Outsourcing vs. Outstaffing Models: What is the Difference?
12 min.

What could this choice mean for your IT operation and your business?

When it comes to extending the capabilities of your IT staff, there are many ways to define the choices before you. In the United States, they call it hiring a contractor. In Europe, many try subcontracting or offshoring. In Australia, it’s talent outsourcing.

But no matter what term you use to define it when you have more IT development needs than your current staff can handle, you need to hire more help. And this is when knowing what is outsourced product development and how it differs from “outstaffing” comes in handy.

Consider these recent statistics from Grand View Research, Inc. The company’s market analysis concluded that the global expenditures for outsourcing and outstaff will reach $936.6 billion by 2027 – a rate that is expected to grow by 7.7 percent year over year until then.

So, let’s overview both models, outsourcing and outstaffing advantages and disadvantages, and more to help you make the right choice!

What is an IT Outsourcing Model?

In general, outsourcing is when you have an idea, but there is no way to implement it on your own. You don’t want to bother and establish a whole IT department; instead, you just want to come to another company with your idea and get an application or website ready, paying a certain amount for it.

outstaffing vs outsourcing

What is an IT Outstaffing Model?

IT specialists and businessmen use the word “outstaffing” meaning that it is a type of remote employment where a company is responsible for all, or nearly all, of an outstaffed employee’s time.

This allows a client to “employ” a dedicated IT outstaff team member. At the same time, the IT services provider acts as the official employer that pays benefits, bonuses, equipment, holiday pay, and employer taxes.

Outstaffing Model
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Difference Between Outstaff vs Outsource

Outstaff vs outsource – which path should you choose?

At ProCoders, we usually ask our clients to think hard about the kind of outstaff projects needed. Will you truly have enough work to keep one or more people occupied full-time, year-round? Do you have the capacity to bring that person in as a “vendor worker” or “contract worker” within your company? Do you want access to this worker as a manager, working with them and controlling their workflow daily as if they were a member of your ongoing IT staff? Then the outstaffing model might be for you.

Outsourcing will be the right option if you have occasional bursts of IT needs, whether to build a new app or shepherd the company through major software outsourcing and outstaffing transitions.

In this case, your IT services vendor can quote you what it will cost to work with their IT resources for the duration of your project. They handle all the management of their team resources, with a client liaison that helps work with you on a business plan.

Outsourcing and Outstaffing

Outsourcing Example:

We at ProCoders have our own service that can fit your business requirements that’s close to outsourcing: discovery phase + dedicated development team.

The discovery phase is a critical step in your process. At this stage, ProCoders are making a development plan. We help to estimate your project as accurately as possible.

After compiling a discovery phase, we can select a team for you that will work under your supervision. ProCoders teams manage themselves, but you, as a client, still control the process: you have clear prescribed metrics for success, deadlines, and budget, so unlike classic outsourcing of software development, you have guarantees written in an official document.

One of the most prominent examples ProCoders has in our experience is the software development for Dryft. For the Discovery Phase, ProCoders worked with Dryft’s management for 4 weeks to conduct an extensive survey of requirements needed for each of the app’s functions, and weigh options for programming languages, plugins, platforms, and widgets. Once the right tools were identified, a work plan was assembled with an eye to speed and maximizing the budget.

After creating a favorable impression with our initial Discovery phase of Dryft’s app, ProCoders was hired for an additional activation. The ProCoders team worked with the UX/UI designers at Dryft to create an app that delivered on the user experience they were trying to achieve.

Outstaffing Example

One of the perfect outstaffing examples is ProCoders’ collaboration with AxisPoint/VSimple. When AxisPoint could not find enough local engineers in their home state of Kentucky, they reached out to ProCoders for help. ProCoders answered the call with an IT Staff Augmentation Services proposal that allowed the CTO management team at AxisPoint to manage the programmers ProCoders provided directly. This way, AxisPoint/VSimple saved both money and time on hiring.

Outsourcing Pros and Cons

Advantages of Outsourcing:

  • Code quality is the vendor’s responsibility. Vendors should be responsible for quality assurance and ensuring the coding fits your project parameters. No daily management outputs are necessary from you at a client level. And that’s a big plus.
  • Day-to-day management is not needed. Vendors provide you with turnkey service. They coordinate resources between all the IT talent working on your project, from your internal staff to their outsourced team. They manage schedules, quality assurance, deliverables, and communication.
  • Your vendor handles HR. Need more people? Or less? They handle scheduling and recruitment, as well as employee taxes, payroll, benefits, and so much more. Get only the help you need when you need it.
  • No hardware/software purchases are needed. Your outsourced IT team will need hardware and software to complete your projects, but those expenses will not be directly on your expense ledger. Your vendor will be responsible for all the costs of those expenses, and this will most likely be factored into the estimate for their work with you.
  • A wider, more interchangeable variety of resources is available. When you work on an outsourcing basis, it is easier for your vendor to bring in various specialists to your project for just an hour or two. When you outstaff, the vendors you choose are tied to your company’s work similarly to a full or part-time employee, so you have to stick with your resources. The flexibility that outsourcing offers can be a key deciding point for many clients.
  • Faster turnaround times. With more resources available at lower rates, it’s easier for outsourced developers to meet deadlines that might be impossible for your existing team to meet without overtime pay or sacrificing quality assurance procedures during crunch periods when a lot is going on in multiple projects at once.

