Outstaffing vs Outsourcing: The Ultimate Comparison

The main dilemma

Have you ever been confused by the sheer specter of business that seems to arise as fast as the demand of our digital age grows? You’re certainly not alone.

Hiring locally has long stopped being the sole option. You can’t say remote work doesn’t come with plenty of benefits. For hiring companies and for hired contractors — it’s a win-win situation. Plenty of options for businesses to hire talent and manage their projects. Don’t want to work with the company down the road? Find your perfect fit in the international market!

With this norm, we face two common practices of employing experts: outstaffing and outsourcing. You’d be surprised how often those two get confused. Understandably so, as both models have certain similarities. However, there are significant differences also, and if you want to structure your business operations successfully, it’s vital to pinpoint exactly what fits your needs.

In this article, we'll review the differences between oustaffing and outsourcing and help you understand which could work better for your business. We'll dive into the advantages and disadvantages of each model, giving you a clearer picture of what to expect. So, sit back, relax, and let's get started!

About outstaffing

Let’s start by establishing outstaffing definition. When you hire remote employees as temporary members of your main in-house team, that is outstaffing. You get to add extra people to your team without worrying about all the administrative stuff that comes with hiring someone in-house.

With outstaffing, you work with a company that finds and manages remote employees. They take care of all the recruitment, payroll, and legal stuff, while you focus on managing your team's work and ensuring they meet their goals. This is a great option if you need to scale up your team for a specific project quickly or if you need temporary staff for a short period of time.

The best part? You get access to a global talent pool, which means you can find the best people for the job, no matter where they are in the world. And with remote work being more popular than ever, outstaffing quickly became the go-to solution for businesses of all sizes.IT outstaffing is an especially successful practice.

So, the main points are:

• Outstaffing is a model that lets businesses hire remote employees to collaborate with the in-house team.
• The outstaffing company handles tasks such as recruitment, payroll, and legal compliance.
• Clients manage their team's work and ensure their goals are met.
• Outstaffing is a cost-effective way for businesses to expand their teams without the administrative burden of traditional in-house hiring.
• It's ideal for temporary or project-based staffing needs, providing quick scalability.
• Outstaffing offers access to a global talent pool and provides flexibility in staffing.

The pros and cons of outstaffing

Let’s take a closer look at the benefits and drawbacks and what this practice can bring to your table.

Pros:

1. Save money. One of the biggest benefits of outstaffing is cost savings. By outsourcing your staffing needs, you can avoid expenses like office space, equipment, and training costs. That means cutting the budget you would spend on employment. And who doesn’t what to free up some money? There are plenty of other business needs you could be spending them on.
2. Access global talent pool. With outstaffing, you are not confined by geographical location. Expand your horizons! Dive into the exciting world of the international job market. That means you can find the best people for the job, no matter where they are. This can be particularly useful if you need specialized skills or expertise that's hard to find locally. Did we mention you can also save money while doing so?
3. Get flexible with staffing. Outstaffing provides a lot of flexibility when it comes to hiring new employees. If your employment needs fluctuate or you plan a short-term project without needing a regular team after it’s done, you can quickly scale up or down as needed. You don't have to commit to long-term hires you may not need later. Hire people for as long as you need — literally, everyone would benefit from it. Outstaffing companies are happy to negotiate the timeline, and you can avoid painful and unnecessary job cuts with your in-house team.
4. Save time. When you outstaff, the company you work with takes care of all the administrative tasks associated with hiring and managing remote workers. This can be a huge time-saver. That includes things like the recruitment process, keeping people on the payroll, and overseeing legal compliance. You can focus on managing your team's work without getting bogged down in admin tasks. Neat, isn’t it?

Cons:

1. Communication challenges. Working with remote team members can sometimes remind of the game of a broken phone. There may be language or time zone differences to contend with. Maybe there are some cultural differences to take into account. Working with team members from different parts of the world can sometimes require extra attention. However, most outstaffing companies have systems in place to manage these issues. Being open and timely is, of course, a huge help to get everyone on the same page.
2. Limited control. When you outstaff, you have limited control over the day-to-day management of your team members. They are ultimately under the management and control of the outstaffing company. This can be both a pro and a con, as it highly depends on the amount of control over operations you seek for your project. On the one hand, there’s only so much you’ll be able to manage. On the other hand, though, you won’t have to bother with every little issue that organizing a team comes with. Which notion is more important to you?
3. Security risks. When you outstaff, you're working with remote team members who may have access to sensitive data. That can create security risks. However, any credible outstaffing agency has strict security protocols in place to manage these risks. You are also more than welcome to negotiate additional terms, like signing an NDA contract, or inquire about the details of the work ethics and the contractor’s internal processes. Besides, checking the reputation of the company you are considering hiring is always a first step anyway.

