Outsourcing and Outstaffing: What is the Difference and What to Choose in Your Case?

Vladlen Shulepov posted on Jan 17, 2020, edited on Sep 18, 2020
outsource team

Outsourcing and outstaffing are the practices largely widespread and approved. They can speed up the development process, save your costs and allow you to utilize the precious experience of IT experts working from anywhere in the world. 

If you are interested in either of these approaches, welcome to this brief guide on outsourcing vs. outstaffing from Riseapps. Maybe you are choosing between the two? Or you’ve already opted for one of the models but want to know all about its pitfalls? We’ll do our best to address these questions.  

Riseapps is keen on both – outsourcing and outstaffing. We build mobile and web apps for companies and enterprises from Western Europe and the USA, designing, developing and testing our products internally. Currently, we are focusing on healthcare, wellness, tourism, and entertainment industries, where we have a lot of successful cases.

In this article, we’ll lay out the basics about outsourcing vs outstaffing along with some tips on implementing these models. Read on. 

Difference Between Outsourcing and Outstaffing

People often assume outsourcing and outstaffing are the same things. This probably happens because both methods imply a client entrusts workers from outside the company to do a job. Moreover, some people consider outstaffing as just an outsourcing model. 

In this article, however, we’d like to clearly distinguish these two methods to avoid ambiguity, so you can make a thoughtful choice between them if necessary. 

Let’s start the talk about outstaffing vs. outsourcing with definitions

What is outsourcing?

Outsourcing is a practice of having workers from another company (or just an individual) to perform a certain job for you. This could mean creating an app, a software product, website development, etc. Along with outstaffing, outsourcing is as an alternative to creating your in-house department or handling tasks to employees working in your organization. 

Related Article: In-house vs. Outsourcing Development: How to Make the Decision?

Most often, outsourcing means that your contractor will do the whole scope of work – not just a task or two. If it’s an app, they will deal with everything – from technical requirements to final checks and maintenance. Having chosen outsourcing, you’ll most likely to interact with a project manager handling the team. 

This is how the outsourcing model basically looks: 

outsourcing modelOutsourcing example: a Europe-based team of enthusiasts being a dab hand in fitness and workout wants to share and monetize their experience. They wish to build a healthcare app but don’t have any technical expertise. So they turn to a reliable vendor that builds a profitable app for them within 5-6 months. With the release of the tool, the service sales rose by 5 times (from 20-30 clients per month to 100-150).

Sidenote: this is an actual Riseapps case, you can check it out following the link. 

Now, let’s move to what is outstaffing and how to define it.

What is outstaffing?

Outstaffing is a type of contracting when a third-party team or worker, being officially employed by another company, performs the work for a client. 

In outstaffing model, the whole scope of work is controlled by customers themselves who have direct access to the development team. Often, they manage the hired team (or an individual) along with their own; the payroll is handled by a contractor (an outstaff company), though. 

Basically, outstaffing model looks like this: 

outstaffing modelClients often choose outstaffing when they already have their tech team but lack some experts, so a task can’t be handled internally. 

Outstaffing example: a US-based health management company delivering therapy and counseling to patients in their home utilizes the most effective technology available. They have a digital-savvy team of their own. However, for supporting their particular technical solutions they need two more developers – ReactNative and Android. Eventually, they turn to a European software company to outstaff their workers; their successful collaboration has been continuing for more than a year now

Sidenote: in this case, the IT outstaffing company is Riseapps. The client is Viemed – one of the fastest-growing companies in the secular trend of home healthcare, which reported impressive revenues of about $23.5 million for the Q3 2019. 

So, the main difference between outsourcing and outstaffing lies in who manages a team (or an individual) performing your tasks. 

In the case of outsourcing, it’s usually a project manager of the hired team (outside of your company) who directs and controls the full scope of work. 

When it comes to outstaffing, clients manage their extended team themselves, as it is fully at their disposal. Your CTO, your product or project manager can be in charge of the development process but whoever they are they come from your side. Also, the software development service provider is responsible for hiring, maintaining the team and, as mentioned, payroll. 

Sidenote: clients can outstaff IT teams with a project or product manager, but this rarely happens. 

There are some more specific differences between the approaches. We’ll sum them up in the “Outsourcing and Outstaffing Business Models Comparison” section. 

Now, let’s move to the pros and cons of both models. 

Pros and Cons of Outsourcing

Pros

  • Save money. As a rule, to outsource a team for a project costs much less than hiring an in-house one. This is especially true if you live in the U.S. or Western Europe where developer fees are quite high. Choosing contractors from Eastern Europe, like Riseapps, you’ll save money, yet getting high-quality development services.
  • Enjoy access to global talents. Outsourcing implies you collaborate with your team remotely, not being constrained by the geographic location of your experts – they can reside anywhere in the world.

  • Less managing efforts. You don’t need to direct a working team; neither you have to dive into technical specifics of your project. The development process is managed by the vendor. However, you ought to control it, usually by collaborating with a project manager.

  • No hiring efforts. As your contractor takes care of hiring the experts, there’s no need to bother oneself with employment issues. All you need is to find a good vendor. We’ll give some tips on that below.

  • Quick start. R&D centers and remote agencies often have engineers that are between projects and can start working immediately. So if you have limited time, finding a remote development team that specializes in your area of interest will probably be quicker than hiring your own.

