Outstaffing is a relatively new business model that is rapidly gaining traction both in Ukraine and abroad. The number of developers choosing outstaffing companies over outsourcing ones is steadily growing. Why does it happen? Our Managing Director, Igor Tkach, helped us connect the dots.
What is the difference between outstaffing and outsourcing?
First of all, it’s a working model. The classic outsourcing model works like this: a company receives a certain scope of work from the customer, provides its estimates on terms and budget, builds a team from the employees, and start executing its work according to Time & Materials or Fixed Price contract. Basically, an outsourcing company is making most major decisions regarding product architecture, technology stack, and specialists to be involved in product development at every stage. An outsourcing company is responsible for the delivery of the end product, its part or support.
In outstaffing, a company is responsible for providing and supporting a team that meets the customer’s requirements and works with them on exclusive terms. In fact, members of such a team are employees of the customer who work remotely from the office of outstaffing company. There is a direct collaboration between the team and the customer. The outstaffing company provides a platform for such work – from the office, workplaces, and workstations to the HR service, Recruitment, Employer Branding, different internal activities, training programs, payroll – and pretty much everything needed for the successful work of the remote team directly with the customer.
There’s also another major difference. When it comes to outsourcing, there’s usually a Manager from the outsourcing company’s side who manages the development process. It can be a Project Manager or – in the case of Agile methodology – a Scrum Master or a Resource Manager, depending on the size of the team, the company itself and its management structure. In the case of outstaffing, there’s no Manager from the outstaffing company’s side. The customer is the one who manages the team. If there are no management resources on the customer’s side or if the remote team grows to the size at which the flat structure doesn’t work well (usually 7-10 people), an outstaffing team hires its own manager. This is a Project Manager or a Team Lead – a full-fledged member of the team who works with only one customer and pursues their interests in making local management decisions. The key difference between outsourcing and outstaffing is taking on the responsibility for product delivery.
Why do developers choose outstaffing?
The primary reason why they do it is an opportunity to work directly with the customer without any Project Manager’s involvement from the side of an outsourcing company. They don’t always professionally manage projects, and their interests may сonflict with the interests of developers. For instance, a Project Manager can have KPI – to increase the profitability of the project for an outsourcing company, while for a developer it is an optimal product implementation from a technical perspective and a comfortable rhythm of work. Also, a Project Manager can be overloaded with tasks on several projects at the same time and may not have enough time for a quality development management. As a result, timing, quality, communication and motivation of the team – it all suffers.
When it comes to outstaffing, it’s pretty similar to working in a product company, but on a platform provided by an outstaffing company. On the one hand, you work directly with the customer, and on the other hand, you have everything you need in the office that an IT company provides for you. In such a way, you simultaneously integrate into two companies – of your direct employer and of the customer.
Another important point is that once the project is completed or any other issues arised, an outstaffing company will help a developer find a new project. It holds true for outsourcing as well, but one of the advantages of outstaffing is that a developer always works on one project, rather than messing around with several projects. They can thoroughly focus on one customer or even on one product. Developers love it.
What are the limitations of outstaffing for a developer?
One of the limitations is a more complicated process of internal mobility. Once the project is completed, an outstaffing company usually stops paying salary to the developer and starts looking for a new project for them. If it doesn’t find it, a developer is leaving the company, since there’s no benchmark in outstaffing companies. At Daxx, we do our best to minimize these risks in every possible way. If we see a high risk of team reduction or the customer has already informed us of this decision, we start proactively looking for new projects for a developer without a delay. And in 50% of cases, we find them.
In general, outstaffing companies don’t have an onsite R&D department, where you can hone your skills, learn new technologies, or build products for pleasure at your spare time.
How popular is the outstaffing model in Ukraine?
Outstaffing is popular, but not as much as outsourcing. If we take all IT service companies, excluding product ones, a part of outstaffing companies will officially make up about 20%. But in reality, the situation is a bit different. If we take a closer look at some projects of various outsourcing companies, there’s a certain percentage of outstaffing – in those cases when the customer is directly involved in managing such a team. However, they can still call it outsourcing and even specify it like this in the contract. That’s why it’s about 30% overall, and can reach up to 40%, but no more than that.
The thing is, not all developers are familiar with the outstaffing model, especially those who have just started and have a vague understanding of what is happening in the IT market today. At Daxx, we strive to promote this model in any possible way – both for the customers and for IT specialists.
What level of expertise is needed for a candidate to land a job at Daxx?
Most of our IT specialists are of Middle level and higher. But again, we don’t have a standard grading program as different customers have different requirements. That’s why a Middle-level specialist on one team may vary from a Middle-level on another one – in terms of maturity and expertise. In other words, you can hardly find a Junior-level specialist at Daxx as we have those needs of direct communication with the customer and rather high job-entry demands. Yet, we carry out internship programs for several customers. We can “grow” the right specialists within the company this way. Also, it’s a good chance for young and talented IT specialists to get a promising job and realize their potential in a successful European or American company.
What kind of benefits is Daxx providing as an outstaffing company?
If you have a look at the market of outstaffing companies, you’ll see that Daxx is a pretty remarkable company when it comes to in-office perks. We organize corporate holidays, provide decent work conditions, and support our internal communities. Plus, we have health insurance. It’s not a common thing in outsourcing companies, let alone outstaffing ones. We also have a unique, democratic and free corporate culture. We don’t have micromanagement on our teams. We let freedom to our IT specialists to express their creativity and encourage their desire to learn. That’s why we have partnered with BookBox. Now you can find a bookshelf in our office filled with books on different topics. Our customers maintain the same culture, especially those from the Netherlands and Scandinavian countries. Developers can always come to Daxx with their feedback. The customer and Daxx can come with their feedback to developers. This is part of the Dutch mentality – a direct and straight style of communication.
Also, we provide a range of “standard” benefits you can find in most big and medium-sized IT companies – office facilities, fruits/cookies, “happy hours”, transportation to metro stations, a parking lot, etc. We offer opportunities for self-development and growth. Depending on the case, either the customer or the company itself cover the conference participation fee for developers. If someone wants to be a speaker at a conference, we support their will and cover costs related to their participation – preparation, transportation, accommodation, etc. We also have free English courses in the office.
What about English? How crucial is it for a developer?
Since we’re talking about direct communication with the customer, English is very important. Overall, 98-99% of IT specialists at Daxx know English at an intermediate level and higher. Therefore, English is one of our key requirements. And when it comes to native speakers like the UK and the USA it’s twice as important.