Outsourcing vs. Outstaffing: Choosing the Right Model for Your Business

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Key Takeaways

• Outsourcing and outstaffing cut operational costs for businesses. By assigning tasks to external providers, companies save on labor expenses and gain specialized skills without in-house overheads.
• Outsourcing and outstaffing let businesses access a global talent pool, ensuring diverse skills and expertise that fit the budget.
• 92% of G2000 companies delegate to outsourcing vendors to delegate time-consuming development tasks while focusing on core objectives.
• In outsourcing, a company hires an external service provider for the entire IT project or a significant part. In outstaffing, professionals are hired to augment the client’s team, working under the client’s direction.

No matter the business size, modern companies search for faster and more cost-efficient ways for growth. As the options of remote hiring expand, companies struggle with a choice: outsourcing vs. outstaffing — where to address which business needs?

Both outsourcing and outstaffing models imply task delegation, cost reduction, and access to a vast talent pool and global expertise. However, the two have several differences, knowing which might take your business to the next level faster and more cost-efficient.

Having served as a software development vendor, Acropolium has matched great companies with skilled talents. Today, we will solve the outstaffing-vs-outsourcing puzzle, exploring reasons to outsource and outstaff with each model’s pros and cons.

Outsourcing and Outstaffing: What’s the Difference

In 2023, global remote staffing spending reached $731 billion, with 92% of G2000 companies relying on outsourcing software development. Sparked by the pandemic era, the role of remote hiring has become critical for businesses striving to thrive in fluctuating landscapes.

Outstaffing and outsourcing are models of delegating IT tasks and software development services to external providers. They differ in terms of the engagement structure and the level of control a client retains over the team.

What is Outsourcing?

In outsourcing, a client hands over a specific project, along with task and software requirements, to an external service provider. Having conducted a project estimation, the expert company picks the best talents for the project from their talent pool. The IT outsourcing partner fully manages the assigned and carefully chosen team and is responsible for the project’s delivery.

Outsourcing is often used for entire projects or ongoing tasks that can be handled independently by the external provider.

This has long been a profitable staffing model, where clients receive regular performance updates on each development stage. According to Statista, the IT outsourcing market is expected to hit a revenue of US$512.50 billion by 2024.

These numbers show the frequency of companies turning to digital vendors. By hiring the expertise and tech stack lacking in in-house teams, businesses save operational costs. Anything from employee onboarding and retention to legal aspects of employment is a vendor’s responsibility. The most common tasks and projects to outsource include:

• Software and app development
• Web and graphic design solutions
• Secure data-processing software development
• Customer support and helpdesk services
• Accounting activities
• Human resource management
• Legal and financial operations
• Research and development

What is Outstaffing?

While outsourcing is more project-centered, outstaffing is a team-centric model. When comparing outstaffing vs. outsourcing, the flexibility of the latter is the most considerable cooperation aspect. The outstaffing model allows for adjusting team size, skill sets, and project priorities.

With the client’s evolving needs, outstaffing companies can scale the team up or down, contributing to better payroll savings and resource allocation. In terms of team integration, outstaffing involves hiring remote employees or a dedicated team through an external agency.

At the same time, a verified vendor provides a seamless team integration, while the client has more control over its management. The client has direct control over the outstaffed team, managing tasks, workflows, and daily activities. As a result, the provided team operates as an extension of the client’s in-house team.

While outstaffing needs vary from business to business, the most commonly delegated tasks include:

• Digital marketing and advertisement
• Customer support
• Network administration and cybersecurity
• Virtual assistance and administrative tasks
• Software testing and quality assurance
• Market research
• Bookkeeping and accounting services

IT Outsourcing vs. IT Outstaffing: Advantages and Disadvantages

To choose between software outsourcing and outstaffing, one should be aware of both the advantages and the downsides of potential cooperation. Although each model is designed to elevate businesses, there are several risks to consider to reveal the full potential of the service.

Pros and Cons of Outsourcing

Advantages of outsourcing:

• Cost reduction. Outsourcing contributes to substantial cost savings, as companies can leverage lower labor costs in other regions.
• Vast talent pool. By outsourcing projects, you get access to a global talent pool, tapping into specialized skills and expertise.
• Risk management. Outsourcing helps manage risks associated with specific tasks or projects, as external providers often have experience dealing with various challenges.
• Business focus. The delegation of non-core tasks allows businesses to concentrate on their primary competencies and strategic initiatives.

Disadvantages of outsourcing:

• Control issues. Companies may have less control over the management of hired teams, potentially impacting the quality of work.
• Communication challenges. Time zones and cultural differences can bring communication challenges, affecting collaboration and project outcomes.
• Quality risks. If a vendor doesn’t offer transparency in project progress and communication, there may be concerns about the quality of work.
• Security concerns. Without proper measures to protect confidential information, sharing sensitive data with external agencies can pose security risks.

Pros and Cons of Outstaffing

Now, let’s look at the advantages and disadvantages of the outstaffing model.

Advantages of outstaffing:

• Full client control. Clients have direct control and management over the outstaffed team, allowing for close oversight of tasks and projects.
• Effective communication. Closer communication between the client and the team reduces the risk of misunderstandings and ensures alignment with project goals.
• Scalability and flexibility. Outstaffing companies provide the flexibility to adjust the project priorities as the client’s needs change.
• Consistent management. Offering complete control over risk management, IT outstaffing models allow for quicker resolution of issues and adaptability to changing circumstances.