Disadvantages of Outsourcing:

  • Control is with the vendor. This is the flip side of our “pro” listed earlier. If you are a client who likes to have a hand in the day-to-day activities of coding, planning, and scheduling, outsourcing may not be for you.
  • Outsourcing is more expensive than outstaffing. All that management and turnkey service comes at a price. In an outsourcing agreement, you must pay by the hour for the help of the workers and the outstaffing project management team assigned to coordinate your account. Many vendors may charge you a higher hourly rate for a simple project but may lower their rate when they know you are staying around for greater projects in the future.

    So, before choosing between outsourcing and outstaffing (for example, in terms of software development), compare their different pricing models.
  • You don’t have direct contact with all members of the team, which increases the probability of being cheated. This is because there is no direct communication between you and your outsourced developer or designer, so it becomes difficult for you to know exactly what they are doing or how much time they are spending on your project.
  • It’s hard to keep an eye on all the processes involved in your project. You may find that your contractor is not doing what he promised, or worse, he might be overcharging for his services.
    outsourcing and outstaffing

    Recommended: Staff Augmentation vs IT Outsourcing

    Outstaffing Pros and Cons

    Advantages of an Outstaffing Model:

    • Flexible hiring model. Outstaffing is the next best thing to having your own auxiliary staff. Staff resources are dedicated to you and your IT needs, while the vendor handles payroll.
    • You have daily control over the development process. The decision to outsource vs. outstaff often comes down to this. If you need more staff but can’t afford to hire them into your organization, outstaff development is the next best thing.
    • Full Access. When people wonder what outstaffing is and why they would choose to work this way, the answer lies in having more day-to-day, hands-on management. In this outstaffing model, you work as the project manager. You coordinate resources. You handle the quality assurance of the development process.
    • Lower costs. Because the client is handling so much of the heavy lifting on management, the hourly rate of the outstaff team members is usually lower, and if you eliminate the hours of project management, your vendor usually adds the estimate. The savings can be significant if you’re up for the extra work.
    • The work is done quickly. When you hire an expert to do your programming, you don’t have to wait for them to learn the ropes of your business and get up to speed. The developer will know how to create programs compatible with your system, so you won’t have problems integrating the new app into your website or other programs.
    • Reliability. Finding a team that can be as reliable as a remote outsourcing company is hard. This is because the team you hire is not your employees but your contractors. As long as they are paid well and have incentives to work hard, they will never leave your side. They can set their own schedules and work from anywhere they want. You won’t have to worry about them leaving for another job or being too busy with other projects to finish yours on time or at all!
    • Search. You just need to send your requirements and get the CVs of those interested in your project. It wouldn’t be just freelancers you have found on the freelance platform, but real professionals who were already interviewed and tested by specialists.
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    Disadvantages of Outstaffing:

    • Failure to provide good communication channels. With vendor staff often working remotely, or at least separately from the rest of your team, communication channels are important. As the client, you’ll have to ensure your outstaff team is fully part of your project management software system and their reporting is transparent to the rest of your corporate team. It is also key to setting clear expectations and staying involved daily, just like your corporate-based IT team.
    • Project responsibility lies with the client. Depending on the time you have to manage your IT outstaffing services, this can be a pro or a con. It’s up to you to decide—what’s easier to invest, your budget or your time?
    • Price. It can be higher if you want to collaborate with a company with lots of good feedback and a high reputation. This is because these companies have more customers than smaller ones and can afford to hire more qualified developers.
      • Hidden costs. To hidden costs, we can include:

        – Overtime work. Usually, you sign a contract or a particular amount of hours. However, if you need your developers to work overtime, you will need to pay for it additionally;

        – Rate change. If you work with an outstaffing company for a more or less long period of time, mind that the rates may be changed. Nowadays, the economy is unstable, so rate change is common;

        – Employee change. Some outstaffing companies may change an employee for your project without even informing you. Of course, it’s not common, but we decided that you should know that such situations may also appear;

        – Senior = middle and middle = junior. This is the worst case that any client can imagine, but sometimes it happens too. Some outstaffing companies may charge you for a middle developer while actually providing you with a junior one. For it not to happen, you should always look through the company reviews and don’t hesitate to contact their previous clients directly.

