Outstaffing vs. Outsourcing: Balancing Flexibility & Cost

Outstaffing and Outsourcing are all the same, right? Well, not exactly; there are some critical differences. Most people don't even realize that outstaffing is really an option. With outstaffing, you get to choose an overseas employee, train them, and get the cost-benefit of a long-term arrangement, but you also have the benefits of them working in an office with local management, HR, and reliable internet and power. So, there are still a lot of benefits outside of hiring a freelancer as well.

With outsourcing, you can rent a resource for a day, week, or month with zero commitment, so the firm has to raise rates and cover for the non-billable time across all of the projects that year. Think of it like the difference between using an Airbnb and owning a second home for your vacations. They both allow you to vacation, but they provide different experiences. Let's get into the details, and you can evaluate which strategy to take advantage of.

What is Outstaffing?

Outstaffing is a model where businesses hire remote employees to work as an extension of their in-house team. These remote workers are employed by a third-party vendor but are managed directly by the client. This approach offers flexibility in scaling the workforce while maintaining control over the project's direction.

At Zibtek, we call this model Workforce+. We allow customers to use our Bangalore operations center and HR team to hire whoever they want among the 1.1 billion people in India. We take care of the office, computer, payroll compliance, HR, federal taxes, etc. The client is responsible for that employee's output and makes the final hiring decision, as well as yearly appraisals and compensation increases. Under this model, the customer does not pay for the increased pricing that outsourcing companies add in order to manage downtime for staff that is not billable. We have seen an average of 40% cost savings in this model, and candidates typically have more experience as well.

What is Outsourcing?

Outsourcing involves hiring a third-party company to handle entire projects or specific business functions. The outsourced team works independently, taking responsibility for delivering results. Outsourcing is charged hourly or by milestone. This model is typically chosen for its cost-effectiveness and ability to leverage external expertise. The customer does not hold a commitment to the employee or the non-billable time. It is known for its tremendous flexibility.

Pros and Cons of Outstaffing

Pros:

1. Increased Control: Companies maintain direct oversight of remote employees, ensuring that project goals align with business objectives.
2. Scalability: Easily scale your team up or down based on project needs without personally expanding your office space.
3. Access to Global Talent: Tap into a diverse talent pool, allowing you to find specialists with the exact skills required for your project among a massive labor pool.

Cons:

1. Management Responsibility: Requires effective communication and management to integrate remote workers seamlessly with in-house teams.
2. Potential for Misalignment: If not managed properly, there can be discrepancies in work culture and expectations.

Pros and Cons of Outsourcing

Pros:

1. Flexibility: Outsourcing can allows you to stop and start a resource at any time with no commitment.
2. Focus on Core Activities: Frees up internal resources to focus on strategic business areas by delegating non-core tasks to experts.
3. Expertise and Efficiency: Outsourcing partners often have specialized knowledge and experience, ensuring high-quality outcomes.

Cons:

1. Less Control: Companies may have limited influence over how outsourced tasks are executed, leading to potential mismatches in expectations.
2. Communication Challenges: Time zone differences and language barriers can impede effective collaboration.

Statistics and Insights into Global Outsourcing Trends

• According to Deloitte's Global Survey, 65% of businesses cited cost reduction as a primary reason for outsourcing. This highlights the financial benefits that drive companies to outsource various functions. Even greater cost savings could be found in outstaffing if the company is willing to take on the responsibility for performance and the long-term commitment of the resource.
• A report by Grand View Research predicts the global business process outsourcing (BPO) market will reach $343.2 billion by 2025, underscoring the growing reliance on outsourcing and outstaffing to optimize business operations.

"Outstaffing provides businesses with the agility to expand their teams quickly while retaining control over project outcomes, making it an ideal choice for dynamic industries," says Sarah Johnson, a tech consultant at Innovate Solutions.

Navigating the Trade-Off, Why Choose Outstaffing?

Choosing between outstaffing and outsourcing depends on your company's priorities and goals. If maintaining control and direct oversight of projects is crucial, outstaffing offers the ability to manage remote teams effectively. On the other hand, outsourcing provides a streamlined solution if flexibility and speed of starting a project are paramount. If you want to chat about your specific needs, we are happy to walk you through all your options. Contact us here.

For businesses navigating this decision, consider the following factors:

1. Project Complexity: For highly specialized projects requiring niche skills, outstaffing may better suit your needs.
2. Budget: Long-term Outstaffing can be substantially less expensive than outsourcing, as you choose your specific team and do not pay for the non-billable time baked into all outsourcing hourly rates.
3. Long-Term Goals: Assess your business objectives and determine which model aligns best with your growth strategy.

In conclusion, both outstaffing and outsourcing present unique advantages and challenges. By understanding the trade-offs between flexibility and savings, businesses can make informed decisions that drive success in today's competitive landscape. At Zibtek, we have seen that more companies want greater control over what type of experience and how much experience each resource has instead of trusting an outsourced provider to deliver the correct talent level on a project. We have seen the outstaffing model work really well with software developers, accounting, marketing, and data entry.

For more insights and tailored solutions to enhance your business operations, we would love to understand your needs and help you evaluate the best solution for your business. Contact us today to take the next step in your journey!