Disadvantages of outstaffing:

• Less significant cost reduction. Despite being more cost-effective than in-house hiring, the savings may not be as significant as in traditional outsourcing models.
• Talent pool dependency. Outstaffing relies on the talent available within the provider, which may limit access to a broader range of specialized skills.
• Management responsibility. Managing remote teams can be complex, requiring effective coordination to ensure consistency regarding project goals and timelines.
• Quality and security concerns. Cooperation with distributed teams may be challenging, requiring continuous monitoring and feedback. Also, sharing sensitive information with an external team carries inherent security risks, which require extra attention to data protection.

To Outsource vs. Outstaff: That is the Question

When considering outstaffing vs. outsourcing, businesses should carefully evaluate the models’ development benefits and disadvantages first. Most importantly, one should do it in the context of their specific requirements, organizational culture, and the nature of the projects involved. For example, it’s also crucial to evaluate software development pricing models offered by vendors so you understand possible cooperation and payment formats.

When to Outsource?

For companies prioritizing cost savings, outsourcing is definitely the best way to optimize expenses. This model will also be a suitable choice if you have specific projects or tasks that can be completed without continuous control.

Since outsourcing companies operate with broader talent pools, there’s a greater chance you’ll get the right talent at a proper price. Whether you need a full-stack team for comprehensive development or require a single low-code specialist, you’ll have it covered.

When to Outstaff?

If you need to expand your team, an outstaffing partner will match you with the number of specialists and expertise needed. For tasks where control plays a pivotal role — like startups or small product companies — it’s better to cooperate with outstaffed employees. On top of that, as your company grows, you can also ask your provider for additional teammates.

This remote staffing model will also benefit CEOs and managers who focus on proactive risk management. With your control over the augmented team, you can easily manage disruptions while still saving on operational costs.

Software Outsourcing and Outstaffing with Acropolium

Acropolium has been trusted by businesses globally with IT outsourcing, task delegation, and team augmentation for over two decades. From software project and website development to IT consulting and legacy system upgrades, we provide expertise focusing on clients’ priorities.

Experienced in both outsourcing and outstaffing, we help our partners find the best solution for their requirements and budget. Our teams have delivered 450+ solutions of any complexity following the highest ISO standards and compliance principles.

Below, we’d like to share some of the latest success cases.

Acropolium Case Studies

Recently, our partners have asked us for SaaS solutions where each client has different management goals and budget frames. We analyzed the project needs and budgets, picked up the teams, and made the objectives come true.

Software Development Outsourcing: a SaaS Crypto App

When working with a cryptocurrency company, we were asked to build a SaaS-based app that would serve as a robo-advisor. The client needed a user-friendly product for cryptocurrency novices, simplifying the navigation of industry assets for entry-level users.

Challenge

Ensuring compliance with evolving regulations for each cryptocurrency was the primary technical challenge. Our task was to align with dynamic rules based on user location, chosen cryptocurrencies, and activity.

Solution

• The dedicated team implemented diversification as the core feature, allowing users to spread investments across multiple trading strategies, reducing exposure to individual assets.
• Our developers furnished comprehensive performance metrics for informed decision-making, encompassing historical returns, risk assessments, and relevant data.
• We ensured the client prioritized consistent platform performance, offering scalable scenarios for rapid technical issue resolution and minimizing downtimes.

Results

• User registrations surged by 250%
• Trading volumes increased by 119%

Consulting and Development Services Outstaffing: a SaaS Medical Appointment

During cooperation with a healthcare business, Acropolium was to develop a SaaS-based appointment system. We had to build a comprehensive patient scheduling system integrated with Electronic Health Record (EHR) solutions. The appointment software had to offer basic and premium subscriptions, facilitating online booking to eliminate manual scheduling.

Challenge

Without medical scheduling software, the clinic faced staff overload and errors, leading to overbooked slots, inefficiencies, and prolonged patient waits. Staff burnout and customer dissatisfaction followed, coupled with significant missed appointments, resulting in substantial revenue loss.

Solution

Having consulted the client on future project improvements and tech implementations, we have provided the following services:

• Development of a comprehensive SaaS appointment app with essential features.
• Building of secure clinic scheduling software with basic and premium access levels.
• Implementation of multi-language support and multi-user access.
• Integration of patient appointment booking system with an Electronic Health Record (EHR) platform.

Results

• Reduced patient no-show rates by 30%.
• Cut average patient wait time by 25%.
• Hospital scheduling software increased patients’ access to medical records by 40%.

Final Thoughts

There are no weak and strong players in the outsourcing vs outstaffing comparison — each model presents growth opportunities. Outsourcing is suitable for discrete projects where you can relinquish more control, and cost savings and specialized expertise are critical.

Outstaffing, on the other hand, is ideal when you want more control over the team, continuous collaboration, and flexibility in adjusting resources. The choice depends on your strategic goals and the level of control you wish to maintain.

Acropolium is here to breathe our expertise and approach to successful software development partnership into your business. Our vast scope of development and consulting services and certified processes allow us to build scalable solutions to address your challenges.

Don’t know where to start with outsourcing or team augmentation? Let’s talk: we offer flexible subscription-based cooperation and are ready to guide you toward cost-efficiency.

Sources of Information

• IT Outsourcing - Worldwide | Statista Market Forecast