Outsourcing vs. Outstaffing Models: What is the Difference and Their Pros & Cons
Literally in every company you can find outsourcing or outstaffing format: it can be a hired security guard in a shopping center or a lawyer in an IT company. What is the difference between these concepts, we will figure it out today.
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This is a work format in which your company, according to the principle of “contract – work – payment”, performs any business processes for the customer’s company. Only a “total process responsibility” approach will give you the opportunity to maximize profit, loyal customers and reputation in the service market.
The main principle of outsourcing can be formulated as follows: “we leave to our company what we do better than others, the rest is passed on to others who are specialists in this”. And your role in this chain is that of the very specialist.
For example, the most popular outsourcing format in IT today is hiring a remote team to work on a project. You receive the technical assignment and payment, and you give the finished application / service, which was made by your developers.
DIFFICULTIES OF OUTSOURCING
The provision of outsourcing services has its own pitfalls.
First, more often than not, the work you do does not belong to you. Clients can draw up contracts in such a way that you will not be able to use even fragments of developments in the future, you simply will have nothing to prove your competence in a similar task.
Secondly, carefully study the contract with your customer. An illiterately drafted contract can lead to refusal to pay for services under the pretext of “poor quality work”. Proving the opposite is a difficult task, since the quality of an IT product cannot always be objectively measured.
Therefore, we advise you to contact a lawyer and prepare templates for contracts, which take into account all the slippery issues.
Now information technology is so firmly “rooted” in any business that the collapse of the IT component can mean the collapse of the entire business. Perhaps not the collapse of the production itself, but the collapse of sales, logistics and finance for sure. There is no objective reason to be afraid to go into this area, given all the benefits of outsourcing.
Considering that foreign companies are now cutting back on spending and trying to save on everything, including development, this is an open sea of opportunities for IT outsourcing. Analyze your projects, build a profile portfolio and go to market.
In fact, you provide your specialist to perform some tasks in the customer company. Your employee temporarily becomes part of the client’s team, he is under the guidance of their managers, but he receives payment from you, since the contract was concluded with you.
A big plus of outstaffing is that you don’t need to worry about benchmarking. The customer pays for the time of your employees in full, even when they are not overloaded with work or the project is idle. The existing outstaffing advantages will allow everyone to benefit significantly: you, the client and the employee himself.
OUTSTAFFING AND OUTSOURCING DIFFERENCES
* Location. When outsourcing, you are in your office, no relocations are expected; when working under an outstaffing agreement, your employee may be on the client’s premises.
* Time. Outsourcing often concludes long-term contracts with the possibility of prolongation, outstaffing is limited by the time of the contract. After the expiration of the term, your client may want to hire him or replace him with another specialist.
* Payment. Work under an outsourcing agreement is paid depending on the volume, content and quality of the work performed. At outstaffing, your employee receives a flat rate.
* A responsibility. Outsourcing gives your company freedom of action, the client only cares about the result by the agreed date. If any error occurs, then in the outsourcing format the responsibility lies with the owner, while in outstaffing the employee himself solves the problem.
WHICH MODEL TO CHOOSE?
When choosing a service delivery model, you must determine what is more profitable for your company, which format is more interesting and has more potential.
To explain it on the fingers: when a client needs to get from point A to point B, which is better for your business – to become a taxi or to rent a car (tool)?
As soon as the demand for a service or product begins to grow, the number of players in the market increases dramatically. Outsourcing and outstaffing in the labor market is now going through this period.
Leading this market will help you build and maintain your reputation in the first place. Cherish every client, work honestly and do quality. When choosing a company for cooperation, customers study your portfolio and contact customers for recommendations, no one wants to risk it.
Strive to partner with international and national companies, learn more about software cost estimation. It will be a big plus to have lawyers on staff, this will help to avoid tax and legal risks for your business.