topic is an instant butthurt alert for many IT communities. It is believed that "renting out staff" is something unworthy and can be done only out of necessity. When you check most of the web developer team's websites, it is hard to understand whether they work according to this model or not. Even if they do use it, they either talk about it in a veiled way, or mask it behind some other names — strengthening, scaling up, time&material, etc.

We are using the outstaffing model and we are very open about it. Now it accounts for more than half of our revenue. We really like it. There are many advantages for our business, for our customers and even for our employees.

In this article, we will try to answer some of the questions about outstaffing you may have (and which you have already prepared to ask in the comments).

  • What is the difference between outstaffing and outsourcing?
  • What would be the best area for the outstaffing model?
  • Why do we like outstaffing more than outsourcing?
  • Why is outstaffing model more appealing to the client than outsourcing or in-house?
  • In which case is it better for a web studio/production not to try outstaffing model?

What is the difference between outstaffing and outsourcing?

Let's dig into some theory first.

Outstaffing explained

  • A person/team of people who work for a web production company sell all their work time to the customer company. Most often, this is a full-time work on one project. If it's part time, there may be two projects.
  • The customer usually chooses one developer or an entire team, conducts an interview, or multiple interviews. This also includes test tasks and even live coding. The candidate should pass a set of strict selection criteria.
  • The customer's manager is responsible for creating the backlog and setting tasks. The developers communicate with him directly. All commits, reports and actions are recorded in the client's project management system.
  • The contractor's function is to complement, strengthen or totally replace the customer's team. Usually, the need for only one specific function is closed (for example, frontend development on React.js).
  • The contractor's manager is engaged in general accounting and HR support.
  • The payment format is retainer (client pays the developer/team a fixed amount per month) or time&material (hours worked multiplied by the rate, ideally — with payment for downtime due to the client's fault).

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Outsourcing development explained

  • The contractor has it's own staff and he forms dedicated teams for the client projects at his discretion.
  • The customer does not interact with specific developers. He may not know much about the qualifications of people working on his project. Only the result mattersis matters.
  • Most often, a developer works on a few projects and switches between them several times a day.
  • The contractor bears full responsibility for the development or a particular part of the job. It is the manager on our side who creates a backlog, sets tasks and monitors the project implementation.
  • The client communicates with the contractor's manager or the team leader.
  • The payment format is most often fixed-price, sometimes - time&material (for a long-term technical support, and less often for development from scratch).

In other words, if a client needs specific with a certain stack for a project that requires constant development, it is easier to find an outstaffing supplier who has ready and willing professionals. Our role here is to build our own talent pipeline. Be responsible for the selection, training and motivation of personnel — creating conditions in which the employee will grow and open up.

If a client does not have minimal technical competencies, any human resource for onboarding, setting tasks and monitoring performance, if there is no in-house team or a desire to work on any of those, it will be easier for him to outsource some work to a contractor. The contractor will manage all the process and the customer will accept the result, without worrying about what is happening inside the task.

Outsourcing is a taxi, outstaffing is car-sharing. An in-house team can be compared to a private car.

Keys

Almost any employee can work within the outstaffing model - analysts, testers, programmers, layout designers and web-designers, etc. Most of our staff are react developers. The demand for their services is outpacing the supply.

What would be the best area for the outstaffing model?

Our experience shows that the area of business does not play a key role. Our teams work with Fintech, Retail, IT holdings and integrators. We develop public domains and internal corporate systems with equal success.

The size of the project is also not a determining factor. Outstaffing model is great both for large projects that require constant (or endless) development, and for the goals that take no longer than 1-2 months.

We have put together a brief checklist to help you decide if it's for you. If you have at least two points, you can try and use the outstaffing model. Otherwise, think again. Your new endeavour may result in a disappointment - for the client or yourself.

Client's company has some IT competencies

IT product development is a complex process, and things just get so much easier when the client knows how it works. Otherwise, the work will not be as efficient as it could be. Even despite the availability of the necessary competencies, few companies can (or want) to maintain a robust and dedicated IT department. There are projects/areas that the client does not want to share with his in-house development team, for various reasons.

An example from our experience: the client has no back office or in-house developers, there is only a key technical expertise and a product manager who leads the external team (that is, us).

What are we primarily interested in? We want to balance workloads across our developers without any downtime This means that an ideal client has all the necessary competencies to correctly set and approve tasks. The meaning of such terms as "refactoring", "bugfix", "testing" should be clear to both parties so that no one has objections like, "Why didn't you write the correct code right away? I will not pay you for correcting your own mistakes." You are lucky if there are tech leads on the client's side in the same stack where you work.

someshit

— We have some shit here!