About outsourcing

Outsourcing is as common business model these days as hiring an outstaffing company. Outsourcing, however, is the practice of hiring another company to handle certain tasks or projects that the in-house team is not up to. The reasons for that may vary. Often the in-house team is just plain busy working on the main product. Sometimes you do not have the right experts for the job. Maybe you are a startup that needs professionals for a jump start. Outsourcing solves a lot of problems for businesses of all sizes and niches.

There are two main types of outsourcing: offshore and onshore. Offshore outsourcing is when a company hires a service provider abroad, while onshore outsourcing means employing a service provider from the same country.

Outsourcing can be applied to various tasks, depending on the company's needs. For example, if a company needs a new software product developed, it might outsource that to a specialized software development company. Or, if they need to handle a high volume of customer inquiries, they might outsource their call center operations.  It can truly be anything — from IT support to manufacturing or customer service.

Let’s recap the main points:

• Outsourcing is the practice of delegating projects to an external company.
• Outsourcing solves various tasks, including IT services, manufacturing, customer support, and more.
• The outsourcing process typically involves identifying the tasks to be outsourced, finding a suitable outsourcing partner, and establishing a contract or agreement.
• Outsourcing can be done domestically or internationally, with international outsourcing often referred to as offshoring.

The pros and cons of outsourcing

Let’s define the advantages and disadvantages of this model as well, shall we?

Pros:

1. Save money. It’s no wonder hiring a remote workforce can cut your spending. Outsourcing can often be cost-effective, as you can access specialized services at a lower cost than hiring in-house staff. Besides, you are not tied to your location. Not happy with local options? Well, the world is your oyster. For example, Ukraine outstaffing and outsourcing services can both be much more optimal in the price-to-quality ratio than hiring in the US.
2. Be more efficient. By delegating non-core functions to specialized service providers, you can free up your time and focus on what you do best. This is great news not only for you as a business owner but for your team as well. There is so much stress and worry that hiring extra help can take off your shoulders.
3. Access specialized expertise. Outsourcing can help you reach experts in areas you might not have any specialty in. Both software outsourcing and outstaffing, for example, are in high demand globally exactly for this reason.
4. Scale on a whim. Alright, not exactly on a whim, maybe. But scaling up and down with outsourcing can be done quickly and efficiently. Everything here depends on your needs only. You won’t have to invest in additional personnel, for example. Just discuss your challenges with a project manager —- your primary contact with the agency you employ. They are here to help you along the way and will find a perfect fit solution for your project specifically.

Cons:

1. Communication challenges. You know it. We’ve touched on this while talking about IT outstaffing services. Working with service providers in different countries can potentially lead to communication breakdowns at any stage of the process. Worst case scenario, it can lead to delays and misunderstandings. However, as we already mentioned, most companies with a decent amount of experience always establish ways to prevent such issues. 
2. Quality assurance. What’s important to keep in mind is that by outsourcing, you give up a certain amount of control over the project. For some people, it's easy; for others, it’s not. It can be difficult to review work that's being done by someone else, especially if they're in a different location, with a different time on their clock. Ultimately, there are several steps you can take to make sure the final product will be up to your standards. And that’s the usual precautions: research the provider company, don’t make deals through shady websites, negotiate a contract. You know the drill.
3. Can get pricy. Outsourcing can definitely get expensive if you're not careful. While it's true that such a practice can save you money in the long run, there are also some potential pitfalls that can end up costing you more than you expected. For example, if you don't carefully vet your partner, you might end up with poor-quality work that you must pay to fix. Or, if you don't have a solid contract in place, your outsourcing partner might nickel and dime you for every little change or add-on.

Aside from the scammy part, there is much to pay for. It can get expensive because companies often have to pay for the services they receive from other companies, including salaries, overhead costs, and profit margins. There are different rates for different agencies as well. Not to mention the bigger your project gets, the more to pay for. It’s certainly not an inconsolable issue for a business — just something to be aware of.