Modern companies often opt for hiring outside specialists or teams to solve specific issues and handle dedicated tasks. Outsourcing vs outstaffing is one of the most popular dilemmas for companies all over the world. In this article, we analyze the pros and cons of both approaches to hiring third-party specialists with a pinpointed specialization.
What Is IT Outsourcing?
Let's start with outsourcing software development. Assume you have no in-house development team or technical experts on your staff but need to create a software product. Does it make sense to hire in-house developers for a single project that will be completed and closed within a few months? Even if you choose to invest in hiring, onboarding, training, and then offboarding, expert engineers are unlikely to accept a full-time job for such a short while. In this situation, outsourcing your project to an external development team is a more sensible option. Outsourcing implies handing over your software product concept to a remote development team. The configuration of the outsourcing software development team is determined by your project needs; it may or may not include business analysts or UI/UX designers, but it must include software engineers, QA experts, and a project manager. If you work with outsourcing companies, you will be able to choose whether to oversee the project closely on your own or fully trust a PM with it.
What Is IT Outstaffing?
Outstaffing is a business structure in which a business contracts professional services to an outsourcing company. Outstaffing companies provide employees and resources to other companies, typically temporarily. Outstaffing company often specializes in providing certain types of expertise and skills. The employees they supply are generally highly skilled professionals employed under different regulations than conventional employees.
Outstaffing offers the flexibility of hiring temporary workers without incurring the costs when hiring full-time or part-time staff members. Outstaffing also provides access to a larger pool of applicants — including self-employed ones — than would be possible if there were stringent requirements about where the candidates had to live or work.
Pros and Cons of Outsourcing
Everything has its pros and cons, and this section will tell you about the advantages and disadvantages of outsourcing.
Advantages of outsourcing
Outsourcing IT services is the best way to ensure that your web platform is safe.
Offshore outsourcing may be the answer for those looking for an affordable yet reliable service. The benefits of outsourcing IT services are numerous, here are a few major ones:
- Security: Websites are often attacked by hackers and spammers. Outsourcing website development and maintenance to a trusted service provider ensures that your company is protected from attacks.
- Process optimization: You can access experienced professionals from all over the world and use their skills to your advantage.
- Profit: If you are ready to invest in outsourcing services, there is a fair chance that you will spend less in the end than it would cost you to hire in-staff employees.
Disadvantages of outsourcing
Although outsourcing has shown to be a dependable IT approach, it isn't suitable for every company. Let's look at some of the drawbacks of outsourcing:
- Potential hidden costs: Outsourcing is typically more cost-effective than employing an in-house team, but the underlying costs must be managed scrupulously so as not to come across unexpected hidden costs.
- Lack of complete control over the project: You will have to trust the outsourced group to handle most of your responsibilities. If you want to control an IT project on your own, IT outstaffing services are by far superior to outsourcing.
- Communication obstacles: Because you don't have complete control of your projects or daily communication, and the team is dispersed, there may be some misunderstandings. Time zones and language barriers can be an obstacle.
Pros and Cons of Outstaffing
The previous section was all about the cons and pros of outsourcing. This section will deal with the advantages and disadvantages of outstaffing.
Advantages of outstaffing
Outstaffing is one of the most challenging tasks for a business, but it has some considerable perks:
- Filling the expertise gap: Outstaffing provides a great opportunity to involve specific specialists with the expertise your existing team may lack without going for full-on recruitment and employment. This is a cost-saving way to fill up some gaps by “renting” the skill and work time of savvy profiled specialists (where you also get instant access to specialized tools and technologies without covering any licenses and such).
- Rapid business/project optimization: Yet another ultimate benefit of outstaffing is that it helps go through hard times without excessive losses. In particular, by allowing you to better support spiking seasonal demand or rapidly patch up certain parts of the project on the go, hiring the most fitting extra specialists in the shortest terms.
Outstaffing is the best option when you need to quickly ramp up your staff in an area where you don't have many qualified candidates already on the team. Thus, outstaffing enables businesses to meet the occasional challenges of market demand fluctuations more effectively than would be possible if they had less flexible staffing arrangements.
Disadvantages of outstaffing
However, the outstaffing is not ideal and has some problems:
- Communication issues: Many outstuffed employees work remotely and come from different languages and cultural backgrounds. Having so many people from all over the planet will cause specific communication issues.
- Low qualification risks: The contractor may not cope with the duties, which may happen if they aren’t qualified enough or don’t receive clear instructions. However, most of the specialists provided by outstuffing agencies have excellent working experience. Such a situation won't be likely to occur if the agreement with the outsourcer has been made correctly and the project has been managed professionally.
Outstaffing vs Outsourcing: Key Differences
Outsourcing is the process of transferring specific jobs and tasks to another company. On the other hand, outstaffing is a temporary service in which companies hire freelancers on an hourly basis for their projects/tasks. The main difference between outsourcing and outstaffing is that outsourcing implies hiring people on a long-term basis, and outstaffing only for a specific project or job.
Outsourcing also refers to transferring your work to companies offshore, while outstaffing usually means getting local professionals, therefore avoiding communication barriers. Your choice should depend on what exactly you want.
What Model Is Best for Your Company?
When it comes to determining whether outsourcing or outstaffing is right for your business, the most critical factors are resources (including finance and human capital) and internal capabilities.
Consider the following:
- Do you have suitable internal management capacity for managing more employees?
- Do you have internal processes in place for assigning and tracking projects?
- How easy is it for third parties to get access to your project management software?
- Is it possible for your staff to work with external developers seamlessly?
If the answers to these questions are no, you should consider outsourcing rather than outstaffing.
However, if you're thinking about outsourcing, you'll need to weigh a different set of issues:
- Do you have the financial resources required for outsourcing?
- Is it possible for an external party to take charge of your IT development temporarily, even if just for a project?
If your answer to either of these questions is no, consider whether outstaffing will be a better option for you.
There are a lot of factors to consider in the outsourcing vs. outstaffing debate. But at the bottom of it, all of the advantages and disadvantages boil down to one thing. Outstaffing is preferable for clients with significant, long-term demands who require day-to-day control of their vendor team. Outsourcing is the best option for clients with shorter-term requirements that need turnkey service from their vendors.
Can Outsourcing or Outstaffing Replace In-House Employees?
We need to clearly understand how outstaffing and outsourcing work before discussing the possibility of replacing your in-house employees with independent developers.
Imagine that you have decided to build your own house, and your friends or family have volunteered to assist you. The project has been underway for some time, but you find out that you don't have anybody who knows how to work with wood. You go to a local construction firm and sign an agreement with a carpenter who will now work with your team. You terminate the collaboration once they've completed their task, then continue doing what you need to do.
crew and delegate them. Now that they've begun, their responsibility is to finish the job. You can visit the site every day or once a week, or you can even leave and come back after a year to see how it's coming along. After they're done, you say your goodbyes. The house is now yours for as long as you want it.
These two examples make it obvious that you can outsource your project to another team. However, you can’t replace your whole development cycle with outstaffed members, as these are narrow specialists who can add expertise to your in-house team on demand.
In this article, we discussed different models of hiring outside professionals to create a new product or enhance an existing solution to generate additional profit.
Outstaffing and outsourcing are different concepts. Every company needs to choose the kind of model that will suit its needs. Before starting a project at Requestum, we analyze our customer requirements and business specifics to advise on the best model of cooperation. Contact us - our team of experts will be happy to help.