Outsourcing Versus Outstaffing – Which Should You Choose?

By: First Union | Date:

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Outsourcing Versus Outstaffing – Which Should You Choose?

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As the world becomes more and more technical, where digital is driving nearly everything, it is increasingly tough for business owners to find highly qualified IT professionals. There is a veritable war for talent when it comes to those with tech backgrounds. As a result, we are seeing numerous companies shift to a model in which they outsource or outstaff their tech-related projects. In this article, we look at the difference between the two and consider what companies these types of solutions may be best suited to.

Outstaffing vs. Outsourcing: Is there a difference?

There actually is a difference between the two and this difference has caused confusion for some. Both terms are relevant to the IT sector and have emerged as important options over the past decade. Especially with the turmoil the world now faces, outsourcing and outstaffing both stand to gain even more ground in the months and years to come. Generally, both will entail employees working remotely, be it from home or some other such office not necessarily located in proximity to the company headquarters. So what is the key difference: basically with outstaffing, the business is hiring professionals from other firms to work on projects but such professionals are then under the supervision of the business owner. With outsourcing, a company is instead opting to give a project/task to a third party and that third party remains under their own direction.

A Closer Look at Outstaffing

The term outstaffing is not as prevalent at outsourcing, and yet within the IT-sphere many are finding it to be an ideal solution. So, plainly put, a business owner will hire an IT professional; they in turn keep working at their normal workplace but you represent their new employer. Such outstaffing employees often include digital marketers, data analysts, developers, and designers. Sometimes the outstaffed team will come and join the primary team, but often they will simply continue to work from where they are originally located. Many such outstaffed teams are in fact based in other countries apart from where the hiring company is headquartered. That said, that could cause issues as far as company culture, motivation, and the concept of fitting in. Below are a few of the pros and cons associated with outstaffing your projects/IT tasks:

  • The overhead on hiring an outstaffed employee is generally quite a bit lower than hiring a traditional employee. Usually, you are not paying taxes and insurances.
  • There is more flexibility in terms of the size of the team you hire. For bigger projects, you just outstaff more professionals for the task at hand.
  • Given the project requirements, you can choose people who specifically specialize in that type of work—even if it is more nuanced.
  • Communication can often be trickier with outstaffed employees. Management and said employees may not always be on the same page.
  • When mistakeserrors do arise, who is responsible for addressing them: the remote outstaffed team or the in-house team?

A Closer Look at Outsourcing

Rather than hiring professionals and you be in charge of their performance etc., with outsourcing a company is basically handing a project off to a third party. This third party company is generally more specialized as far as certain IT needs go and thus has the team and resources required to complete your project to your satisfaction. The primary benefit of outsourcing is that you are getting high-level specialization and yet, overall most find the cost to be quite reasonable versus hiring full-time for such a position/project. Another huge benefit is that it is saving the company a lot of money as far as having to train/upskill their current staff members. In addition, some of the other benefits of outsourcing:

  • The quality of the end product is under someone else's control as are the associated expenses and any overages incurred.
  • The outsourced provider has to take care of any of their own HR problems that may arise during the project.
  • You can focus on your day to day operations knowing that a special project is in the hands of a team trained precisely for the scope of that task.
  • Your company doesn't incur expenses such as those associated with the necessary equipment or facility fees.
  • That said, a couple of the drawbacks to outsourcing: communication could get a little dicey at times, especially if disagreements arise between the two teams.
  • In the end, the third party does have more control over product development.

Which Is Better for Your Business?

So the question stands if you are considering subbing out a project or set of tasks, which route makes more sense as far as your business goes? Both will get you results, and often both come with the benefit that they are more cost-effective than if you were to hire a team inhouse to take care of such responsibilities. What it will come down to in the outsource versus outstaff debate are your specific requirements. That is to say, if for example you're content handing the project off entirely, and consequently, you want to build a lasting relationship with a team that could continue to help you on similar projects, then outsourcing may be the better path for you. They have their own resources, they provide transparency, and they likely have an experience that your firm may lack. On the other hand, if you want to monitor the employee's performance throughout the task at hand, then you would definitely want to outstaff. This gives you more control while still gaining you access to valuable talent and skillsets that your company may not possess.

First Union Lending is here to help. Working with small business owners, we can get you the funds necessary for any special project you may have. Whether you need to purchase equipment or hire professionals to assist you with your project, we have the perfect lending solution for you. Call today and let's get started!

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