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Virtual Team: 4 Advantages and 4 Disadvantages for Business

Chief Business Development Officer
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Expert in offshore development strategies for technology companies and startups. Legal background in M&A, IP rights, and contract law.
19 October 2021
7 min

Since the Covid-19 outbreak, remote work has become vital for many firms, and especially those in the IT industry. For this reason, companies are more likely to hire virtual teams now. It helps them reach global tech professionals and save on office rent and utilities. But are such teams as good as they seem?  

 

In this article, I’ve decided to talk about remote employees, discuss virtual team advantages and disadvantages, and ascertain if such employees will help you reach the business goals of your company! 

 

What are Virtual Teams? 

 

Virtual teams are teams of remote developers who are dispersed geographically and usually have different time zones. For instance, your company is situated in the United States, while your developers work remotely in Ukraine. They communicate via online conferencing tools, email, messengers, project management tools, yet may never meet in person.  

 

You can create such teams via in-house hiring or outsourcing. In the first case, you’ll be the one to form and manage your virtual staff, including handling administrative functions. On the other hand, the outsourcing model presupposes cooperation with third-party agencies that allocate the needed people for your project and control them. 

 

Such industries as information technology and mass media have been working with virtual team members or outsourcing partners for many years now, while others – like the financial services industry – switched to remote only in 2020. Some companies have even set up their offshore development hubs abroad 

 

Nowadays, employees that work outside the office have become an integral part of tech companies – which makes this option of collaboration a hot topic of discussion. But what are the main pros and cons of virtual teams? 

 

 

 

4 Benefits of Having a Virtual Team 

 

Before you decide whether to employ this model of employee engagement or not, I suggest you learn about the disadvantages and advantages of a virtual team 

 

Let’s start with the pros:  

 

– Access to bigger talent pools 

 

One of the main advantages of a virtual team is the ability to hire professional software engineers not just from your country or city, but from any part of the world. This is essential for businesses situated in regions with overheated IT markets – like in the USA – since it’s harder to find skillful coders there. 

 

But where do the top companies and enterprises like Samsung or Wargaming find seasoned developers?  

 

These companies have discovered Eastern Europe as the #1 outsourcing location for business processes. It happened because Eastern European countries like Ukraine provide foreign businesses with access to over 200,000 professional programmers with intermediate and higher levels of English. 

 

– Boosted productivity 

 

The work-from-home opportunity belongs to the benefits of a virtual team since every third employee would opt for a home office than a pay rise. Many developers find their homes more convenient than traditional offices, as they not only save time on commuting to work but also become free in terms of time management – which contributes to increased efficiency.  

 

– Better flexibility 

 

Flexibility is among other benefits of having a virtual team because you can easily adjust your outsourced staff. If such virtual engineers have completed the project, you may immediately terminate them. In case you need more virtual team members, you can hire new remote employees via outstaffing to back up your core team quickly. 

 

– Cost reductions 

 

While office team attributes such as rent, furnishings, redecorations, and Internet/gas/water bills consume your costs, virtual teams don’t require as many investments of this kind. Moreover, software engineers from America and Western European countries charge higher salaries than coders in Eastern European countries like Ukraine, where you can hire developers remotely 

 

4 Disadvantages of Managing a Virtual Team In-house 

 

Now that we’ve covered virtual team benefits, let’s consider the adverse features of this cooperation mode if you hire remote developers in-house: 

 

– Little attention 

 

Many companies refuse to invest their time and money in the training of a new internal remote team, thinking that it’s enough to briefly explain the goals of the company to them. As a result, if these developers are not educated about the values and the working process in your company but stay for long, they may produce results below your expectations. 

 

– Challenged management 

 

Since remote developers come from different countries, they might have a different work culture from the one in your company. This can lead to problems in management unless you conduct team-building activities that unite your programmers. For instance, at Alcor, we handle HR events for offshore teams of our clients like Ledger, Ring (now owned by Amazon),  and others to help them get to know each other better and boost productivity, especially when it comes to teamwork.  

 

– No operational backup 

 

Among other virtual team disadvantages is that it’s not enough to just hire and pay for software engineers in your virtual team. You will also have to comply their operations with the laws of both your and their countries, pay taxes, sign service and non-disclosure agreements, maintain their records, plan your finances, and do many other things yourself. If you are not an expert in operational activities and have poor knowledge of the legal system of other countries, then find a reliable partner to back up your operations with the virtual team. 

 

– FOMO 

 

The fear of missing out or FOMO is a major pitfall of remote work that is managed in-house. If there is a lack of communication between remote employees and C-level managers, your internal virtual team may feel left out when it comes to news or changes in the company. This can result in isolation and anxiety among your overseas developers (and hinder the working processes). 

 

 

 

Traditional Teams vs. Virtual Teams: The Main Difference 

 

The difference between traditional teams vs. virtual teams lies in the working environment. While the former work in offices, the latter are not bound to location and only stay online. However, it’s important to mention that traditional and virtual teams may share the same kind of engagement. For example, tech companies are OK to hire software engineers either through the outsourcing model or in-house. In both cases, employees can be based in an office (traditional) or remotely (virtual). 

 

Remote teams hired via outsourcing may come in handy if you just want to improve or create a new feature for your existing product. In this case, recruiting and managing virtual engineers via outsourcing is more suitable than hiring full-time office developers in your home country, because you won’t have to spend so much time and money on their maintenance. 

 

Yet in-house remote employees are more beneficial for IT companies where development is the main product. It’s better to keep the core activities in-house and not entrust outsourced virtual employees with them, especially when it comes to programming 

 

 

Risks of an Outsourced Virtual Team Every CTO Should Consider 

 

Do you want to know why some companies will never even think about hiring remote employees through an outsourcing provider? If so, read up on the risks of a virtual team below. 

