Outstaffing vs Outsourcing: which to choose?
And what could this choice mean for your business?
August 09, 2021
5 min read
To turn a great idea into a working digital product, you need the right people on your team. Qualified candidates in IT are not very easy to find and, if found, to keep on your team. Instead of building an expensive in-house team, many companies opt to outsource or outstaff.
According to Grand View Research, Inc, the global expenditures for outsourcing and outstaffing will reach $936.6 billion by 2027, then growing by 7.7% yearly. Resorting to external vendors is a real world-wide trend that has become the new norm in the IT industry.
Why do companies look for talent outside their own organisations? Main reasons are expense of hiring and maintaining permanent staff, conjugated with a shortage of qualified workers. Turning to outsourcing and outstaffing allows employers to tap into whole new talent pools. Firstly, eliminating geographical borders means you can hire the best talent for your specific task from any country. Moreover, this working model is also more cost-effective, as companies determine salaries by baselines local to workers. As a result, paying for a talent from a lower cost country such as Ukraine can be as much as 50% less than for a similar talent from the United States
So, we have established that turning to the external vendor may be very beneficial to your company. The next question is, outstaffing or outsourcing? What is the difference? How to determine which suits your needs better?
While the two models seem similar on the surface, let’s define what sets them apart.
What is Outsourcing?
Situation: someone wants to build a house, but does not even know where to start. This person has no building experience whatsoever. They hire a construction team, describe what they want and show the blueprints — and leave them to it. This person becomes their client, and while they can visit a construction site every day, all the work is done by the professional builders. When the house is finished, the house belongs to the client, while the team moves on to build another house for someone else.
The same works for software development. When a company lacks technical knowledge, sometimes it is a more rational decision to hire professionals for a specific project that lasts a couple of months, rather than to recruit in-house developers. It just takes too many resources to invest in hiring, inducting and training an in-house team.
Outsourcing means a company gives their idea to a remote development team — and they deliver a final digital product. While an outsource vendor provides their technical and management expertise, the company can focus on its business. The concept behind is to reduce costs and a way to use someone else’s highly-specialised expertise and experience.
What is Outstaffing?
Situation: someone wants to build a house, has plenty of experience and has a team of relatives and friends on hand. However, they do not know which wood to use. This person calls a professional carpenter, the former becoming a client and the latter becoming a full-fledged part of the building team.
On a company scale, outstaffing means a remote specialist acts as a temporary member of your in-house team. This allows a company to ‘rent’ basically any super-specialised software developer, depending on what this specific project needs.
In addition to cost-reduction, outstaffing helps to simplify personnel management: no need to sort out vacations, sick leaves, payments, compliance with social guarantees. All of these bureaucratic questions are the responsibility of the outstaffer company. What is more, a hiring company does not have to spend time searching for and recruiting a candidate, as the outstaffer will provide a suitable expert for them.
So, one or the other?
An outsourcing company will be fully accountable for work results and quality. They decide on the framework and team composition, controlling the development process from A to Z. On the other hand, an outstaffing provider does not intrude into the company’s software engineer work and an in-house project manager will always oversee what they do and communicate with them.
Which one you need therefore depends on whether you have an in-house team and what kind of expertise you require. If you are not 100% sure about your ability to outsource or outstaff, Voypost can help you choose and build a dream team for your business needs specifically. We provide both outsourcing and outstaffing services and have extensive commutative experience in a wide variety of specialties in all areas of digital product development.
We would love to hear about your needs and put together the most suitable solutions for you.