More and more tech businesses face the choice between outstaffing and outsourcing, as both of the ways to delegate IT tasks are getting traction. The global spendings on IT outsourcing services are constantly growing — the figure is about $1,3 trillion in 2023. It’s predicted that large enterprises and SMEs will invest nearly 6% more resources in outsourcing of HR functions, known also as outstaffing. What is the difference between outsourcing and outstaffing and which one is more preferable and beneficial for achieving business needs and goals?

We are to start our comparison of outsourcing and outstaffing with their clear definitions and provide you with the key decision-making factors, which might be up to the point if you are going to implement one of these models.

The Difference between Outsourcing and Outstaffing

What is Outsourcing?

Outsourcing is a B2B cooperation where one company hires another company to deal with a certain scope of business tasks.

The most popular things to outsource are software development, UI/UX design, call center services, customer and technical support, and BPO services

What is outstaffing?

Outstaffing is all about how to scale tech teams flexibly. It is a B2B cooperation where one company hires another company to source technical professionals, interview them, handpick the best candidates for the approval, onboard newcomers and become their Employer or Record. In this case, they become a part of the client’s team, but work on the outstaffing company’s premises. In fact, outstaffing is an outsourcing of HR processes.

Outsourcing vs. Outstaffing in One Sentence

Outstaffing is partnering with an agency which staffs remote teams for you and manages HR Ops, while outsourcing is delegating tasks or projects to an external team and getting the work done independently.

Outsourcing Pros and Cons

✅ The Quality Is the Vendor’s Responsibility

According to Statista, 59% of businesses outsource to cut operation costs and only 31% do it to improve service quality. With outsourcing, enhancing the quality is a vendor’s responsibility. All processes are controlled and supervised by the vendor’s team. The client and their customers only get the final product.

This allows businesses to free resources and direct their attention to business growth.

❌ Control Is in the Vendor’s Hands

Together with all processes, an outsourcing vendor takes almost the entire project control. They establish day-to-day operations and processes, provide teams with information and advice, and deal with emerging roadblocks. The client themselves might be involved in the process, but not for 100%, which might make the collaboration frustrating.

✅ No Need for Day-to-day Management

97% of businesses believe proper project management is crucial for organizational success. An average business has a 70% project failure rate that can only be decreased by a proper and dedicated management. It is not always possible to achieve in-house.

Outsourcing provides companies with constant project supervision that can help increase a team’s productivity and provide the control required by difficult projects and tasks.

❌ Costs More than Outstaffing

Because of the resources spent on management and supervision, an outsourcing client does not only pay for the tech team. They also pay for the time and effort of the management team, which can significantly increase the costs of the service compared to outstaffing.

✅ It is Filled with Innovations …

Outsourcing is a mature industry. It has traditions, experience, and innovations. It is constantly developing and changing in accordance with customers’ requirements and desires.

… and Roadblocks

On the other hand, constant shifts can confuse professionals and cause roadblocks:

• Not all tech professionals can follow the latest trends and provide services of equal quality.

• Outsourcing teams may have no time to catch up with ever-changing demands.

Outstaffing: Pros and Cons

✅ The Client Holds All Controls

No desire to relinquish control is often a key factor in the ‘To outsource or not to outsource?’ question. The outstaffing model, also called IT staff augmentation, provides businesses with an opportunity to optimize HR processes, save on high costs and retain all control over the project development. Given the right amount of available resources, businesses can benefit from full control over the projects and tasks of the professionals working on them.

❌ The Processes Are a Client’s Responsibility

When separate professionals or entire teams report directly to a client, that client should take care of:

• Time management.

• Defining the scope of work.

• Following up on the task statuses.

• Checking the quality of work

The good news is that with time, the need for such management decreases as everyone gains more understanding and experience with the project.

✅ The Processes Are Totally and Fully Flexible

This is a pretty noticeable thing to consider when comparing outsourcing vs. outstaffing. Outsourcing suggests a review of partnership conditions not earlier than some agreed date. While with outstaffing, the team can not only scale as required by the project, but quickly and efficiently adapt the processes to the shifting requirements. This is possible due to direct communication. The flow has no mediator and no bottlenecks, which allows communication of all changes directly to the team with no loss of information.

❌ It Might Seem Too Difficult

Business owners might hesitate to leverage outstaffing because of its seeming difficulty.

The toughest outstaffing stage is choosing the provider of the service. The rest requires minimal effort from the client’s side — recruitment, interviewing, onboarding, setting up, and retention become direct responsibilities of the service provider.

Seemingly difficult, outstaffing provides tech companies with a very easy solution.

✅ It is More Efficient

Freeing up additional resources, minimal participation in the recruiting and post-hiring processes, and not having to engage in the operational processes makes outstaffing more efficient and definitely safer than searching for freelance specialists or hiring them in-house.

Outstaffing agencies source and interview candidates like handpicked ML Engineers, and Front-end Developers for hire, and pre-vetted IT Support Specialists. Once, they hire the most matching ones for you, they continue to curate those specialists. The post-hiring stage includes:

• Launching a new specialist after a structured onboarding to avoid typical beginner’s organizational questions;

• Arranging payrolls according to the regulations of your team members’ home countries;

• Curating an administrative routine like day-offs, vacations, and personal documents updates;

• Tracking the level of specialists’ satisfaction within the team roles.

Outstaffing vs. Outsourcing: Which One to Choose?

A business needs to answer a few simple questions to determine what to do, outsource vs. outstaff burning tasks.

Do You Have Resources for Management?

Yes: if you have the resources for direct control, outstaffing is a better choice.

No: outsourcing would be better, but be ready to relinquish some control.

How Long Will a Project Take?

Short-term (up to a year): short-term projects will benefit more from outstaffing and outsourcing, depending on the terms of agreement. The main thing to consider, the team should already possess all the required knowledge and be eager to jump directly into work processes.

Long-term (longer than 1 year): An outstaffed team can take care of a project of any length.

What Specialists Do You Need?

With very technical and specific knowledge and skills: no doubt — outstaffing is the right choice here. Projects related to AI implementation and other innovations, obviously, belong to that department. Outstaffing specialists scan the global talent market in search of unique skill sets, so that you can be sure your new hire can cover the necessary tech stack to the fullest.

When a company lacks tech expertise and/or requires strong technical management: outsourced teams are a better choice.

At first glance, outstaffing vs. outsourcing sounds like we are talking about twins in the world of building IT teams. In reality, the difference between outstaffing and outsourcing makes both of them non-fungible. These formats of partnership provide businesses with different solutions and help them achieve different business goals.

FAQ

by Anna Shevtsova
on October 27, 2023. Share on LinkedIn Post on Twitter

Anna has 6-years overall experience in writing. She previously observed financial markets, conducting the daily research on the state of bonds and stocks. She is a keen reader with interest in historical literature and international cuisine. Her latest obsession — approaches to creating family-like teams in remote times.