In today’s tech-driven world, businesses must adapt to rapid changes. However, it’s not always feasible to find the right specialists quickly or to train existing employees in new skills. This is where external teams come in, offering outstaffing and outsourcing services.
When it comes to choosing between outstaffing and outsourcing, it isn’t just a hiring decision — it’s a strategic step that will impact your project team, budget, and the success of outcomes. Before making a decision, explore all the benefits and drawbacks associated with outsourcing and outstaffing, which we have prepared in this extensive guideline. Here we go!
What Is Outsourcing?
If you have a wealth of ideas and financial resources but no clear path to implementation, external companies — IT outsourcing services — can help. Instead of hiring an entire in-house IT team, you can apply to another third-party company from a global talent pool, regardless of time zone. This format of cooperation matches everybody, startups, and businesses that are already operational and generating revenue.
Оutsourcing involves contracting out the whole project or specific tasks to an external vendor, who takes responsibility for the project, starting from planning to software development and delivery. All you need to do is approach a company, specify your requirements and deadlines, and wait for results.
What Is Outstaffing?
Outstaffing means a way of expanding a business’s capabilities with external help. Outstaffing is ideal for startups and developing companies that want to hire professionals to work on specific projects or tasks. Unlike traditional outsourcing companies, outstaffing vendors are committed exclusively to one client company, rather than working from project to project.
This job approach is a high-level, long-term strategy for extending your IT team. It matches particularly well for those companies looking to find experts for the extension of their in-house team in a certain area, all without the headaches of hiring long-term employees. While using an outstaffing model of collaboration, a business takes a more active role in managing a remote team.
Difference between outsourcing and outstaffing
Outsourcing involves delegating specific tasks or business processes to another company, which carries full responsibility for the outsourced software services. Outstaffing, on the other hand, involves the temporary hiring of staff who formally work elsewhere but perform tasks under your management.
These collaboration models have significant differences. However, one thing that is common for both is delegating tasks to an external organization, which reduces business expenses and provides a high-quality software solution. On the other hand, the methods and outcomes of this delegation differ.
When it comes to outstaffing, a customer manages the remote team. Additionally, outstaffed workers aren’t physically present on-site; they are considered part of the team, and the client manages their work, including coordinating assigned tasks, milestones, information sharing, and deliverables.
As compared to outstaffing, the responsibility for managing the outsourced team lies primarily with the external service provider. The customer may provide input and feedback, but the day-to-day management is handled by the outsourcing software company.
Outstaffing Services: Advantages and Disadvantages
The outstaffing model helps companies stay competitive and address specific issues where they lack in-house expertise and don’t want staff augmentation.
This is an excellent option for managers who prefer to stay in control and be involved in project development. Collaborating with a single outstaffing company ensures a smooth process for adding or removing staff as needed.
If changes arise during the task, the company can easily adjust the number of specialists, ensuring that the overall outcome remains unaffected.
Benefits of Outstaffing for the Client
Let’s look at the key advantages of outstaffing:
Outsourcing vs. Outstaffing: How to Choose the Right Model for Your Business?
Control: unlike outsourcing, the client has complete oversight and can influence the process.
Flexibility: team size can be adjusted easily depending on needs, without lengthy hiring processes.
Cost savings: there’s no need to establish an expensive IT infrastructure for remote employees.
Access to a global pool of qualified specialists: there’s no need to search for and train specialists independently; outstaffing companies will find the best developer for your request.
Higher efficiency: companies with full access to project development can assess the hired employees' efficiency at any time.
Disadvantages of the Outstaffing Model
While outstaffing provides control over the process, it also has some drawbacks. Firstly, you are responsible for selecting and managing hired staff, which can be challenging if you lack project management experience or technical expertise. In such cases, it's advisable to consider an outsourcing agency.
Some disadvantages of this model include:
Full administration and associated costs: the client bears responsibility for the legal and administrative issues related to the hired workers.
Communication issues: coordination and mutual understanding between teams can be difficult, especially when communication with remote employees goes through the outstaffing agency.
Dependency on providers: If the service provider encounters any issues, project delays for the client are possible.
High security risks: outstaffing also involves sharing confidential information and intellectual property, which comes with certain risks.
Pros and Cons of Outsourcing
Outsourcing allows businesses to delegate their non-core functions to highly qualified IT companies.
A well-chosen outsourcing strategy can bring many benefits but also has drawbacks. Businesses can save on labor, equipment, and infrastructure costs by handing certain tasks or projects to outsourcing companies. This option is particularly valuable for companies with small teams and limited IT development expertise.
