
Modern companies that seek to increase their competitiveness and optimize business processes often face a choice between different formats of external cooperation. Outstaffing and outsourcing stand out among the most popular solutions. Despite the similarity of concepts, these approaches differ significantly. The issue becomes especially relevant in the IT sector, where IT outsourcing companies play a key role in providing technological support to businesses.
What Is Outsourcing?
Outsourcing is the process of transferring functions and tasks to a third-party company. The main goal of outsourcing is to reduce costs and focus on other business processes.
Unlike hiring personnel, outsourcing involves concluding an agreement with another company that takes responsibility for performing tasks and attracting highly qualified specialists without permanent staff. This allows the company to free up its own resources for more important processes or to obtain expertise that is not available internally.
What Is Outstaffing?
Outstaffing is a form of hiring in which employees are hired by a third-party company but work for the customer. Legally and administratively, they are subordinate to the outstaffing agency, which handles HR and accounting issues. For example, a startup orders development services with unique expertise from an IT agency.
The main goal of outstaffing is to find a competent specialist or an additional employee to compensate for the lack of in-house personnel.
Outstaffing is used to quickly increase the staff without having to go through a long process of hiring employees. The service is used by entrepreneurs who need temporary workers for projects or seasonal work.
Pros And Cons of Outsourcing And Outstaffing
Let’s consider the advantages and disadvantages of outsourcing.
Pros of outsourcing:
- Reduced personnel and infrastructure costs. The customer does not need to invest in equipment, office space, and training of performers. This is already included in the cost of the IT outsourcing services.
- Access to highly qualified specialists. You should look for a company that has experience working with projects of varying complexity, and each employee of the agency has unique knowledge and undergoes training to improve their skills.
- Increased efficiency and quality of task execution. For each project, a team with a certain stack of technologies is usually assigned that can solve the client’s problem faster and more accurately.
- Flexibility in resource management and scalability. Specialized companies adhere to flexible project management methods and, depending on the tasks set, they can scale and help develop the project.
- Reduced time to complete tasks and implement innovations. Reliable companies work with current versions of tools and actively implement innovations in customer projects.
Disadvantages of outsourcing:
- Loss of control over the process of completing tasks.
- Risk of confidential information leakage.
- Possible cultural and language barriers.
- Dependence on an external service provider.
- A long search process due to insufficient competencies and adaptation of a suitable outsourcer.
Now let’s move on to the advantages and disadvantages of outstaffing.
Advantages of outstaffing:
- Quick attraction of additional personnel. Companies that specialize in outstaffing help customers quickly find additional contractors for urgent projects.
- Reducing the burden on the HR and accounting departments.
- Flexibility in managing the number of personnel.
- Possibility of temporary hiring of specialists for projects.
- Reducing legal risks when hiring and firing contractors.
Disadvantages of outstaffing:
- Employee motivation and loyalty may be lower.
- Possible problems with integration into corporate culture.
- Limited influence on personnel management.
- Risks of violating labor laws.
- Additional costs for outstaffing services.
The Difference Between Outsourcing And Outstaffing
Let’s look at the key differences between outstaffing and outsourcing.
- Where should the contractor be located?
- Outsourcing: the contractor works at his workplace, following internal rules of procedure. The results are transferred to the customer in the form of reports.
- Outstaffing: employees work directly on the customer’s premises or remotely.
- Employment.
- Outsourcing: specialists are employed by the service provider and are not legally associated with the customer.
- Outstaffing: specialists are employed by the outstaffing agency, but actually work for the customer, remaining legally assigned to the outstaffing agency.
- Wages.
- Outsourcing: the customer pays for the results of the work according to the contract, the amount depends on the volume and complexity of the project.
- Outstaffing: the customer pays for the staff hours, the payment includes the employee’s salary, taxes, and the outstaffing agency’s commission.
- Manager of employees.
- Outsourcing: employees report to the managers of the service provider company.
- Outstaffing: employees report directly to the managers of the customer.
4. Contract nuances.
- Outsourcing: a contract for the provision of services, which clearly specifies the tasks, deadlines, and responsibilities of the parties, it may include penalties for failure to comply with the terms.
- Outstaffing: a contract for the provision of personnel, regulating the working conditions, responsibilities of the parties, and the level of responsibility for employees.
- Level of control and responsibility.
- Outsourcing: the primary responsibility for the quality and timeliness of task completion lies with the service provider company, which reduces the risks for the customer.
- Outstaffing: The responsibility for the management and control of employees lies with the customer, and the outstaffing company is responsible for administrative and personnel issues.
- Duration of cooperation.
- Outsourcing: can be used for both long-term and short-term projects: from website development to the development of a large-scale web product.
- Outstaffing: usually used for temporary projects, allows the client to quickly increase or decrease staff, as well as find highly specialized performers. In rarer cases, outstaffers are attracted for long-term cooperation.
- Focus on business tasks.
- Outsourcing: allows the company to focus on its core competencies, transferring non-core tasks to external performers.
- Outstaffing: helps the company manage peak loads by temporarily attracting the necessary personnel without long-term commitments.
- Cost and financial transparency.
- Outsourcing: fixed costs for services specified in the contract allow you to accurately plan your budget.
- Outstaffing: a flexible cost model, depending on the number of employees involved and the duration of their work, may include additional costs.
Final Thoughts
Understanding the differences between outstaffing and outsourcing allows companies to make more informed decisions based on their needs and development strategy. Services provided by IT outsourcing agencies are ideal for transferring responsibility for tasks to third-party specialists and achieving a high level of expertise. If you are looking for a reliable IT outsourcing service provider, we recommend paying attention to N-iX.