What Is Outstaffing? A Comprehensive Guide to Outstaffing vs Outsourcing: Advantages, Disadvantages, and Decision-Making Tips

Outstaffing vs Outsourcing. Which one should you choose? Deciding whether going for outstaffing services is the appropriate choice for your business can be a complicated task. If you’re looking to scale your business and access a vast talent pool, both outstaffing and outsourcing can provide the necessary flexibility. In fact, according to Statista, the IT outsourcing revenue is expected to hit US$395.00 billion in 2022. The outstaffing model, in particular, has gained traction due to its attractiveness to businesses looking to fill skill gaps in their team.

However, before deciding between outstaffing vs outsourcing, it’s important to understand their differences. Outstaffing and outsourcing operate on different hiring models and cater to distinct business needs. In this article, we’ll dive deep into outstaffing – what it is, how it works, its pros and cons, and how to choose a suitable outstaffing partner for your company. Finally, you will have the opportunity to take a brief quiz to determine whether outstaffing is the best option for your business.

So what is the Outstaffing model?

Outstaffing is a popular staff augmentation model that allows businesses to hire experienced specialists from outstaffing companies to work on their projects. In this model, the external team is responsible for the recruitment, management, and payment of their staff, who work exclusively on the client’s project.

How does the Outstaffing work?

Here are the key steps involved in the outstaffing process:

1. Determine your project requirements and the skills you need to complete it successfully.
2. Choose an outsourcing service provider that specializes in your industry and can offer outstaffing team with the skills you require.
3. Select and delegate tasks to the skilled outstaffed developers or other professionals who will become an integral part of your in-house team.
4. Monitor and manage your remote team’s work progress and coordinate their tasks with your existing team.
5. Enjoy the benefits of having a remote team of experienced specialists working on your project without the added cost and hassle of hiring employees.

Pros and Cons of the Outstaffing Model

Pros:

• Access to a pool of IT professionals from different regions and cultures with unique perspectives and experiences.
• Flexibility to scale your dedicated team up or down depending on your project requirements.
• Reduced overhead costs associated with hiring, training, and managing employees.
• Greater control over your project, including direction, coordination, and task assignment.

Cons:

• Lack of physical presence and possible communication gaps between outstaffed and in-house teams.
• Sole responsibility for the success or failure of the outstaffed developers, support specialist or else.
• Potential cultural differences, language barriers, and time zone differences that may affect team collaboration.

Best Suited for Outstaffing

Outstaffing services are best suited for companies  that require specific skills to supplement their existing in-house team or startups looking to build a team without the added cost and hassle of hiring employees. Outstaffing offers flexibility, cost savings, and access to a talented pool of professionals. Ultimately, whether a remote hiring model is a good fit will depend on the specific job and the individual’s preferences and circumstances.

 

What is the Outsourcing Model and its Key Components in Remote Hiring? 

Outsourcing is a reliable model of remote hiring where businesses delegate their entire software development responsibilities and other tasks  to a third-party company. This external IT agency is responsible for recruiting and managing team members, handling administrative tasks, and submitting project deliverables. Companies with a hiring model that relies heavily on outsourcing or contracting external IT services may not need to maintain in-house IT capabilities of a high standard. However, it is important to note that outsourcing IT services does not mean that a company can completely disregard its internal IT capabilities. A basic level of IT expertise is still necessary to effectively manage and oversee the external IT services being used.

Key Components of Outsourcing: 

• Access to a global pool of talented developers
• Delegating the entire software development lifecycle to third-party managed IT teams
• Flexibility in fulfilling software development needs
• Reduced software development costs while ensuring superior quality
• Pros and Cons of Outsourcing:

 

Pros:

• Launch an app and meet tight deadlines without depending on in-house IT expertise
• Access to rare software skill sets from any region in the world
• Flexibility to choose a different work arrangement after project delivery

Cons:

• Limited visibility and control when outsourcing to an offshore IT company
• Privacy and security concerns

 

Outsourcing is Best Suited For: 

Outsourcing is a great option for startups and companies with precise, short-term requirements, such as turning an idea into an MVP in six months. It is also suitable for businesses that require a high level of motivation and productivity from their employees, as outsourcing allows them to focus on core business activities while leaving software development to third-party experts.

