Basics of
IT outsourcing

What IT outsourcing services, the pros and cons of software outsourcing, types and cooperation models with outsourcing developers are, and 5 things to consider when choosing an outsourcing partner.

startup robot

The traditional approach is to create your own software development team, but it is not easy to find and get the right professionals. As you know, people are the most expensive resource. Since qualified specialists cannot be cheap, there is intense competition among companies. It is not always efficient to keep very expensive specialists in your team as they may be needed to perform 10-20% of the project only, or get involved when the time is limited. In addition to that, hiring a person for 3-4 months is also not reasonable. This is where such a service as IT outsourcing comes in handy.
Outsourcing is the practice of a client company to contract out certain tasks and functions to a contracting company that specializes in the relevant field.
In the IT sphere, such work can be the development of a mobile or web application, product design, software development, etc. A company that lacks its own resources thanks to outsourcing has the ability to afford it without additional significant costs for hiring.

Outsourcing of IT project

These days a lot of businesses from different industries rely on IT solutions and they become more competitive when they automate their business routing processes. But there is a dilemma. For example, your business specializes in medical services and you don’t have a team of software engineers to automate some of your processes. This is the case when project outsourcing comes in handy.

You can have only one Project manager in your team to control the development and outsource the whole work to a company that specializes in software solutions and has the expertise which is required for your particular project. This way a company avoids the resource consuming process of investigation of non-profit part of the business and can keep its focus on the main industry while collaborating with other professional software companies. An IT company can lead the project and help avoid challenges during the project implementation and make an easily scalable solution for future needs.

What benefits can a company get when outsourcing a project:

  • The project will be planned and estimated by a team of specialized professionals.
  • You can build automation tools for your business to increase the ROI.
  • You don’t have to invest in a previously unknown industry.
  • You can rely on experienced partners to escape potential problems during the project implementation.
Outstaffing is also known as staff augmentation or providing remote developers.

Outstaff approach to istaff outsourcing services implies a contract in which an outside team or an individual employee is officially hired from the outside to perform work and/or a number of company functions. This is one of the variants of remote employment, in which the team that performs all the necessary range of work for the client company is legally another company (outsourcing agency). The latter acts as the employer, which means it is responsible for the wages, bonuses, and equipment provided to the worker, while the client company gives the workers tasks and assignments.

The main difference between outsourcing and outstaffing is who is responsible for managing the hired team (or individual employee) that performs your tasks. If it is outsourcing, then the control of the entire scope of work and management of the team is done by the project manager of the contracting company. The client does not communicate directly with the development team.
startup robot
In the case of outstaffing, the client themselves manage both their own team and the team provided by the outstaffing company. But this does not mean that the owner of the client company manages everything personally. These functions can be delegated to the company's technical director or project manager. We have a CTO outstaffing service, by the way.

Chief Technology Officer is an important role for a starting company with sufficient tech capacities. A founder might get into a situation when there is neither a suitable candidate nor time for finding a reasonable candidate to take the technical lead and solve technical challenges.

What we can provide you in this case:

  • Technical expertise about the realization of your project/product.
  • Strategic consulting about the development of your company’s technical capacities.
  • Guidance on architecture to let you scale your project and minimize potential risks.
  • Consultancy on updating your software from legacy and adopting new approaches.
  • Research on challenges you are facing and the most effective ways to overtake them.
  • Audit your code.
This service is widely used by early-stage start-ups at the seed or A funding rounds, as well as by mature SME-s companies which are launching side ideas and products with the goal to innovate and bring new revenue but don’t want to lose their primary focus on the core functionality.

The differences between

Cooperation model

A person/team is on the staff of the software company, but their hours are completely purchased by the customer company. Mostly it is full-time work on one project.

A person/team is on the contractor's staff, and the contractors form teams for clients' projects.

The customer usually selects one developer or the whole team, conducts interviews, or even more than one.

The customer does not interact with specific developers. Mostly the result is evaluated. Communication is organized between the customer and the project manager (or team leader).

The contractor's function is to supplement, strengthen or completely replace the client's team. Usually, a dedicated team can completely close a project's needs.

A developer is involved in a project based on the project manager's decision and can operate on different functions of different projects.

Responsibility (contractor)
The manager on the side of the customer is responsible for the formation of the backlog and the setting of tasks. Developers communicate with him directly.
The contractor's manager is responsible for general accounting and HR support.

The contractor takes full responsibility for the development of the project or a part of it. The contractor forms a backlog, sets tasks, and monitors the implementation. The contractor's product manager or team lead communicates with the client.

Payment type
Payment model - retainer (when the customer pays a fixed amount per month for the developer/team) or time and material (hours worked multiplied by the rate).

Payment format - most often fix price, sometimes - time & material.

Outsourcing or outstaffing: which model to choose?

