Outstaffing Or Outsourcing, Which One to Pick?
22 December 2020
Many think that outsourcing and outstaffing are the same. Or they think that outstaffing is a model of outsourcing. But this is not the case.
While they share a similar concept, they are quite different. So what is the difference and which one is better?
IT outsourcing is paying for a company to complete an entire project. IT outstaffing is hiring a remote expert to assist in an in-house project.
Which one of these approaches is more efficient? What are the advantages and disadvantages of these methods? This article is a brief guide that will help answer those questions.
The Difference Between Outsourcing and Outstaffing
Both outsourcing and outstaffing involve contracting workers from outside the company to do a job. Outstaffing and outsourcing are alternatives to creating an in-house IT development team.
Creating an in-house team is expensive, time-consuming, and stressful. Outsourcing and outstaffing both provide an effective and less expensive option.
The main difference between outsourcing and outstaffing is the management role.
With outsourcing, the outsourced company is in charge of a project from start to finish. They use their own employees on the project, pay their salary, provide the equipment, and more.
For the salary payments, you can create a pay stub that helps to coordinate the process and make it easier for the company.
The outsourced company manages the entire project. They are responsible for completing on time and creating a quality product. The client has limited access to the progress and process of the project.
Outstaffing is hiring a remote expert to assist with a project that is being handled in-house. The client company provides the assignments and projects to the worker.
The company manages the worker, the team, and the project. The company retains complete control of the project. The results, quality, and timetable are their responsibility.
What Is Outstaffing?
Outstaffing is contracting a third-party worker or team to perform tasks. The workers are officially employed by another company. That company handles salaries, equipment, bonuses, etc.
The contracted worker or team acts as an extension to the client company’s employees. And the client company manages and assigns tasks to the contracted workers.
Outstaffing is the hiring of a professional in a specific field to provide expertise. It enhances the efficiency of certain activities while saving the company money.
Pros of Outstaffing
There are several benefits to using the outstaffing approach. It means that companies do not have to hire and build an in-house development team. Instead, they have access to experts at a fraction of the price.
Here are some more benefits of using the outstaffing approach:
- Vetting: The client company does not need to vet outstaffed workers. The outstaffing firm has already done this.
- Employee status: The outstaffing firm is the employer of the contracted workers. Thus the outstaffed workers are not employees of the client company.
- Cost Reduction: Outstaffed workers are not considered employees of the client company. The company, therefore, saves money on taxes, recruiting, personnel maintenance, and more.
- Flexibility: The client company can change the number of their outstaffed workers according to need.
- Control: The client company manages outstaffed workers. This gives them complete control over the software development process. They also can assign, adjust, and prioritize tasks according to the project.
Cons of Outstaffing
There are also drawbacks to using the outstaffing approach. One drawback is that the client company retains responsibility for project management.
They must have the necessary skills, qualifications, and knowledge to complete the project. Or an adequate budget to hire someone else to manage the project.
Other disadvantages include:
- Communication: Proper communication has always been a problem between employers and employees.
- In the case of outstaffed workers, many come from different cultural backgrounds. This creates a bigger chance for lack of communication or misunderstandings to occur.
- Not fitting well: There is always the risk that an employee does not fit in well with the company. This risk exists with outstaffed workers too. A recommendation is to add control points into the contract. If the outsourced worker does not meet the stated requirements, the company has the right to terminate the agreement.
- Implementation mistakes: The resolution of any implementation mistakes is an in-house responsibility.
- Motivation: Lack of motivation is also a disadvantage. Outstaffed workers need constant communication and updates to stay focused and enthusiastic.
What is Outsourcing?
Outsourcing is hiring another company to complete a project. This includes creating a website, an app, a software product, etc.
The outsourced company maintains its own employees. It handles everything including payments, assignments, and equipment.
The employees of the outsourced company may work on several projects at once.
Often, an outsourced company will complete an entire project. They then deliver the completed product to the client company.
The client has limited access to or control of the development team and processes.
Pros of Outsourcing
There are several advantages to using the outsourcing approach. Most notably, the responsibility for the result and the quality of a product lies with the outsourced company.
They have to build the product according to the requirements of the client. If there are any technical issues these are borne by the outsourced company.
Other benefits include:
- Saving money: Outsourcing is less expensive than building an in-house development team. Developer fees are high, especially in the United States and Western Europe.
- Management: Client companies do not need to worry about managing when they outsource. The outsourced company is responsible for managing every aspect of the project. They handles hiring and provide the software and equipment needed for the project.
- Global collaboration: In general, outsourcing companies use experts from all around the world. This helps with the price and does not constrain a project to a geographical location.
- Faster development: Outsource companies are wholly focused on the projects assigned to them. This means that they develop the product faster than an in-house team would. The client company can release the product faster and stay competitive.
- The client company can focus on the core functionalities of their business.
Cons of Outsourcing
As with everything, there are downsides to using the outsourcing approach. As discussed above, the client company does not need to manage the project. This can be considered both an advantage and a disadvantage.
In general, it is advisable for companies to manage and track projects on a weekly basis. With outsourcing, full control of the project goes to the outsourced company.
The client company does not have direct access to the team handling their project. This means that it is impossible to assess the consistency, quality, or pace of the project.
Other disadvantages include:
- Higher costs: The prices of outsourcing are usually higher than outstaffing. This is because the outsourced company has more responsibilities than outstaffed teams. They manage the whole project and they are responsible for the product.
- Communication: Misunderstandings and lack of communication often happen. This is because outsourcing involves remote workers and distant collaboration. It is helpful to establish proper communication methods from the very beginning.
Which Approach Should You Choose?
Use the outstaffing approach if:
- You have the expertise, skills, and qualifications to manage and supervise a team of engineers
- The workload remains the same but the task requires a specific skill that in-house employees do not possess
Outstaffing is the better choice for companies that can manage the development process but need an expert with a specific skill set.
Use the outsourcing approach if:
- An entire project needs to be developed from start to finish
- Current in-house employees are not tech-savvy
- You do not possess the expertise in managing and developing a technological project to completion
Outsourcing is the best option for companies that do not have in-house programmers. It is also useful for companies that do not have a lot of resources or time. They can describe what they want to an outsourcing company and they will take care of the rest.
Ending thoughts on outstaffing and outsourcing
Both outsourcing and outstaffing are viable options that help companies grow. Choosing which approach to use depends on the company, the project, and the resources.
If you enjoyed reading this article on Outstaffing, you should check out this one about nearshoring.