June 30, 2023

What is outstaffing and outsourcing? The difference between outsourcing and outstaffing


From clients, you might often hear something like,

“We are in dire need of workers."
"All the staff units are filled."
"We need to hire someone from the side.”

The desire is quite understandable, especially considering the urgent need for competent IT specialists in the field. You can close the demand for external IT specialists in different ways: through IT outsourcing or IT outstaffing. Both cases go about staff rental, but there are distinct differences. Many people confuse these concepts, considering them almost equivalent.


And we will not confuse them with you. We will try to figure these differences out.

What is outsourcing?

The concept of outsourcing implies the transfer of a specific part of the duties and tasks to a third-party contractor. Thus, the customer company receives those services that it cannot perform independently. In turn, the contractor ensures the high-quality performance of the tasks assigned to them by a team of own specialists.

Outsourcing has proven itself, especially in the IT sector, as recruiting a developing team is tricky, energy-intensive, and often unprofitable. It is much more efficient to address any recruitment agencies and hire a remote team of developers.

In outsourcing, communication between the customer and the contractor occurs according to the client – project manager – team of specialists model.


In this model of outsourcing, the client company usually discusses all issues with the manager of the contractor company, and the project manager distributes tasks to their team of specialists and monitors the progress of the work.

It should also be understood that in outsourcing, some concepts are divided into outsourcing of personnel and outsourcing of business processes.


In the first case, certain tasks are delegated to one of the contractor’s teams. And in the second case, the contracting team manages a whole segment of work within the customer company.


IT outsourcing services have several advantages:

  • Quick start. When starting a business, you can immediately transfer the implementation of urgent IT tasks to an outsourcing company with a ready-made team of professionals who will directly get to work. This opportunity is especially significant for start-up companies.
  • Ability to attract highly qualified remote workers from anywhere in the world. Since the choice of an outsourcing agency is not limited by location, there is always access to many specialists with unique skills.
  • Reducing the burden of managing employees by delegating responsibilities. When outsourcing, the contractor forms a team for the project, distributes duties, and controls and pays for the work of their specialists on their own.
  • Reducing costs by hiring professionals to do temporary work. Paying for an outsourcing company’s services is much cheaper than paying the salary of the specialists employed on the staff. Besides, office space is saved since the provider’s team works on their territory.


On the other hand, there are also some disadvantages:

  • Risk of leakage of information and important data. When you hire professional employees from outside, such a risk can lead to losses; in some cases, even business collapse always exists. Therefore, it is essential to contact companies that have established themselves in the market with positive reviews and a good reputation.
  • Possible difficulties with constant communication. In conditions of remote collaboration, especially if there is a time difference between the customer and the contractor. In this case, proper communication channels and well-established cooperation methods are needed.

What is outstaffing?

Outstaffing involves a slightly different model of remote employment. In this partnership, the customer company hires specialists from a third-party organization to perform a project or specific services and tasks. Still, it takes over the distribution of functions and controls the work. At the same time, the payment of wages, the provision of necessary equipment, and the workplace remain in the hands of the contractor.


Communication in outstaff with a hired team takes place on a par with the full-time teams on the principle of a client–hired team. This option contributes to the uniform distribution of the scope of work and their high-quality performance due to the control by the client.


Outstaffing has its pros similar to the ones outsourcing has, but there are also some particular pros:

  • Transparent selection of the right outstaffed employees with a guarantee of their competence and professionalism. The customer has the opportunity to recruit a team of outstaffed experts based on their reputation, experience, and professional skills.
  • Absence of any labor agreements directly with the IT specialists performing the work. All personnel and accounting issues are resolved by the outstaffing company, which saves the customer from dealing with any labor disputes, accruals of earnings, etc.
  • Costs' reducing. IT personnel outstaffing is cheaper than a full-time customer IT team. It is especially beneficial to use IT outstaffing services for small one-time projects when a team of experts is hired for a particular time or until the completion of work. And the payment is made according to the final result.

Outstaffing also has its cons:

  • Professional understanding by the customer of the scope of work for which they hire specialists. Otherwise, the task set may go wrong, leading to the project's failure. And the responsibility, in this case, will lie with the customer.
  • Poor communication in the case of remote team management. In this situation, the solution may be the temporary placement of the hired specialists on the client's territory. Or you can set up communication channels that will be convenient for everyone with a clearly defined communication schedule.

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The main similarities

As we have already found out, outsourcing and outstaffing are two popular schemes for attracting third-party personnel to perform tasks in favor of the customer company.


In both cases, the hired employees are part of the outsourcing or outstaffing company staff that pays them the salary and resolves all personnel issues.

The main differences

The main difference between outsourcing and outstaffing is the subject of the contract.


With outsourcing, the employer orders a specific labor service. And it is not so vital for them who will perform the labor function. The essential thing is the quality of the final result.


Thus, the goal of the outsourcing company is to provide employees, ensure the workflow and complete the task.


When outstaffing, the employer orders labor units of a certain type: with the necessary qualifications, work experience, etc. The outstaffing agency has such employees in its staff and provides them to the customer on the conditions specified in the contract.


Instead of concluding

“Which scheme is better?”, could you ask. None. And both are good. Whether you choose outsourcing or outstaffing, will entirely depend on the purpose you are planning to hire extra personnel.