There is a clear and conscious need for scaling up

Let's say a client has a very large-scale project that requires hiring 30-40 people at once. This is a real challenge for the HR department. Digital competition will continue to grow. While some clients are wasting valuable time searching for a dream developer, others are already rolling out new releases. Another common a situation is when the team's performance is not balanced, there is a lack of certain expertise, and hence the technical debt keeps growing.

brain explosion

A typical HR who needs to onboard 40 people to a project in 2 weeks.

The need to grow up becomes obvious when the company business processes slows down or additional resources are required to deliver all the tasks in time. Speeding up the workflow to ensure timely project launch is crucial for the business development and a quick return on investment.

We hate to sound like massive geeks here, but you would probably agree that the shortage for IT staff is very real. Building an IT department from scratch or scaling it up can cost a company a fortune. Therefore, many people use the opportunity to turn to outstaffing services in order to save money. This is a great time to start negotiations.

Clients are ready to play bigger

When choosing an outstaff team, the client is usually involved to the maximum. This is a stage of multiple interviews, checking test tasks, evaluating the quality of the code and each employee's professional and extra-professional experience.

Not everyone actually realizes that after the work starts, interaction with the team should continue. If a client has a built-in architecture and his own code requirements, then simply connecting the developer (i.e. giving him access to the accounts and layouts) and leaving him to face all the challenges alone will not work.

hard game

Some games are difficult to play alone

A client should be ready to extend his onboarding system to external specialists as well as to the in-house team. Discussing your vision, requirements for approaches, expectations for results, giving regular feedback is the minimum without which you will not get.

Why do we like outstaffing more than outsourcing?

Dear marketplace community, we have bad news for you (yes, for many it will still be news). If you think that you are more competent than your customer is, you are stuck in the past. Product teams on the client side and back offices are growing and rapidly increasing their expertise. They are fully able to develop, be creative and achieve great results independently.

The client is no longer interested in a lackadaisical "turnkey development" when trying to foresee all possible risks up-front results in ballooning estimates. To keep up with the rapidly changing digital landscape, the focus should be on hiring the most qualified people for particular tasks and achieving the set KPIs. There is no time to procrastinate.

That is why we choose to develop the outstaffing model as a separate area of our business. Below are the advantages of this model for the outstaffing team.

There is less chance to get into trouble with an incorrect project evaluation by a fixed-price.

We all know that evaluating projects by fixed price is like walking a tightrope in the dark with blindfolded eyes over a canyon with chiseled peaks at the bottom.

dangerous

Well, you get it.

If you underestimate — say goodbye to the margin. If you overestimate — the client will say goodbye to you. Outstaffing removes this headache from the equation. We are paid for what we have done. Our main task is find out more about the client's expectations about out performance on his project.

Predictable workload and revenue

In outstaffing model, the projects are often larger and longer, with more challenging tasks. For us, this means having a clear production schedule and a fairly accurate revenue forecast, both for the project and for every team member.

Saving resources. Minimizing chaos and entropy

When the project management is on the customer side, it's not us who bear the risks directly. Our developers don't need to jump from project to project several times a day. If there is an area where "everything is broken and needs to be fixed ASAP" we can channel our energy and focus on that particular area rather than juggling multiple. The main task of management on our part is general supervision of the project and maintaining a good atmosphere in the team.

Red Oleg

— Oleg, that needs fixed NOW!

We extend our expertise into diverse technologies and markets

Let's be honest: it's much easier to build relationship with top clients and land some of the coolest projects as an outstaffing company than as a contractor. Our developers have the opportunity to work for companies of any level and gain invaluable experience. It's cool when you can have a sneaky peek at some of the new technologies, processes and practices (both good and bad) and apply the best ones with your own team.

Why is outstaffing better for a client than outsourcing or in house development?

We have figured out why outstaffing is profitable for our business. Let's now see why it's good for our clients, too.

What does the client want from his contractor or in-house team? The answer is well- known - to get more (results, quality, finished tasks, launched projects) and to spend less (time, money, own resources).

How can outstaff help?

Strengthen your team in no time.

save time

Less time — more results!

There is no better way to scale up as quickly and efficiently as possible. The client chooses a seasoned talent or an entire team that is ready to immediately to join his project and disconnect at the moment when the project is completed.

Here is another real-life case. A company was trying to staff the position for two months, while the tasks remained stationary and the technical debt on the project was growing. They didn't believe in outstaffing, and it took us a long while before we even got your foot in the door. The client eventually agreed to try us it and gave two test weeks. We landed the whole project and it has been on for 7 months.

Our example showed the client that it is possible to work on such a model in principle, and he invited one more contractor. In fact, that one didn't last long — but that's a completely different story.

Image of Yaktocat

We often had to modify someone else's legacy code. Here is an example of the customer team leader’s feedback. We had time and your code has been finalized!

