Companies often reach a point in their development when they have to hire remote experts to fulfill their needs. Those can be third party vendors or remote employees. Either outsourcing or outstaffing will be able to meet the company’s expectations, depending on its goals and the type of business.
Outstaffing VS Outsourcing
Outsourcing strategy became an intrinsic part of the international business economics in the 1990s, having gained a worldwide popularity since that time. Outstaffing, or subcontracting, means hiring an outside provider or company to perform specific services. It is an older term than outsourcing and usually refers to the situations when a task cannot be handled internally. Outstaffing companies or employees work closely with the providers until the end of the project. On the contrary, an outsourcer is responsible for the results of the project and is not supposed to cooperate with the employer in the process on a daily basis. Therefore, outsourcing copes with the whole project, while outstaffing means hiring individuals to work remotely.
IT Outsourcing Trends
A software outsourcing company is likely to work on one project at a time with the clients whose business does not heavily rely on IT. There are numerous companies in the world that do not focus their main effort on tech. It is easier for them to find a reliable outsourcer who would deliver the best results. Therefore, outsourcing is the most suitable option for the companies which need web development services and/or other kinds of business development that require tech initiatives. As a rule, outsourcing providers agree to deliver the entire project. This means that the costs already include the employees’ salaries, and the providers are also responsible for outsource personnel management.
An outstaffing supplier is supposed to select skilled personnel qualified for a particular task set by the company. However, the staff offered by the supplier is not responsible for the ultimate outcome. Such people or companies are “rented” and should be treated as remote employees. They usually charge the employer for their services, however, they are subject to the outstaffer. Outstaffing suppliers provide official employment, insurance, and taxation to their staff. However, they are responsible neither for the quality of services rendered, nor for personnel management. In certain cases, staff can be hired by the employer and even agree to relocate.
There are two models of outstaffing. The first one is called cost model, when the client pays fixed amounts of money per person, and the company manages this money. It pays the person at its own discretion, including bonuses, which may be called hidden HR management. The second one is called “the cost plus” - the customer knows how much he or she pays to a person and also covers all additional expenses, including holidays, taxes, bonuses, office, equipment, and the company’s margin is also included here. The latter is a more open model, as the customer fully participates in the process. Therefore, there are less risks for the client and, at the same time, more power.
Outstaffing is often considered a part of outsourcing, but it is not so. Outstaffing is basically signing a long-term contract to receive professional support in the particular field during a long period of time. It allows to enhance the efficiency of certain activities and, at the same time, to cut the company’s costs.
To conclude, the main difference between outstaffing and outsourcing is that the latter is delegation of particular functions with a focus on the result. Outstaffing is never about a complete transfer of duties, as it engages workers to perform specific tasks. Both outsourcing and outstaffing are widely popular in the IT sector. The majority of well-known IT corporations often resort to these two strategies. Which one is better, outsourcing or outstaffing?
Pros of Outsourcing IT Services
Forward-looking companies are interested in spending less time on web development, which becomes possible with outsourcing. Outside experts will entirely concentrate on your business, so it will bring good results. The products will be delivered quicker to the market, increasing your competitive ability. Moreover, you will have more flexibility due to outsourcing,
which will allow you to focus on the core business activities.
Wide Choice of Experts
There is a plethora of professional teams that provide excellent IT outsourcing services, especially in Ukraine. What is more, HR responsibilities will be delegated to the outsourcer, too. Therefore, you will have more freedom from challenging IT tasks. So do not be afraid to entrust your IT project to professionals, as you will be able to concentrate on the most important business decisions.
A software outsourcing company will come up with innovative technical solutions, which is crucial for your business in the long-term perspective. European companies tend to outsource the following functions to reliable professionals: IT services, advertising and PR, accounting services, optimization, translation, logistic services, legal support, recruitment services, as well as security provision services, and gives their software services outsourcing.
Outsourcing Pricing Models
Outsourcing provides wonderful cost-efficient solutions for almost all types of businesses. In fact, the outsourcer is fully responsible for the quality and the result of an outsourced project. Therefore, the client does not have to spend additional money to cover the insurance, overtime, and various benefits of overseas employees. Procuring materials and equipment that are necessary to complete the project are also within the scope of the outsourcer’s responsibility. Speaking of IT industry, Ukrainian outsourcing experts are incredible professionals who deliver quality services for a reasonable price.
An outsourcing company is responsible for the result, for the task, for technical knowledge, as well as for technical expertise. This means software products or parts of such products delivered on time, a task accomplished on time, or server support stability. There are open and closed interaction models. In the open model, customers can act as a part of a distributed team, they and their staff can be involved in the planning process, daily meetings and watch the performance of the whole team. And it is very important for the customer to have the same employees who he had already worked with. And in the closed model only PM and business analyst interact with the customer, but the entire team is closed, so no one knows who exactly works there. In such a model, the customer is not supposed to care much about it, as the main thing is the result. It depends on the customer and on the situation on the project itself, but in any case staff turnover on the project is very bad, regardless of the outsourcing model. This greatly affects the project and makes it almost impossible to bring it to life without drawbacks.