Cons

  • Measuring effectiveness. Assessing consistency, quality, and pace of your development project might not be easy, as you don’t have direct access to your team. It’s usually advised that clients manage their projects intensely, at least on a weekly basis. Guidelines for quality norms and processes can immensely help with that. 
  • Communication challenges. Misunderstandings can happen, especially in distant collaboration, because of remote discussions, time differences, etc. Proper communication methods and channels have to be established from day one to make the process effective and seamless. 

Now, let’s move to the advantages and disadvantages of outstaffing. 

Pros and Cons of Outstaffing

Pros

  • Save money (even more than choosing outsourcing!). As costs for software developers have soared across Western Europe and the U.S., outstaffing is a great way to arbitrage expenses. As you manage your team yourself, outstaffing is more cost-effective than outsourcing. Also, the approach helps to restrain the payroll and overhead costs. And again, the rates of outstaffing agencies from Eastern Europe are usually more reasonable. 
  • No payroll care. You don’t need to manage salary payments for workers. Your vendor does it, along with hiring and maintaining the activities of your IT experts. 
  • Control development process. You have full control over the quality and speed of your project, being provided with direct access to any team member. 
  • Quick start. Like in the case of outsourcing, you might start faster if you turn to outstaffers, as software companies often have engineers available right away. 

Hire from anywhere. Choose outstaffers from any corner of the earth, regarding their expertise, ratings and development fees.

Cons

  • Work management burden.  Directing and managing your extended team, you bear the burden of controlling your workers. You have full supervision over the quality of code, consistency pace, etc. Therefore, it’s better to have tech-savvy experts in your existing team if you choose outstaffing model.
  • Communication challenges. As in the case with outsourcing, miscommunication can happen when working with the remote outstaffing team. So maintaining clear lines of collaboration is crucial.

Outsourcing and Outstaffing Business Models Comparison

Let’s briefly sum up the comparison of outsourcing and outstaffing models.

Outsource Outstaff
High-level vision Your true north will remain untouched, as in both models it’s the client who manages the process, but in different ways
Key workload Often, a client entrusts the outsourcing company the whole project from A to Z  Usually, specific tasks are handled, the ones that cannot be performed by a client’s existing team
Team management Often, a client doesn’t have direct access to their team; communication is maintained via a professional – a project manager Most often, a client manages and controls their extended team directly
Technical skills necessary Minimal; usually it’s enough to formulate the requirements for your future product Considerable technical skills are necessary, as you directly manage a team of IT experts
Price More expensive as the scope and work is performed via a self-managed team Less expensive, as you assign tasks and control performance yourself
Payment Often vendors work on the pay per milestone basis. The development can be planned according to sprints (about 2 weeks). Under the contract of outstaffing, employees receive a monthly salary.

 

Our Experience

As mentioned, Riseapps provides both – outsourcing and outstaffing services. 

In the beginning, we’ve provided you with examples of Riseapps implementing these methods. For clarity, let’s introduce one more case – of outsourcing this time. 

A multinational Japanese corporation – the world leader in digital imaging – needs to adapt their interactive presentation content for potential clients worldwide. Looking for a clever and cost-effective solution, they turn to Riseapps. 

Put it in a nutshell, we crafted a web app based on WordPress for our top-notch client. We used the cutting-edge and new-found Gutenberg editor that allows creating reusable blocks that include paragraphs, images, quotes, audio, lists, etc. 

 

Riseapps outsource case

With the new tool, sales managers of the top-notch company can easily adjust their presentations for clients. The solid tech solution built via outsourcing model would be a contributing factor in boosting sales. 

How to avoid risks?

There are certain risks and challenges when you choose either outsourcing or outstaffing. Here are 2 key tips on how to minimize them.

  1.  Study cases, ask for references. If you want to choose a reliable vendor, ask for the references of at least a couple of software applications they have launched. Also, it’s a good idea to study the cases of an agency. Check the reviews and ratings on platforms like Clutch, GoodFirms, or Upwork. Ask former or current clients about their satisfaction with the vendor. Another key might be to explore what industries and what type of workload a company is engaged in. All this will help to make a thoughtful decision. 
  2. Define clear guidelines. To establish an effective development process and build a high-quality product, you have to provide the proper guidelines for quality norms and processes at the beginning of your collaboration. Needless to say, the guidelines might be revisited. Don’t forget about project management, collaboration tools like Asana, Jira, Github Project Management. When you sign a contract with your remote team, including all the metrics you will be tracking.

Conclusion: What to Choose in Your Case?

In this post, we’ve reviewed the basics about outsource vs. outstaff. 

Both methods suggest you use the workforce outside the company to do the job. But the main difference is in who manages the team. In case of outsourcing it’s the vendor. Outstaffing means a client directs and controls development by their own efforts. 

Wrapping up, if you are to make a thoughtful decision on choosing a particular business model, have a look at these clues: 

Choose the outsourcing model if: 

  • you need the whole scope of work to be done; 
  • if you (and your team) are not tech-savvy; 
  • if you want to delegate project management work to a vendor

Choose the outstaffing model if: 

  • you need to handle some specific but regular workload – probably not the whole project; 
  • you have enough technical expertise to manage a team of engineers

If you made your decision on what model to choose, feel free to contact Riseapps! We’ll do our best to come up with the most sensible outsourcing or outstaffing solution for you, offering high-quality services at a reasonable price. 

Drop us a line, so we could assist you in bringing your big idea into life.  

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