Why Choose Outsourcing
Outsourcing is often used to handle entire projects from start to finish by an external provider, offering the following advantages:
Continuous project development and improvement: the provider thoroughly learns the client’s needs and brings them to life, ensuring all ideas are realized.
Cost reduction: there is no need to maintain the internal IT department for a specific project, saving on salaries, equipment, training, and other resources.
Look for responsibility: an outsourcing provider manages the entire project, freeing you to focus on core business matters.
Outsourcing agents typically have higher expertise and experience in specific fields, ensuring high-quality products or services.
We have reviewed this topic in detail in the article about the advantages of IT outsourcing.
Drawbacks of Outsourcing
Hiring specialists through an outsourcing agency means transferring control over business processes to a third party, which poses certain confidentiality risks.
Additional outsourcing drawbacks include:
Reduced control and flexibility: contractual agreements can limit the client’s influence over procedures, protocols, hiring processes, and planning.
Restrictions on codebase: irresponsible service providers may intentionally create limitations in access during the development stage, preventing clients from managing or influencing the process.
To avoid issues, carefully select a reputable company. Work only with responsible contractors who have high client ratings.
There is also some dependency on the outsourcing agency in terms of project timelines.
Outstaffing vs. Outsourcing: Key Differences Affecting Your Choice
First, identify your business needs and project specifics. Then we’ll help you compare these two models to make the best choice for your situation.
Key Features | Outsourcing | Outstaffing |
Pricing | A company hires and pays for services provided by a provider that handles the project execution and its management. | A company pays for a set number of developers and other specialists hired directly for their team. |
Timelines | Integrating a new team into the existing structure and specific projects may take some time. | Work proceeds faster due to an internal understanding of processes. |
Control | A service provider takes responsibility for day-to-day operations and project management. | A client maintains control over team management, setting development priorities, and project execution. |
Flexibility | The ability to make changes to the team or processes depends on the terms agreed upon in the initial contract. | A model allows the client to adjust team size and modify the project according to business needs. |
In the outstaffing model, the client is responsible for the project outcomes. In outsourcing, the provider is accountable for meeting deadlines and ensuring quality.
Project Duration and Size
Arguably, the most critical factors in choosing a cooperation model are the project's size and duration.
Project Size and Duration | Outsourcing | Outstaffing |
Small and Short-Term Projects | This model is ideal for such projects. You don’t spend on team management, but only pay for the completed work. | This model is not cost-effective for such projects. Personnel selection and training costs may outweigh the work volume. |
Large and Long-Term Projects | This model can also be suitable for these projects. The key is to clearly define responsibilities and the quality control mechanism. | An effective model for these projects. You can establish long-term relationships with hired staff and maintain full control over the process. |
Make predictions regarding the completion of your order, and it will become clear which model suits you best.
Outsource vs Outstaff: Budget and Expertise
An important aspect when choosing between outstaffing and outsourcing is the budget and available technical knowledge.
If you lack internal skills and have budget limitations, outsourcing is likely the best option. It will be more cost-effective because you won’t need to pay for training, taxes, salaries, etc.
However, if the budget is sufficient and you already have a team with the necessary project development skills, outstaffing would be the better choice. This model allows you to have better control over the work process and collaborate more closely with the hired specialists.
Outsourcing vs Outstaffing Services: Which to Choose?
When comparing outstaffing vs outsourcing, pay attention to factors related to the specifics of the projects and your business. We have created a table to help you determine which option is best suited for your needs.
Factors | Outsourcing | Outstaffing |
Budget | Higher at the start, more predictable long-term | Lower at the start, may increase later |
Project Size | Medium, large, very large | Small, medium, large |
Project Duration | Long-term | Short-term, medium-term, long-term |
Control | Low, dependent on the outsourcing company | Higher control and full involvement in the process |
Internal Skills | Minimal or none | Sufficient to manage the team |
Flexibility | Lower, harder to change the team composition | Higher, easier to change the team |
Process Launch | Slower due to contract agreements | Fast |
Specialization | Ability to hire teams with different specializations | Ability to bring in highly specialized experts |
In outsourcing, there is also dependence on the provider. On the other hand, with the outstaffing model, you will need to spend time selecting, adapting, and training employees.
Who Is Suitable for Outstaffing?
Outstaffing is an ideal choice for companies that:
Have full control over the project and oversight of every development process.
Have an urgent need for a specialist
Lack sufficient resources for a specific stage of development.
