Outsourcing vs. Outstaffing. It’s the age old question of whether to hire a third party vendor, or to staff employees from remote locations. Okay, so maybe it’s not that old of a question since IT Outsourcing and regularly staffing remote workers is somewhat of a new trend for companies.
Still, knowing when to use one and when to use the other is important terrain to cover, so in this post we’ll go over a detailed explanation of what each is, what the pros and cons of using each are, and which might be better for you.
What is the Difference?
An IT Outsourcing provider typically works on one project at a time with different companies whose businesses aren’t entirely, or even mostly, reliant on IT. And being that most businesses in the world don’t revolve around tech, Outsourcing is typically the go to move for companies that need web and/or other business developments which heavily center on tech initiatives.
Outsourcing providers are responsible for the entire project that they agree to deliver on, which means that both the costs of paying employees, and the quality of work fall under the responsibility of the assigned agency.
Meanwhile, an Outstaffing supplier is responsible only for the qualified personnel they provide to clients. This process is also sometimes referred to as FTE (Full Time Equivalent) and basically allows clients to “rent” IT professionals. The general way that Outstaffing works is that any business can hire an Outstaffer’s employees, who then continue to work at the Outstaffer’s offices—though these employees essentially change the employer they work for.
This can last for as long as the business requires the services of an Outstaffed employee, and can sometimes turn into relocation and hiring of the employee themselves. Outstaffing suppliers are responsible for ensuring the official employment, taxation, insurance, etc. of all employees, but unlike IT Outsourcing providers, they are not responsible for the management of personnel or the quality of services rendered.
Basically, where Outsourcing refers to the complexities and overall support of a whole project, Outstaffing is about hiring individuals.
Pros of Outsourcing
As the quality and overall delivery of an outsourced project falls under the Outsourcer’s responsibility additional costs such as overtime, insurance, and benefits don’t fall to the client.
- More HR responsibilities are delegated to the Outsourcer
- Added flexibility allows the client to continue core business activities while the outsourcer works on delivery of the project
- Does not require overhead cost of procuring materials and equipment necessary to completing the project
Cons of Outsourcing
- Since Outsourcers are not integrated within your own company the time spent on communicating project pressure points and expectations can become significant
- Project control is essentially given over to a third party agency which limits your own company’s control on the end product
Pros of Outstaffing
- Benefit of hiring a vetted IT professional without having to pay the overhead of benefits, taxes insurance, etc.
- Flexibility in being able to increase and decrease the amount of dedicated specialists you hire to work on your projects
- Efficient way of identifying professionals and guiding their activities as it relates to ongoing projects
Cons of Outstaffing
- Again, as Outstaffed employees work remotely (many times overseas) communications between project managers and employees can sometimes be an issue
- Any implementation mistakes that occur during a project will have to be solved in-house without the expertise of other qualified experts
Which to Choose?
Both options can provide quick and actionable results for companies that either don’t have the technical knowledge to fulfill their own development initiatives, or for companies that don’t have the in-house man power to properly execute on initiatives. But whether to choose an IT Outsourcing agency or to go with an Outstaffing supplier depends on your needs.
If, for example, your company does not have a huge focus on technology—and therefore does not have the needed personnel to oversee or staff appropriately for needed tech initiatives then Outsourcing is probably the preferred mode of completing any development projects you may have. As stated above, most companies in the world don’t center their day to day tasks on technology deployments, which is why Outsourcing is such a popular choice.
If you’re still not sure on what an Outsourcing development plan could look like for your own company, we’ve provided a link here to a case study for the nonprofit NYRR (New York Road Runners) which is the world’s largest running organization.
What’s more, Outsourcing agencies typically look to cement a long term relationship with the clients they service as continued service will make transitioning to future development projects more of a seamless process.
Moving on to why an Outstaffing supplier might work best for your company’s project goals, we suggest going this route if you want to build relationships with specific employees that can work on a project to project basis. This option is particularly useful for companies that have managers and directing partners who are capable of overseeing development projects, but who aren’t necessarily in a position to fulfill positions in-house.