It's a real money-saver

Save your time

Less money with the same result.

Fixed-price model makes it difficult to evaluate a complex project from scratch. The budget will be directly proportional to the number of "black boxes" on the project — the more of them, the more the contractor will re-budget, trying to close all possible risks. As a result, even a detailed estimate will have about the same relation to the time actually spent on the project as your passport photo to an Instagram selfie. In most cases, neither the client nor the contractor likes it.

Outstaffing allows you to run a project budget sensibly and effectively. Moreover, the client can manage the available resources as flexibly as possible, and not waste energy on arguing with the contractor on things like "this was not in the specs that we had received six months ago, so we will not do it".

Get the maximum team's involvement

best

Less of your own resources — but more involvement and initiative.

An outstaffing specialist immerses himself in the client's company processes and workflow almost as much their own employee — with the acceptance of all the requirements for the working tools, corporate culture and project timeline.

At the same time, with proper organization of processes and 5 star onboarding, his motivation is comparable to the motivation of a full-time employee. As a result, the client gets a highly-motivated employee or a team that is fully integrated into their processes.

For example, we once assigned a Dubai-based banking project to a team of six frontend developers. Two of them became team leaders in their dedicated areas and played a key role in the workflow management and the new member onboarding. The client highly appreciated our work - so much so that he invited our your team to work in his office for a month.

Photo

The work process in the customer's "office"

Of course, it would be unfair to focus on our success and not mention the risks that are involved.

Yes, there are risks and challenges for all parties involved. This is a big topic for a separate conversation, and we are already working on a special article for you.

When is web production outstaffing just not for you?

Finally, when you have already launched a new business process in your head, it's time to ask yourself if are you ready to face the new challenges that go with it.

Below are the obvious stop factors that should make you think twice.

You are not ready to boost your HR efforts and support your team

The management is all about carefully picking your talent pool and l and maintaining it properly. Make sure to value and cherish your employees, to increase their loyalty because high level of staff turnover within the company affects the overall efficiency and profitability.

In addition, there is an opinion among experienced contractors that you should not offer outstaffing if you are not fully responsible for your resources. Simply put, don't hire subcontractors to do your work.

You have too many juniors

Ongoing COVID-19 turmoil has set a new trend - a demand for smaller teams and even more stringent selection. If your employee fails an interview with a client, he has no value in the outstaffing market. Your client needs Middle and Senior Leaders but not Juniors. Clients can interview several dozens of candidates. Don't make a nuisance of yourself trying to sell your Junior for 80 bucks where strong middles offer 50 per hour. In the worst case, your karma may drop so low that your developers will be no longer invited for interviews.

Development outsourcing allows you to balance your team help your developers grow in their own pace, whereas in outstaffing there is no cover-up for any incompetence. Are you ready for this? How about your team?

You don't know how to work remotely

We initially started building our team as a remote and distributed one, which have turned out to be a great idea in the long run. For more than two years, we have built our efficiency in Zoom interviews, setting real-life tasks and monitoring our progress. We learned how to keep our team positive and engaged — although we have never met some of our employees in person. This approach helped us to find rare, hard-to-find talents and extended our reach well beyond our region and even internationally. If this does not suit you, if you do not know how to deal with some of the unavoidable risks, or you would not trade your office cookies and a coffee maker for all the gold in the world, then think twice.

You are not ready to work at NDA

Yes, this is our harsh reality — we classify a considerable part of our projects as "top secret". We do not use a client's logo on our website or disclose the information about a client's case without the client's consent to do so. We may not be adding as many projects to our portfolio as we could, but we respect our clients' privacy. Sometimes you just need to find other ways to prove your skills.

To sum it up...

In this article, we have summarized our insights on the current market and customer needs. We wanted to share a bit of our backstage and some tips that that can help you work towards your goals.

The Advantages of Outstaffing for Web Production in a nutshell:

  • Long-running, constant, and predictable workload for developers. Smart ways to make work measurable and easy to manage.
  • You benefit from our team's diverse experience that can be easily tripled.
  • We cannot get into trouble with an incorrect fix price estimate — just because we don't use that model.

Some of the key benefits for our clients include:

  • We know how to quickly enhance your IT expertise. Your business can focus on the product goals rather than HR.
  • Our staff can easily be embedded into your team and thrive.
  • You have the flexibility of ramping up or scaling down your team, which is easier than firing staff once the project is finished.

Through these benefits, we are building a long-term partnership, investing in our staff's training and development and increasing our sales and marketing capabilities. And we are here to stay!

Let us know in the comments what you would like to learn and we will talk about it in our next article. It would be great if you could tell us about your experience in outstaffing (whether successful or not) and share some real customer cases. Feel free to join the discussion!