 

Communication gaps 

 

Even though remote software engineers via outsourcing firms usually have a team lead or senior developers who are in charge of team performance, it doesn’t mean that you’ll be able to communicate with them directly. Your vendor will be an intermediary between you and your team, so there’s a chance that you’ll struggle to deliver clear feedback to them on time. 

 

No trust from clients 

 

Clients often don’t trust companies that hire outsourced remote employees to complete their projects. If you decide to create such a team, your business may seem like a shell corporation or a ghost company – an organization that exists on paper but has no active employees. Such a reputation is destructive for businesses that abide by legislation, and your potential clients may even choose the services of your competitors over your own. 

 

Loss of internal expertise 

 

If companies choose to cooperate with outsourced virtual teams, they will probably work with freelancers who will be the ones to create the core product. Once these developers have done their job the company will fire them, which could put the business at risk of losing unique knowledge acquired by this virtual team during the project. 

 

Unclear pricing 

 

Outsourcing partners tend to adopt flexible pricing models that depend on developers’ market salaries, taxes, resources, and time allocated to the project. It may sound okay, but these agencies rarely inform their clients of the exact price composition for services, often charging hidden costs to gain maximum profit. As a result, you might pay more for unknown reasons. 

 

Alcor Software R&D Solution vs. Virtual Teams  

 

In the case where either hiring outsourced or in-house virtual teams might not satisfy your needs, there is a solution for you. Imagine having a full-fledged development team that effectively completes your tasks in another country – under your brand with lower wages and taxes – and all of this being 100% compliant with the law.  

 

Sound appealing?  

 

It can become a reality if you create an R&D development hub. 

 

For example, Alcor is a BPO services provider that can help you set up such a center in one month and hire up to 30 dedicated software engineers in just 6 months. Our team recruits dedicated in-house developers that can work both at home offices and/or a physical software center of your company. 

 

For example, Ukrainian developers of an IT product company that manufactures an AI platform for B2B sales, People.ai, enjoy a mixed schedule now during the pandemic. But before the company found our solution, they had been working with different service providers which slowed down the offshoring process. Eventually, they reached out to us and received an office in 4 weeks, over 25 loyal developers, plus the full cycle of back-office functions.  

 

 

Why is our model different from virtual teams? 

 

1. You manage your Ukrainian R&D center directly. 

 

Our company takes no part in the development process; thus, you will have no intermediaries who can hinder your communication with programmers. Furthermore, our IT researchers and recruiters will hire a project manager and/or a team lead who will not only match your job description but also have an upper-intermediate and higher level of English to speak with you without issues. 

 

2. Your clients will be eager to invest in your product. 

 

An offshore R&D branch in countries like Ukraine will allow you to accelerate your entry into local and international markets, as well as help you attract investments (or even go public). This is what happened to one of our clients, BigCommerce, that joined NASDAQ in 2020 with a surge in IPO of almost 300%!  

 

3. The team creates value for your business. 

 

Software engineers in R&D will be like your in-house employees but located in Ukraine. They will perform better than outsourcing teams because such developers get a sense of ownership over your product and prefer to see how people use what they create. Nevertheless, they will never claim your IP rights because our company never retains the intellectual property of our clients. 

 

4. You control all expenses. 

 

Apart from providing 100% transparent pricing and a calculator that lets you see the approximate price for our services, our team also produces detailed monthly invoices to let you control your finances. 

 

On top of that, you will always be aware of the development stage your R&D employees are at. We track the performance of developers and report both strong and weak spots in your team to you each week. This is important to make rational decisions about team adjustments and apply the best practices for your business. 

 

If you need help to create home offices and set up IT infrastructure for remote engineers, we also do that. Our team will also assist you in case you want to promote your company in Ukraine! You can also get other operational services – from real estate to payroll & accounting – to ensure flawless operation of your team. 

 

vt vs Alcor

 

 

Final Thoughts 

 

Remote employees hired in-house or via outsourcing is an answer for many companies to the changes inflicted by Covid-19. There are many benefits and challenges of a virtual teamfor instance, you can scale your business and save money on the office lease and utilities. Still, you get exposed to management troubles and receive no administrative support. 

 

So, if the pros and cons of managing virtual teams do not satisfy your needs, you may open your own R&D branch in countries like Ukraine. For example, our BPO company Alcor can help you out with this task. We will hire as many developers as you need, comply your business with the law of Ukraine and your country, pay salaries and taxes for your developers, and perform other back-office tasks upon your request. 

 

FAQ:

Why do companies hire virtual teams?

Virtual teams allow companies to hire professional software engineers from any part of the world, save costs, achieve better productivity because of work from home, and easily adjust their teams.

Why do virtual teams put companies at risk?

It will be more difficult for you to manage outsourced virtual teams effectively because you don’t communicate with them directly. You’re also likely to struggle with attracting investments if you delegate product development to outsourced teams. Beyond that, you may lose the unique knowledge acquired by this team during the project and lose funds from hidden costs.

What is the best alternative to virtual teams?

If neither in-house nor outsourced virtual teams satisfy your needs, you can set up your own offshore development center. This solution lets you obtain an engineering team in another country with lower wages and taxes under your brand, fully comply with the law, and receive operational backup.

Contact Us

We will provide you with statistical data regarding the number of developers in Ukraine and their average salaries. The discussion will proceed with the expected hiring deadlines and our recommendations on managing payroll, equipment procurement, and compliance matters.

We respect your privacy and will never share your data with any third party or spam you

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