Want to supplement their technical department with experts who have specific skill sets.
If you recognize your company's needs in the points above, outstaffing is the right option for you.
Who is Best Suited for Outsourcing?
Outsourcing is typically chosen by companies that:
Don’t have enough budget (or other reasons) to build a full in-house technical team;
Need a development team with various specializations for a long-term project;
Lack internal resources and expertise to complete a task.
Many businesses also choose an outsourcing development team to meet high-quality standards and deadlines, which can only be ensured by a reliable outsourcing agency with extensive experience.
How to Choose the Right Outsourcing or Outstaffing Agency?
For the successful execution of a project and minimizing costs, it’s crucial to choose the right partner for your business. A wrong decision can lead to delays and poor-quality work.
To ensure a positive experience when working with offshore companies, follow these steps:
Before looking for and hiring a software development team, take preparatory measures — clearly define business needs and goals, choose a collaboration model (outstaffing or outsourcing), and set a budget.
Search for potential partners online by using specialized platforms and pay attention to company ratings and reviews, ask for recommendations from colleagues or partners who have worked with outsourcing companies, and attend industry events to gain a deeper understanding of the market.
Evaluate a potential outsourcing or outstaffing partner based on the following criteria: technical capabilities, experience, communication methods, number of seniors in the team, legal aspects, and pricing. Additionally, consider assigning a small test task to assess the quality and speed of the company’s work.
Plan and set up working relationships by drafting a clear contract, establishing a control system, setting up communication channels, and maintaining feedback mechanisms.
Follow these recommendations, and your project will be handled by the best outsourcing/outstaffing company on the market, guaranteeing a high-quality result.
Project Scope and Requirements
Clearly defining the requirements and scope of the project will provide an understanding of the results you can expect from a particular supplier company.
To do this, you need to:
Outline the goal: expected results, performance indicators, deadlines, and budget;
Detail all technical requirements: the technologies to be used, the functional capabilities of the product, required quality and security standards;
Determine the necessary resources, including the number of people, their experience level, specialization, etc.
Choose a collaboration model where you need to define the level of control over development and the willingness to share information.
Evaluation of Outsourcing and Outstaffing Services
A reliable provider is a key to success! Therefore, detailed research and evaluation of companies is crucially important.
Before choosing a reliable developer, you should:
Review the provider's portfolio — analyze completed projects and assess technical competence.
Check client reviews on social media and review websites. If possible, contact previous clients to learn about their experience working together.
Evaluate the provider's success in the field, including a previous experience of the company in the market, the qualification level of their specialists, the financial stability of the company, the processes and methodologies they use, and the quality control system used by the company.
Contract Terms and Confidentiality
To avoid legal and financial issues and ensure the protection of intellectual property (IP) and your data, it is essential to approach contract drafting with the utmost responsibility.
Key nuances to consider:
All aspects of the collaboration, task specifications, and expected results should be clearly outlined.
Define the roles and responsibilities of both parties.
Clearly identify the IP within the project framework.
Include a clause prohibiting the disclosure of confidential information to third parties.
Specify data security procedures and mechanisms for regulating access to data.
Develop a course of action in case of information leakage and a procedure for addressing the consequences.
Both parties should seek legal advice from a lawyer who specializes in outsourcing and IP protection issues.
Summary
We hope that this comparison of outsourcing and outstaffing has been useful and helped you clearly understand which model is best suited for your business.
In summary, an outsourcing model becomes a better choice for companies that:
Don’t have a core product or service based on tech solutions;
Don’t have enough budget for a full-stack tech department;
Have an overwhelmed software development team, which can’t spend time and resources on another project;
Lack expertise in developing the product;
Have grown up into large corporations with enough resources to manage external vendors.
On the other hand, outstaffing is the ideal option for businesses that:
Need to supplement their tech department with specialists who have a specific skill set.
Have insufficient resources for a particular development phase (e.g., QA/QC testing or UX).
Want to avoid hiring/HR tasks and need a specialist rapidly.
Want to maintain control and oversight of every development task.
Regardless of whether you choose outstaffing or outsourcing, you will gain economic benefits, access to highly qualified specialists, more time for your core activities and purposes, and a finished product utilizing innovations and modern technologies.
Finally, remember: trust the implementation of your dreams and goals only to reliable, time-tested companies with a solid reputation. The result will exceed all your expectations.
Looking for a reliable, experienced, and highly reputable software development team to help you gain the best outcome?
Choose Lampa.dev.