Five Key Factors Driving Businesses to Outstaff and Outsource 

Businesses have experimented with various business process models over the years, and these are the main drivers behind their decision to outsource or outstaff certain functions.

• Cost Reduction
  One of the primary reasons why companies outsource to outstaffing companies is to reduce hiring costs. According to a recent study, 59% of US companies outsource to external IT vendors to save money. Outstaffing is an effective way for businesses to hire qualified developers and other specialists at a lower cost than hiring locally. It enables companies to fulfill their project requirements while maintaining a budget-friendly approach.

• Talent Acquisition
  As software development technologies continue to evolve, businesses require developers with new and specialized skills. Outstaffing provides a quick or long-term solution for companies to acquire such talent without upskilling their internal team or going through a lengthy recruitment process. In some countries, it can be difficult to find IT specialists with certain expertise. Outsourcing allows businesses to fill talent gaps and ensure their projects are delivered by experts.

• Improved Business Focus
  When businesses try to handle areas outside their expertise, it can be challenging to maintain their focus on core operations. Outsourcing allows companies to concentrate on their core capabilities while their remote team handles software development. This approach ensures that projects are delivered more efficiently, and businesses can be more productive.

• Resource Optimization
  Software development is a resource-intensive process that requires significant investment in infrastructure and skilled staff. By outsourcing, businesses can free up internal resources and reduce overhead costs. Offshore vendors take care of administrative tasks, workspace, software licenses, and upskilling expenses. This approach allows companies to focus on their core business operations while their offshore team handles the technical side of things.

• Scalability
  Growing businesses require more resources to meet the increasing workload. Outsourcing is an effective way to increase capacity without being constrained by physical resources or rigid financial commitments. With outstaffing, companies can augment their software team with offshore developers and scale efficiently, ensuring that projects are completed on time and on budget.

Outstaffing is an excellent long-term staff augmentation approach for companies with an existing IT team. It allows them to set up a remote team quickly and with high productivity. Meanwhile, outsourcing is a preferred option for companies lacking in IT capabilities or seeking to utilize external resources to build an app.

When managing remote developers through outstaffing, it is crucial to treat them as part of your in-house team despite not being physically present at your workplace. In contrast, outsourced development teams are self-managed and report progress to you at specified intervals based on project requirements.

The financial viability of outstaffing depends on your company’s objectives. Outsourcing is a more cost-effective option if you require app development or completion of a project on a one-time basis. However, if you aim to expand your team in the long run without the hassle of recruitment and training, outstaffing is a more budget-friendly option.

Outstaffing Vs. Outsourcing: How to Distinguish them? (H2)

If you’re still unsure about the distinction of both, here is a clarification of  outstaffing vs outsourcing. These straightforward explanations may help clear things up.

	Outstaffing	Outsourcing
Objective	IT team augmentation for an extended period of time	Creating an app from scratch in a brief period
Control	Complete oversight and transparency with outsourced developers up to the completion of the project	Limited influence over software development processes all the way through the project
Team management	Outstaffed developers need supervision, including assigning tasks and monitoring progress	Outstaffed developers operate independently and are overseen by the outsourcing provider
Cost	Cost-effective for businesses with an established team	Cost-effective for one-time projects or short-term individuals

 

Objective:
Outstaffing and outsourcing are two distinct options for companies with different IT needs. Outstaffing is preferred for long-term IT staff augmentation for companies that already have an IT team in place. Outsourcing, on the other hand, is selected when companies lack IT capabilities or want to utilize remote resources to build an app.

Control:
Outstaffing provides complete control over an outstaffing team, including their tasks, milestones, information sharing, and deliverables, as they are managed directly. Outsourcing, however, provides little visibility, as you may not have access to source codes and certain project documentation.

Team Management:
Outstaffing involves managing remote developers, even if they are not physically present in the office, as if they were part of the in-house team. On the other hand, an outsourced development team is self-managed, with tasks coordinated based on project requirements and progress reported to you at predetermined intervals.

Cost:
The cost-effectiveness of both options varies based on the company’s needs. Outsourcing is typically less expensive for one-off app development, while outstaffing is more budget-friendly for scaling long-term teams without the hassle of hiring and training and of course there’s a chance to save on the salaries.

 

Outstaffing vs Outsourcing : How to choose? 

When deciding between outstaffing and outsourcing, it’s important to consider your specific business needs. Here are four tips to help you determine which option is best for you.