        In the case of ProCoders, we don’t hide our clients, and you can look at some of the projects we have already done.
      Outstaffing

      Recommended: Outsourcing Software Development Costs

      Outstaffing vs Outsourcing: What Would Be Best for Your Project?

      Resources. When you decide between outsourcing or outstaffing or comparing IT-managed services vs. staff augmentation, it’s the only criteria that matters. Do you have the internal resources for the daily management of a team of vendor-employed programmers? Do you have good internal processes for assigning and following up on projects?

      Is it easy to loop outsiders into your project management software systems? Can your staff work with outside developers seamlessly? If the answer to all these questions is no, you should seriously consider outsourcing instead of outstaffing. You’ll need the turnkey convenience that outsourcing provides.

      There are many options to consider in the outsourcing vs outstaffing debate. But truly, all the pros and cons boil down to this. Outstaffing is better for clients with significant, long-term needs that need day-to-day control of their vendor team. Outsourcing is better for clients with shorter-term needs that necessitate turnkey service from their vendors.

      Outsourcing prosOutsourcing consOutstaffing prosOutstaffing cons
      100% responsibility on the developer’s sidePoor quality of the final product is possibleCustomer control the quality of a product100% responsibility for a result is on a customer
      (Almost) no management workLess controlHigh controlAdditional management efforts
      Higher costs than with outstaffingLower costs than with outsourcing

      How to Find an Outstaffing or Outsourcing Partner

      If you’re looking for a partner for outsourcing or outstaffing, Central Europe, Estonia, Croatia, Portugal, and Albania can be good directions for this. A quick internet search can find any number of companies that are more than willing to work with your company. Many of them, especially those in lower-cost countries like Estonia, Albania, and India, can offer you enormous IT outsourcing capacity at a fraction of the cost of working in the US or even much of the main part of Western Europe. The key is to ask the right questions, such as:

      • Does your team have a fluent command of English? This is the key to avoiding important miscommunications. At ProCoders, all of our developers are language-tested, as we only hire people who speak English. If a specialist is technically very good, but their English level needs to be higher, we hire them, but before putting him on a project, we provide them with English language courses.
      • How many time zones separate you? To ensure you can talk to your team during reasonable work hours, your team should be no farther away than seven to eight hours. At ProCoders, we take that extra step, often starting our official workday for that client at 12 p.m., ensuring more hours are available for our team to work directly with a client’s staff.
      • Can you provide references? Don’t let your vendor plead “client non-disclosure.” They should be able to send you a portfolio of their work and have clients who are ready to speak with you directly if need be. You can look through the ProCoders cases here.
      • How do you handle billing and record-keeping? Your vendor should be able to work seamlessly with your accounting department and comply with all your country’s accounting laws.
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      Outsource vs Outstaff with ProCoders

      If you’re on the fence about your ability to outsource vs outstaff, ProCoders can help you choose the information technology outsourcing services. We can work with your team as an outsourced or outstaffed resource. We’d love to talk to you about your needs today and create a proposal specifically for your business needs.

      Whether you need to create your project from scratch or give a boost to your existing product – ProCoders is always here to help. With our outstanding discovery phase service, which will help you find out all the issues before you will face them, optimize the budget and plan further steps, we have already saved a lot of businesses from failure.

      As an IT vendor based in Central Europe, Estonia, Croatia, Portugal, and Albania, we have access to a deep well of programming talent in various specialties and expertise levels. The balance between quality and costs is the philosophy that ProCoders follow.

      We’d love to talk to you about your digital needs!

      FAQ
      What is outstaffing definition?

      Outstaffing is a model where a company hires remote specialists from another company to work on their projects, but the remote staff remains officially employed by the outstaffing vendor.

      What is an outsourcing definition?

      Outsourcing is a model where a company delegates an entire project or business process to an external service provider who manages and completes the tasks independently.

      What is the difference between outstaffing and outsourcing?

      Outstaffing involves hiring remote employees to work under the client’s management, while outsourcing delegates entire projects or processes to an external provider who manages the work.

      What are the types of outsourcing?

      Types of outsourcing include IT outsourcing, business process outsourcing (BPO), offshore outsourcing, nearshore outsourcing, and onshore outsourcing.

      What is outsourcing vs insourcing model?

      Outsourcing involves hiring external providers to handle certain tasks or processes, while insourcing means performing these tasks within the company using internal resources.

      When to use outsourcing?

      Use outsourcing when you need to delegate entire projects or business processes to an external provider, especially if you want to focus on your core activities, reduce operational costs, and leverage specialized expertise without managing the day-to-day operations.

      1 Comment:
      • Hi there @George Krivoruchko thanks for sharing this information with us i really liked it. Now it’s more clear about what outstaffing is actually.

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