Outsourcing vs. Outstaffing: What’s Your Best Option?

2020 has proven to be a year of changes. With the current health crisis on our hands, 56% of companies around the world opted to use remote workers, focusing primarily on outsourcing and outstaffing. And for valid reasons: outsourcing and outstaffing, in addition to cost reduction, offer numerous perks essential for various business needs..

Outsourcing and outstaffing: definition

Every year more and more employers resort to outsourcing and outstaffing. Despite their widespread use, these notions are often confused. The time has come to understand the terminology, to identify the similarities and differences, and the pros and cons of each management model.

Outsourcing is the practice of the company transferring tasks and functions to a contractor specializing in a particular area of activity.

You outsource personnel from another company, delegate certain tasks to them, and sign a service contract, thus getting rid of the problem of equipping workplaces, paying taxes, and insurance. What's more, the salary for personnel outsourcing services is often lower than that of full-time employees.

Outstaffing is a form of the relationship between an employee and an employer, which allows the employer to legally attract the workforce without employing the staff.

In other words, outstaffing service implies the withdrawal of staff from the state and the transfer of personnel administration authority to the executor. When you outstaff specialists, they continue to work at their workplace and perform their old functions, but the responsibilities of the employer officially pass to the outstaffing company.

Outstaffing vs outsourcing: market dynamics in 2022

The prospects for outsourcing and outstaffing in 2022 continue to grow, and this is due to the inertia caused by several years of the pandemic. Lockdown and related shifts in workflows have seriously impacted virtually every industry. The need to move employees remotely has negated the benefits of hiring locally. At the same time, outsourcing and outstaffing have come to be seen by many business owners as a great way to reduce the costs of moving to a remote location while maintaining productivity.

Some areas have suffered significant losses, causing 114 million people worldwide to lose their jobs in 2020, while other industries, such as IT outsourcing and offshoring, have been able to thrive. IT services exports in Ukraine alone reached $5 billion in 2020 - up more than 20 percent from 2019.

Outstaffing vs outsourcing: pros and cons

We've looked into the definitions and studied the market dynamics. Now let's have a closer look at the pros and cons of outsourcing and outstaffing.

Outstaffing

Pros

• A simplified personnel management system, elimination of legal problems when working with foreigners.
• Possibility to reduce the number of employees.
• Ability to concentrate on core business and increase the company's competitiveness.
• Elimination of the need to deal with financial issues.
• Reduced expenses for salaries and taxes.
• Fulfillment of big tasks with the small staff.

Cons

• Outstaffing, as in outsourcing, can have disadvantages in communication problems and staff motivation, so it is important to choose contractors with extensive experience, who can foresee these situations and avoid them during cooperation.

Outsourcing

Pros

• The client simply submits an application and pays for the services actually rendered. All other tasks are taken care of by the contractor.
• The client receives the opportunity to reduce the cost of maintaining additional specialists for the selection and management of personnel, personnel record keeping, payroll calculation, and payroll tax deductions. When outsourcing, there is no need to keep records of vacations or sick leave payments. All personnel matters are handled by the outsourcing company.
• Reduced outfitting costs for jobs.
• Replacing existing personnel during vacations and maternity leaves.
• Attracting additional resources for seasonal work.

Cons

• The downside of outsourcing can be:
• Communication problems when working remotely.
• Time zone differences.
• Risk of corporate data leakage.

This is why it is important to seek the services of reliable and trusted performers.

The IT industry is no exception. Let's say you have a software project on your mind. However, you might lack the large, well-trained, and managed team. Or, perhaps, you might not have enough professionals to do the job. Either way, you are missing the right number of people to man your software development project. What do you do?

If you want to keep your expenditures in check, there are two excellent options for you: outsourcing and outstaffing. Let's unpack each practice and help you decide which one suits your needs best.

Outsourcing: A Software Project From Scratch

Outsourcing is arguably one of 2020’s hottest business trends. According to statistics by Fortunly, the global IT market for outsourcing will grow by $98 billion in just four years. In the US alone, the outsourcing industry is expected to grow by 1.6% by the end of 2020.

So what is outsourcing, exactly? In IT, it's the practice of using an external service provider to deliver software development and maintenance solutions for your project. There are two primary motivations for using outsourcing: a focus on core business strategies and saving costs.

If you need an app for your business but lack the time or money to build a team of developers, outsourcing is a great option for you. As a result of outsourcing, you will have a finished IT project without the need to assemble or manage a team.

Outstaffing: Cost-Effective Control

While outsourcing has been all the rage, outstaffing starts to take its place in the world of modern business. In addition to reducing the costs needed to build a development team, this option offers legislative and tax benefits while giving you a lot of control over the employees.

Outstaffing is the practice of hiring a third-party business that rents its employees to you on a full-time basis. Unlike an outsourcing business, an outstaffing company is not responsible for the quality of the services they provide. Personnel management is also not their job. Instead, you integrate an employee directly into your team of developers.

How Can Perfsol Help?

Both outsourcing and outstaffing are primarily focused on reducing the cost of software development projects. However, each practice has its specific benefits and drawbacks. To avoid the latter, it is important to choose your business partner carefully.

At Perfsol, we have hands-on experience integrating our teams and individual IT professionals into our clients' workflows. We not only possess expertise in software development but also provide the control and communication you require. Whether you choose outsourcing or outstaffing, we’re here to support you with the best software development services out there.