For centuries and millennia, businesses have been stuck with the same old hiring practices – finding suitable workers, keeping them around as long as they are useful, and increasing/decreasing staff based on their needs. Certainly, the emergence of the web quickly led to new hiring models and approaches like telecommuting, but they had never gained a foothold as strong as the one we see them claiming today. The choice shapes cost and control: classic outsourcing hands off a whole project, while a distributed team extends your own team across locations, and nearshore or offshore engineering can lower cost substantially, often by 40 to 60% versus local hiring, if you pick the model that fits your need for control.
Outsourcing and distributed teams are two modern approaches to hiring that are gaining global prominence, and for good reason.
While they maintain the same ancient principles mentioned above, they also cut costs, reduce the amount of effort business owners need to invest, and offer a wide range of other benefits. Let’s take a look at the two models and the differences between them in hopes of making your choice between them easier.
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How do outsourcing and distributed teams work?
Outsourcing
Outsourcing (occasionally shortened to OS) has many varying definitions, but in the context of software development usually refers to one company hiring another company to handle and complete all of a project or a predetermined portion of it. Essentially, they distribute a part of their workload to another business.
Oftentimes, the arrangement between the two companies is confidential and protected with documents like NDAs.
Hiring with outsourcing usually works the following way: a business finds a suitable outsourcing company (or development partner, as it can also be called), and discusses possible cooperation.
If both parties agree and sign the relevant documentation, the first business provides the tasks, while the partner provides the experts and delivers results. Throughout the cooperation and after it is concluded, the first business traditionally maintains ownership of all the work done on the project.
Distributed teams
Distributed Teams (shortened to DTs) are a bit harder to pin down, as they come in several different variations.
Basically, the DT model involves specialists serving as part of a team at a company but performing the work in a location different from where most of the staff are based. In theory, a DT can even function effectively with each team member working from a different country/region.
Hiring with distributed teams can work in several different ways. For example, if a team member is hired as an official and full-time employee of the company, they will traditionally go for an interview at a regional office and work from there too, if selected.
On the other hand, freelancers are usually found through web portals and professional social networks, with interviews being conducted remotely and little to no papers being signed before a freelancer joins the team. The third major approach for DTs is using team extension services. With this approach, a business finds a development partner willing to spare some staff members.
These specialists join the business’s team remotely and assist for as long as was agreed upon by the two sides.
What are the pros and cons of the outsourcing model?
| Pros of outsourcing | Cons of outsourcing |
| + Reduced costs | – Communication issues |
| + Improved delivery time | – Ballooning costs |
| + No long-term obligations | – Lack of professional growth |
| + Better use of time | |
| + Confidentiality |
Pros of outsourcing
- Reduced costs
- Improved delivery time
- No long-term obligations
- Better use of time
- Confidentiality
Outsourcing companies tend to operate in developing countries with widespread access to education.
Thus, the labor market that they tap from includes plenty of energetic young people ready to work at rates lower than those found in the wealthiest and most developed nations. When you hire a full team this way, you will usually have substantially smaller costs than you would if you hired from your labor market.
A large outsourcing team can allow you to get a project done much faster than you normally would.
In this case, there is no need to spend weeks hiring new specialists, as your partner should have the necessary staff right off the bat. This group of experts may work on several different projects simultaneously or act as a dedicated team and focus exclusively on your project.
In most arrangements with this hiring model, the OS company stays on for the duration of the project, after which the two sides go their separate ways.
This is a much more convenient arrangement than hiring full-time employees that will stay on the payroll even after the project is complete.
By handing over tasks and responsibilities to an OS provider, businesses free up time and can dedicate it to other matters, such as research, sales, and strategic planning.
Discretion is the name of the game in OS, so arrangements of this type typically grant the hiring company full rights to the intellectual property that comes out of the project and bars the OS provider from disclosing any confidential information about the project or their cooperation. This makes it possible for the first company to present the work done as their own without anyone learning the peculiarities of where it came from.
Cons of outsourcing
- Communication issues
- Ballooning costs
- Lack of professional growth
Due to the geographic location of the OS provider, their specialists might not have a perfect grasp of your native language, causing communication issues.
Additionally, cultural peculiarities can lead to minor misunderstandings and the time zone difference between the two businesses may cause some organizational issues. Fortunately, most of these things can be avoided by choosing a qualified and considerate partner that will provide round-the-clock support.
Software development is notoriously hard to build a budget for, as unexpected costs and delays come up all the time.
Thus, when you agree on the terms of cooperation with the OS provider, it is best to establish a model that is flexible in adapting to these changes, but does not give the partner carte blanche to delay the project or boost their commission.