1. Evaluate Your Ongoing Requirements
   Assess the software issues you need to solve. Do you require long-term support for existing applications, or a remote team to work on a Minimum Viable Product (MVP)? If you need consistent long-term support, outstaffing is the way to go. But if you’re working on a one-time project, outsourcing is ideal.
2. Consider Your In-House Expertise
   If you don’t have a dedicated team or technical expertise, outsourcing is the better choice. It allows startups to focus on other core business areas while quickly getting their apps to market. On the other hand, if you have a capable in-house IT manager and established software processes, outstaffing may be more beneficial.
3. Factor in Budget and Time Constraints
   Outstaffing can save an established company money because you manage the outstaffed developers, whereas outsourcing is more expensive since the vendor handles day-to-day operations. However, if you have tight deadlines to meet, outsourcing may be the better option.
4. Consider Control and Visibility
   For companies that prioritize control and data privacy, an in-house IT team with outstaffed developers may be the preferred option. Outsourcing vendors are bound by Non-Disclosure Agreements (NDAs), but some companies prefer to keep highly sensitive projects in-house. However, if technology is not your core business, outsourcing can be a feasible option.

 

 

How to Hire a Reliable Outstaffing Company: 7 Simple Steps

By following these steps, you can find a reliable outstaffing company that provides basic functionality for remote work and ensures a successful partnership

1. Define the project scope: Determine the number of developers, skills and experience needed, and your business nature.
2. Search for IT outstaffing companies: Use search engines, business forums, or professional platforms like Clutch to find potential outstaffing partners.
3. Review portfolio and client feedback: Check the company’s previous work and read reviews from other clients.
4. Conduct an interview: Talk to the outstaffing team, preferably with a technical manager, to clarify how the arrangement works and ensure they have the skills you need.
5. Discuss budget and other terms: Agree on fees, confidentiality measures, and other legalities in writing to prevent misunderstandings.
6. Agree on communication modes: Choose communication tools that work best for both parties, such as Slack or Asana.
7. Hire and onboard: Sign the outstaffing agreement and provide clear guidelines to ensure productivity from day one.

5 Common Challenges in IT Outstaffing and How to Overcome Them 

Outsourcing IT services through an outstaffing model can be a fruitful endeavor, but it is not without its challenges. Below are five common hurdles that organizations face in IT outstaffing, along with strategies to surmount them:

1. Time Zone Differences: Working with developers who are in significantly different time zones can hinder effective collaboration with your in-house team. To mitigate this, consider partnering with outstaffing companies that operate closer to your region or have manageable time zones. Alternatively, establish communication protocols, such as setting deadlines for queries and requiring responses within two business days, to facilitate communication across time zones.
2. Communication Barriers: Language and cultural differences can create obstacles in conveying project details, timelines, and expectations to your outstaffed team. To minimize misunderstandings, conduct interviews with developers before hiring them and involve your daily working team in the process.
3. Intellectual Property: Data breaches and protection of intellectual property can be a concern when integrating a remote team. To safeguard sensitive data, regulate email and communication channels, and implement non-disclosure agreements (NDAs).
4. Misguided Expectations: Assuming that outstaffing requires minimal management effort can lead to miscommunication and a lack of collaboration between your in-house and outstaffed teams. To avoid confusion, develop an onboarding guide that outlines your company’s culture, expectations, project requirements and tasks.
5. Choosing a Reliable Provider: Not all outstaffing firms provide the same level of service. To ensure reliability of the team and make sure they deliver results, conduct thorough research by reviewing customer feedback and conducting extensive interviews with potential candidates. Alternatively, you can partner with a reputable and trustworthy provider like Axiom Pro, which employs a rigorous selection process and provides video interviews of specialists to help you make an informed decision, saving you time and ensuring you hire the best candidates for your project.

 

 

The Expense of IT Outstaffing Services 

The cost of outstaffing services varies depending on the country where the developers are located. Developed nations generally have higher salaries, resulting in more expensive outstaffing services. On the other hand, Asian countries offer developers who command lower wages, but you may face challenges with cultural differences.

When it comes to outstaffing, Western companies usually opt for Eastern European countries. Developers from this region are affordable, experienced, and are recognized for delivering high-quality work. Additionally, they are fluent in English and comfortable working with Western clients.

