Outsourcing vs. Outstaffing: Which Model to Choose

For many organizations worldwide, software outsourcing and outstaffing are critical ways to cut costs, enhance efficiency, and free up the staff to focus on innovation. 

In the standoff of outsourcing vs. outstaffing, both models may be equally beneficial, yet there are cases when one works better than the other. 

So, to fail-proof your outsourcing or outstaffing efforts, we offer to consider the differences and similarities of both models. In this article, you’ll learn: 

  • Who manages the outsourcing vs. outstaffing team? 
  • What are the barriers of outstaffing vs. outsourcing?
  • Why outsource your project to third-party vendors?
  • Outsourcing vs. outstaffing: which is better and when? 

Outsourcing vs. Outstaffing: Definition

Outsourcing is hiring an external team to do a project, usually from A to Z. A company may outsource any part of its operations, like IT development, customer support, business management, marketing, etc. With outsourcing, you order services to be done and rarely get involved in project management until the job is done. 

Motives for outsourcing include cost reduction, closing a critical open position quickly, bridging the talent gap, passing routines to focus on core business aims, etc.

The meaning of outstaffing, also called staff augmentation, is hiring a person or a team from an external company to help you with the same project but as a part of your team. With outstaffing, you are in charge of the project management. 

The motives for IT outstaffing are the same. You hire an IT outstaffing agency to help you reinforce the in-house team with an already-trained professional, usually at a lower cost. 

The main difference between outsourcing and outstaffing is that with outsourcing, you rush to materialize your idea with the help of an external team, while with outstaffing, you work on the idea in-house but hire a person or a couple of people to help. 

Below, we describe more differences between outstaffing vs. outsourcing

Outsourcing vs. Outstaffing: Key Differences and Similarities

Both options are mostly similar, though there are differences either. 

For example, when you hire an outsourced team, the payment is often project-based, meaning you pay for the complete product or service unless it is an ongoing service like marketing or support. 

With an IT outstaffing agency, you pay them a salary for the job done by their employee. The agency, in turn, is responsible for wages, bonuses, equipment, taxes, and a replacement of the worker at your disposal. 

Another important point in the debate over outsourcing vs. outstaffing is control over processes and direct communication with the team. With outsourcing, you interact through team management. In the case of IT outstaffing, you manage the project yourself and communicate with the outstaffing team directly. 

The cultural gap is not that noticeable in outsourcing because team managers are usually skilled communicators. However, in outstaffing, as you work directly with an external staffer, some slight communication challenges may appear unless the outstaffing company you hire is from a country that shares cultural and language similarities with your homeland. For example, companies in the US find it easy to work with outstaffing services in Costa Rica. 

Want to learn more about outsourcing or outstaffing options in Costa Rica? 

Contact 5e for more information. Our company has extensive experience in different collaboration models and expertise in web development and design. Let’s meet up to discuss the details!

As for employee training, recruiting, and documentation management, all these are the vendor’s responsibilities. 

The table below summarizes the key differences and similarities between outstaffing vs. outsourcing

Project part Outsourcing Outstaffing
Employee replacement Agency Agency
Recruiting Agency Agency
Building a team Agency  Your responsibility
Payment schedule Depends on a contract Agency salary
Maintenance Agency Agency
Legislative Agency Agency
Communication Through a manager Direct
Cultural gap Not important May cause issues
Control over project Through a manager Direct

Table: Outsourcing vs. Outstaffing: Key Differences and Similarities

Outsourcing vs. Outstaffing: Which Is Better? 

While both methods are equally beneficial, there are special occasions where one is preferred over the other. 

Outsourcing usually requires higher budgets but doesn’t need you to dig deep into details. It is perfect in situations when:

  • The in-house team doesn’t have the expertise needed to handle the project
  • You want to free up inner resources for strategic development and need someone to take over the routines
  • Your company lacks funding, and you seek cost-cutting options to maximize profits
  • Your business has grown rapidly, so you can’t scale up fast enough to keep up without external resources. 

The outstaffing model is great in the following situations: 

  • When too much of your company resources go on personnel costs (bonuses, perks, health insurance, etc.)
  • Human resources can’t keep up to cover the need for high-quality specialists in time. 
  • The company is too large for a favorable tax bucket
  • The in-house staff has grown so much that you have to expand the HR and accounting departments
  • IT outstaffing will reduce your risks with the insurer. 

In a standoff between outsourcing and outstaffing, both options are attractive and advantageous, given that you manage to choose the outsourcing/outstaffing vendor properly. 

 

Interested in how to find a highly professional IT outstaffing company to help you with the next project? 

5e is an outstaffing agency with extensive experience in both collaboration models and a portfolio of successful technology projects. Contact us to see how we can help!