Outsourcing vs Outstaffing: Differences, Common Elements and FAQ

Summary

Introduction

Every business needs qualified specialists. But not all companies have the ability to hire the necessary number of employees because of the high costs. Therefore, many organizations use freelancers as needed, outsourcing or outsourcing the management of their business processes.

Organizations, which searched for highly specialized staff, first appeared in the U.S. in the 1950s, but in Ukraine this service has been in demand only since the late 90s.

Let's try to understand the peculiarities of outstaffing and outsourcing concepts, the pros and cons of these services. And let's make sure of the importance of the service for your business.

Due to the fact that these areas are fairly new to the Ukrainian market, many companies confuse this concept or interpret it in their own way, so it is important to clearly define the difference between outsourcing and outstaffing.

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What is an IT Outstaffing Model?

Outstaffing is a process in which one company temporarily lends its employees to another company's tasks. In IT, technical specialists, designers, developers, and other experts are allocated to solve digital tasks. In this case, the employees come to the office of the company that hires them but are registered in the firm that provides outstaffing services.

Outstaffing is mainly used by companies with at least 100 employees. The service is also popular among startups that want to get the specific specialists they need for development without too much hassle, which is difficult to find in any other way.

The most common types of outsourcing there are:

  • secretaries;
  • designers;
  • translators;
  • marketing specialists;
  • IT specialists.

The mediator takes on the tasks of payroll, taxes, labor law compliance (hiring, sick leave, firing, etc.). At the meantime, employees devote all the time to projects for the client company. In turn, the staff are directly managed by their executives. One of the main differences between this service and outsourcing.

Thus, it is a profitable form of cooperation for all.

Some people have a misconception about such a form of employment as outstaffing. Others think it is the same as outsourcing. In this case, it's not at all like that. There are major differences, and below we'll look at what they are.

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Why Do Companies Choose Outstaffing or Outsourcing?

Outstaffing and outsourcing have long been an issue in business. Each strategy has its pros and cons. Why do some companies choose outstaffing for IT development, while others use outsourcing?

Reasons for Using Outstaffing

Outstaffing helps the customer optimize his activities, and as a result he gets:

  • reduced costs for the upkeep of employees;
  • legal use of migrant labor, no need to follow the terms of paperwork;
  • less administrative burden on the company;
  • no need to resolve labor conflicts with staff members.

The key thing when opting for this service is to find a skilled, qualified provider who is able to provide quality service without coming into contact with existing labor laws.

Reasons for Outsourcing

Common reasons for using outsourcers in IT include:

  • reducing costs;
  • paying more attention to the core business;
  • solving performance problems;
  • increase in business quality;
  • access to a talent pool.

The demand for outsourcing services has increased in recent years because of the effects of the pandemic. But the most successful firms were using this method even before the lockdown.

Outstaffing vs. Outsourcing

Outstaffing involves specialists from the company who have become a team under your supervision. You can control your employees, give them tasks and communicate directly.

With outsourcing, you outsource tasks to workers, which he performs on a contract basis.

For example, creating a turnkey website is a job for which you can invite in-house developers or outsource the project to another company. In this case, the company is fully responsible for the result.

Pros and Cons of Outsourcing

Here are some of the benefits of such employment relationships:

  • Reduced labor costs;
  • Getting rid of social obligations;
  • Independence from circumstances;
  • Improving the quality of non-core services;
  • Focus on the core business of the company.

Working with outsourcers has certain risks:

  • Getting into dependency;
  • Unscrupulousness.

But these disadvantages can easily be foreseen in advance and secured with the appropriate conditions in the contract.

What is the Best Choice for your Business?

Both outsourcing and outstaffing will yield excellent results for businesses.

  • Outsourcing comes in handy if you have a separate software project that needs to be completed.
  • Outstaffing providers will be the best solution for achieving business goals if you need to hire a team to work on each project.

If a business needs to hire remote professional skills, there are two great options to choose from. Both outsourcing and outstaffing will help with company goals and business development.

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How to find a reliable IT outstaffing partner in Ukraine?

  1. Industry and Technical Intelligence

    Choose a potential long-term partner who can help scale and improve the solution.

  2. Awards and Recognition in the Industry

    You should pay special attention to designations aligned with the vendor's technical expertise.

  3. Company Size

    Medium- and large-sized vendors can provide a faster turnaround time.

  4. Employer Brand

    A strong employer reputation in the marketplace is a sign of a salesperson's credibility.

  5. Security

    When choosing a reliable provider, pay attention to whether the company meets all security and compliance requirements.

  6. Customer Reviews

    Feedback from former and current customers can tell you a lot about the level of quality a company provides.

  7. Level of Communications

    Knowledge of English, cultural aspects and emotional intelligence are integral parts of good cooperation.

Key factors for choosing an Outstaffing company from Ukraine

What makes Ukraine a desirable and reliable place for outstaffing?

  • Ukraine's IT market is booming: the country boasts 200,000 software developers and IT professionals working for 1,700+ IT companies;
  • In 2021, Ukraine was recognized as the "Outsourcing Destination of the Year" by the Global Sourcing Association (GSA);
  • More than half of Ukrainian software developers now work in outsourcing and outstaffing software development companies;
  • Constant inflow of new specialists: almost 40,000 graduates in engineering and ICT enter the market every year;
  • Ukrainian technology talents have a mentality similar to that of the West, so communication goes smoothly and without problems.

So, Ukrainian outstaffing allows you to add highly qualified developers and correctly size your team for a project, allowing you to quickly start a large project or scale your team to meet deadlines.

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How to work with an IT company from Ukraine?

Here is 3 steps on how to work with a Ukrainian outstaffing company:

1. Talk to the company

This is the start of a personalized matching process. Schedule a free introductory call with an advisor – a personal contact at the company. They'll make sure the talent is matched perfectly to your needs.

2. Candidate Assessment

A vetted shortlist of candidates will soon be available. The company selects the most suitable candidates from its pool, conducts individual pre-screening, and then arranges interviews for the customer.

3. Getting Started

The company ensures that the contract is signed and invoiced. Until then, there are no obligations.

As for the pricing models of Ukrainian IT companies. The cost of services depends on several factors, such as:

  • the amount of wages of potential employees;
  • availability of additional expenses (business trips, compensations, etc.);
  • the order of payment for services. (will it be prepayment or postpaid).
  • Ukrainian IT companies have the following rates:
  • From 35 USD/hour on Front-end and UI/UX projects;
  • From 40 USD/hour on Laravel back-end projects;
  • From 45 USD/hour on React.is/Node.is projects.

In order to minimize the risks of legal aspects, it is necessary to pay attention to the execution of contracts:

  1. Pay attention to the drafting of contracts between the client and the outstaffing company;
  2. Ensure that contracts reflect actual services or work;
  3. Explain the processes of outstaffing to employees;
  4. Take into account and comply with Ukrainian legislation on the limitations of outstaffing.
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FAQ

What is an Outstaffing Service?

How Does Staff Augmentation Work?

What is considered Staff Augmentation?

Is Staff Augmentation Important?

Conclusion

So, outstaffing implies that the company will allocate employees for a certain time, and you will distribute their duties.

In conclusion, it is worth adding that most companies today are satisfied with the services provided by freelancers from Ukraine. Outstaffing and outsourcing allow companies to optimize business processes and reduce personnel costs. It solves the problem of hiring specialists for a short or long term.

The main thing is to choose the right contractor or specialist, to whom you are going to delegate certain responsibilities, to see all the advantages of outsourcing or outstaffing.

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