Below is a breakdown of the average salaries of freelance software developers in popular outstaffing destinations.x

 

India – $8,603 per year

China – $117,984 per year

Ukraine – $95,589 per year

Romania – $67,449 per year

Argentina – $27,876 per year

Remember that, besides salary, culture, language, timezone, and reputation are equally crucial factors to consider when outsourcing.

In Conclusion, outstaffing provides businesses with a convenient way to quickly expand their workforce with skilled developers. This approach is particularly beneficial for companies with long-term needs, sufficient funds, and an existing in-house team. Although we have discussed the challenges associated with outsourcing personnel, many of them can be overcome by working with Axiom Pro. Axiom Pro is a reputable outstaffing company  that offers international services. We partner with businesses and startups worldwide, and our expertise can help address language, cultural, and reliability issues.

 

 

Why Axiom Pro 

• Access to a skilled talent pool: Axiom Pro offers a pool of pre-screened specialists who have passed English proficiency tests, video interviews, and technical skills tests.
• Cost-effectiveness: Axiom Pro covers taxes, benefits, and other expenses related to employees, saving you up to 50% on employee costs.
• Flexibility in workforce management: Easily swap any specialist hired through Axiom Pro for free and request additional specialists for any open positions.
• Time-saving recruitment process: Axiom Pro can find suitable candidates in under 7 days, compared to the 41-day industry average.
• Reduced administrative burden: Axiom Pro takes care of all administrative tasks related to employees, including payroll, taxes, and benefits.
• Risk reduction: Axiom Pro assumes responsibility for compliance with labor laws and regulations, and eliminates the need to organize a new employee’s workplace or purchase equipment for them.
• Enhanced focus on core business activities: Axiom Pro’s management of administrative tasks allows your organization to focus on core business activities.
• Local expertise: Axiom Pro is familiar with local challenges and can help you overcome cultural barriers.

 

Take our Self-test to determine whether IT outstaffing is the right fit for your business. 

Self-test:

1. Are you seeking to reduce your company’s overhead costs?
2. Do you need to expand your workforce without increasing your office space or equipment?
3. Would you be willing to delegate some management responsibilities to a third-party service provider?
4. Are you open to the idea of working with a remote team who may not be located in the same country as your business?
5. Do you desire greater flexibility in hiring and firing employees as your business needs evolve?
6. Are you open to working with a remote team that may have different cultural backgrounds and communication styles than your in-house team?
7. Do you require specialized skills or expertise that are difficult to find in your local job market?
8. Are you comfortable with outsourcing critical functions of your business, such as customer service or technical support?
9. Would you like to have access to a pool of skilled professionals without the hassle of recruitment and onboarding?

Note: If you answered “yes” to most of the questions above, outstaffing may be a good fit for your company. However, it is always best to consult with a qualified professional like Axiom Pro to determine the right course of action for your business needs.

 

 

FAQ

What is outstaffing ? 

Outstaffing refers to the practice of hiring employees through a third-party agency or Outstaffing company, who then provides these employees to work for a different organization. It is a form of outsourcing that allows companies to reduce costs and gain access to a wider pool of skilled workers without having to deal with the administrative tasks and legal responsibilities of direct employment.

What is the difference between outsourcing and outstaffing?

Outsourcing and outstaffing are two business strategies that involve hiring external resources to perform specific tasks. Outsourcing involves contracting a third-party company to handle a specific business function, while outstaffing involves hiring a remote team or individual to work exclusively on a specific project or task. The main difference between the two is that outsourcing involves the transfer of responsibility and control of a specific function to an external company, while outstaffing allows businesses to retain control over the project while delegating certain tasks to an external team or individual.

What are the pros of outstaffing?

The pros of outstaffing include access to a wider pool of talent, cost-effectiveness, and flexibility in scaling up or down. Outstaffing also allows companies to save time and resources on recruitment, training, and infrastructure, while ensuring quality work output. Additionally, outsourcing certain tasks to a dedicated team can help improve overall efficiency and productivity.

What are the cons of outstaffing?

Some of the cons of outstaffing include a lack of control over the remote workers, communication barriers, cultural differences, and potential legal and regulatory issues. It’s important to carefully evaluate the potential risks and benefits before deciding whether outstaffing is the right choice for your business.