Cons of Outsourcing
Outsourcing team is not usually well-integrated within a company, so the process of communication might take some time. Company representative will have to explain the expectations and peculiarities of the business in the beginning and also estimate project results in the end.
Project Control Challenges
It may be hard to control intermediate outcomes and communicate project pressure points. Project maintenance and control is performed by a third party agency, so company owner is not supposed to interfere much with the process.
Poor administration is not typical of well-known outsourcing companies, nevertheless, it might occur if you are working with less experienced professionals. It is possible to detect insufficient management skills on early stages, though. If you notice that the tasks are set in an indistinct manner, planning is not carried out as it should, and the resources are distributed in the wrong way, it is time to change the outsourcing agency.
Pros of Outstaffing
Hiring Vetted Experts
Outstaffing allows to hire a vetted professional in the required field. You won’t have to do any background checks, as the outstaffing provider will take care of these procedures.
Cheaper Than In-House Employees
You can hire skilled professionals without having to pay the taxes, insurance, benefits, to name but a few. Outstaffing helps business owners to cut down on labor force without losing quality.
Flexibility in Hiring and Firing
Due to outstaffing, you will be able to increase and decrease the amount of experts you’ve hired to work on your project at any time. It is also possible to easily guide their activities related to current projects.
Cons of Outstaffing
Outstaffed employees that work remotely for your company may have diverse cultural backgrounds. This might lead to a certain degree of misunderstanding between the employer and overseas professionals.
The contractor may not be able to cope with the duties, which may happen if he or she isn’t qualified enough or didn’t receive clear instructions. However, most of specialists provided by outstaffing agencies have excellent working experience. Such situation won’t be likely to take place, if the agreement with the outsourcer has been made in a proper way, and the project has been managed professionally.
Outstaffing Management Model
In general, it is much easier to deal with the outsourcer than with a lazy employee. Try to break the project into short parts and define control points at the end of each stage. There should also be the exact criteria that will identify whether the requirements have been met. Include this data into the contract to secure your business: if the outstaffed employee doesn’t pass a control point, then the employer will have the right to terminate the agreement. Please note that any implementation mistakes which may occur during project completion have to be solved in-house without resorting to other qualified professionals.
Outstaffing VS Outsourcing: What to Choose?
Both outsourcing and outstaffing will provide great results for businesses which don’t have in-house professionals that can properly fulfill their needs. Both of these strategies will also be suitable for the companies that do not have technical knowledge necessary to accomplish their development initiatives. However, there will be a difference for certain businesses.
If your company does not lay emphasis on technology and does not possess the personnel to supervise or hire appropriate candidates for the tech initiatives - choose outsourcing. A software outsourcing company will also come in handy, if you have a standalone custom software project which needs to be completed. In case you have concerns about confidentiality, you can always use NDA agreement to avoid data leakage.
An outstaffing supplier will be the best to meet your business goals, if you’d like to hire employees to work on a project-by-project basis. This option will suit companies with a strong management and/or directing partners capable of supervising the projects. Outstaffing will make sense, if you or your employees are able to guide an overseas expert. Such strategy will be also useful if you suddenly need particular workforce that you don’t possess.
At Diceus, we provide both outsourcing and outstaffing. We offer our customers the model which suits their business needs best of all. We select the model based on the expertise of our clients and their business objectives. We have solid HR management with HR team and a recruiter of specialists. Each recruiter selects professionals based on their expertise. This allows us to shape a team for even the most specific requirements provided by our customers and in the best possible time. We also work not only to attract employees, but also to help the develop. Therefore, we provide motivational programs for different types of interactions in order to maintain long-term relationships with our employees, as well as with our partners and clients.
If you want to be more involved, know all the developers in person, build long-term relationships with them, and it's not some fixed scope of work that you want to do and forget, and you have time and desire to manage, and you have your own PM - it's definitely outstaffing . But if you do not have free resources, and there is no time - it's outsourcing. There are certain approaches when outstaffing is performed for the whole team and PM. But still, PM is not a panacea, because PM also needs to be managed. But in this case, you are responsible for the result, and you cannot have any concerns about the team’s technical issues. In this case, the price will be lower.
If your company needs to hire a remote professional, you have two great options to choose from. Both outsourcing and outstaffing will help you to achieve your company’s goals and develop your business. Analyze the pros and cons of each opportunity and select the one that suits you best of all.