Any company needs good specialists, but not every company has all the necessary capabilities and resources to hire and maintain a huge istaff. That is why many companies use staff outsourcing services. The choice of one model largely depends on the initial needs, goals, and capabilities of your business.
If your company does not have staff specialists who could supervise the work of a remote development team, outsourcing is the best option for you. On the other hand, if you already have some IT processes set up and you have everything that is necessary to manage and work with a remote team, feel free to choose outstaffing. However, keep in mind that every case is unique, so we recommend consulting with experts first.
Instances of the fact that you need outsourcing:
  • You have a small project that you want to develop for side benefits, not as the main business.
  • You need to support a small project temporarily.
  • You are starting or already have an ongoing project and urgently need people to work on it to conquer your market share on time.
  • You are hiring a team and do not want to delay the start of the project (assuming that you have a core team).
  • You need experienced specialists for a short time to cover your development gaps
  • You need very specialized staff.
  • It is more financially beneficial to you to outsource than to hire the whole team in-house
  • You want to hire a team in-house, but haven't found specialists yet, while the development process cannot wait.
startup robot
The main expenses of the organization of the own IT team are salary costs, including social payments and taxes; the cost of organizing the workplace and the implementation of basic business processes (rent for office, purchase of hardware, furniture, employee training, additional motivation in the form of bonuses, annual vacation, the cost of special software, etc.), increase in salary expenses due to indexation and increase of tax rates; other possible expenses caused by the organization of communications and risk management.
IT outsourcing allows avoiding similar expenses, at the same time increasing the quality of your products and services. You can get an experienced specialist within no time at all.
Main ADVANTAGES of outsourcing development:

  • There is no need to bear the costs for the office, employees, service personnel, additional financial incentives for the team, sick leaves, vacations, and much more - all the risks and costs are borne by the outsourcing company.
  • No need to spend money on recruitment agencies and HR services.
  • Less effort spent on finding, hiring, and managing employees.
  • There are no risks that someone will quit or be lured to another company, the outsourcing company undertakes a commitment to provide another specialist without cost to you if it is necessary, without any delay on the project.
  • You can choose more qualified specialists. With outsourcing, you are not limited in your choices, you can hire specialists with a unique set of skills from all over the world. Reputable outsourcing companies mostly employ experienced, certified, and highly paid specialists who are not "affordable" to every firm. They do the work quickly and with the highest quality.
  • Also, if necessary, you can always quickly and flexibly add and remove or change members of your team, which is also important in a fast-changing environment.
  • A good outsourcing company will always help and consult you on how to move forward and improve your project because it has a wide range of expertise in various domains.
  • Guarantee of the quality of services. The contract, according to which the company is legally responsible for the quality of employees’ work, will protect you from poor-quality services. Note, in-house specialists do not provide a guarantee of quality performance of services.
  • Fast start of work. Due to the fact that companies offering outsourcing services have a variety of human resources, their specialists can start work immediately.
  • You get access to high up-to-date technology. The specialists of the outsourcing company are engaged in various projects in different areas and accumulate information about the latest technologies and keep abreast of all modern trends.
  • Narrow specialization of the personnel involved allows achieving the highest quality of IT solutions.
  • Sabotage by the customer company's employees.
  • Low qualification of the outsourcing IT company's staff.
  • Problems with communication. When working remotely, especially if it is a large time difference, there can be misunderstandings that affect the work. But this is all solvable. You need to establish all the proper channels of communication and methods of cooperation for an effective development process.
  • Overestimating your own capabilities. Are you ready to communicate in a productive way remotely? Do you have the time and the desire? Remember that managing remote teams is also a big and responsible job. You may find it easier to delegate this to someone else.
  • Security issues. By outsourcing your data to a third party you run the risk of a data leak. That's why it's important to sign an NDA before the start of cooperation.
  • Aiming to get a cheap contractor might end up with broken promises and poor quality of the delivered work. It is important to prioritize the quality of consultancy rather than price.

The disappointment of low quality lasts longer than the joy of a low price.
© Henry Ford
There are different types of outsourcing based on the geographical location of the IT vendor.

Offshore software development refers to outsourcing to countries with considerable time zone differences. An offshore location for the United States would be Belarus.
Nearshore outsourcing means that the vendor is located in close proximity to similar time zones and the same continent.
HF-solution is a nearshore company for EU companies.
Onshore outsourcing refers to outsourcing to IT service providers located in the same country. Of course you can mix any of these models.
The advantage of offshore and nearshore outsourcing is that you’re working with highly skilled software engineers and other IT professionals chosen by you from a wide range of talents and for considerably lower rates than in your own country.
How to choose an outsourcing partner?

  1. When choosing an outsourcing team, don't be fooled by low rates, because good specialists cannot be cheap. Be guided by the national/regional average rates.
  2. Call the company, find out more details about the conditions, read reviews, understand what experience they have in IT and how qualified the specialists are.
  3. Start working with an outsourcing company gradually, starting with 1-5 specialists and increase the turnover if you are satisfied with the quality of work. Decrease it if the result is not satisfactory.
  4. Try to evaluate the team objectively and do not neglect regular standup-meetings and retrospectives.
  5. If you manage your team and set tasks, pay more attention to documenting the tasks, because the better they are described, the better will be the final result.

startup robot
In any business, time and money have always been the most important factors. These two concepts are always closely related and often stem directly from each other. Outsourcing is created to optimize both of them.

The industry of outsourcing services in Eastern Europe has risen significantly in recent years and can bring your business or startup to a considerably higher level of performance. Belarus is one of the most popular software outsourcing destinations worldwide, as Belarussian IT specialists have great qualifications and wide expertise at below average rates as well as great communication skills, good English language, and high responsibility.
Get a free consultation about IT outsourcing