Although partnering with an OS provider should help you deliver a project, it won’t do much in terms of helping your in-house staff grow professionally and hone their skills. All of the experience will be gained by the side that works on the project, and you will just be left with the final results. Fortunately, you can still learn from the lessons of the project by cooperating closely with the partner and asking them to provide updates and briefings about the progress of their work.
What are the pros and cons of the distributed team model?
| Pros of distributed teams | Cons of distributed teams |
| + Flexibility | – Difficult to maintain team spirit |
| + Hire from anywhere | – Harder to keep track of worker |
| + More efficient meetings | – Incoordination |
| + Reduced costs | |
| + Pooling knowledge and expertise |
Pros of distributed teams
- Flexibility
- Hire from anywhere
- More efficient meetings
- Reduced costs
- Pooling knowledge and expertise
Unless you are hiring employees for the long run, you will have incredible flexibility in changing your team’s composition throughout the project.
For example, you can start with a small group and expand it as development gets more demanding. In the final phases when there is less work to be done, you can scale down back to the small group you initially had. This kind of flexible arrangement is easiest to achieve when you cooperate with a development partner.
Choosing a DT will allow you to hire specialists from all around the world, as opposed to OS businesses that are usually based in a single location.
Thus, you have access to the global talent pool, and can get the best that multiple regions and extension providers have to offer.
Anyone who has worked in a large office is probably familiar with the hassle of gathering people for meetings, especially if they are impromptu.
On the other hand, DTs use various communication tools to quickly and easily arrange calls and meetings. Since workers are always carrying gadgets with them, they can respond quickly to emergencies and urgent meetings.
If you opt to extend your team with freelancers or specialists provided by a partner, you will be able to reduce miscellaneous costs that are often overlooked.
For example, you will not need to provide these specialists with an office, supplies, food and beverages, or even hardware. It’s all part of the deal.
Unlike the OS model, a DT will allow you to significantly boost your expertise.
Since specialists will come from different backgrounds and regions, all of them will bring something new and unique to the table. Thus, your in-house team will work with these specialists and pick up the same useful skills and knowledge that they will pick up from you.
Cons of distributed teams
- Difficult to maintain team spirit
- Harder to keep track of workers
- Incoordination
It is no secret that people tend to be more motivated to work when they are surrounded by people they can talk to and laugh with in the office. Unfortunately, the DT model splits teams apart, which can have a detrimental effect on team spirit. Even though it is impossible to eliminate the issue altogether, you can certainly alleviate it by extending your team with specialists from a single source, like a development partner.
These people will be working under one roof and should find it easier to be comfortable in their workplace.
It’s not very easy to keep track of workers when they are hundreds or thousands of miles away from you, so you may find some of them suffering from low motivation or productivity. This can be counteracted by setting clear deadlines and expectations, as well as providing feedback on the tasks being done. If you are working with a development partner, they will normally handle the motivation and progress-tracking for you.
For companies facing these coordination issues, a structured approach to managing a staff augmentation team improves visibility, accountability, and delivery discipline.
Modern workers (and especially IT specialists) have a wide variety of tools at their disposal to organize their day and coordinate with other people in the team.
Unfortunately, this does not solve time zone issues and miscommunication due to language and/or culture. Thus, teams with staff in multiple continents can have a hard time arranging a convenient time for calls and joint efforts. It is a bit easier when there are just 2 locations or countries involved, as they can pick certain hours that work well for both.
So which option is better – outsourcing or distributed teams?
Both outsourcing and dedicated teams offer substantial advantages over traditional hiring practices, so both options should be seriously considered by enterprises looking for creative ways to update their business processes and cut costs. But is there a clear winner? Yes and no.
No, because outsourcing and dedicated teams are used in slightly different circumstances and are both great for their own purposes.
Yes, because outsourcing is better for handling entire projects from start to finish.
On the other hand, distributed teams are better for improving teams already at work on projects. With OS, you get a massive level of support and can devote your time to other tasks, whilst DTs are variable units that you can use sparingly or fully rely on, depending on your business needs.
Where these services can be found
Finding the right company to help your business with outsourcing or team extension is no easy task.
There are thousands of companies out there, often providing their services for particular niches (e.g. game development, manufacturing solutions, and medical applications). Thus, you may look for a company best known for its work in your particular line of business, or choose one that excels in building numerous types of solution and has worked in multiple industries. Program-Ace is one such company.
With over 2 decades of experience, we offer our partners the most qualified specialists and utmost professionalism.
We support several business models, so we can accommodate your needs whether you want to extend your team or outsource your project. Our words are backed up by the dozens of past projects on display in our portfolio, and many more that we can share.
How about we discuss how Program-Ace can help your company? If it sounds good, just reach out to us when it is convenient for you.