Published On: Wed, Nov 13th, 2019

The truth behind outsourcing vs the distributed team

In times like these, anything seems to go.

It used to be the case that if you wanted something done and you didn’t have the personal, that you just make a new full-time hire. In the dynamic economy we live today, companies have more flexible options available to them.

Both outsourcing and distributed teams can be solutions for small or growing companies with uncertain scaling needs.

The numbers reflect this with the outsourcing market reaching a size of $85.6bn globally. Unsurprisingly, the ever-changing landscape of IT is at the forefront with a $62 bn share.

Even between similar concepts like these, there are genuine differences when it comes to your business’ bottom line. So, to make sure you go down the right track, let’s look at what each is and what they have to offer.

photo: photologue_np via Flickr

Outsourcing vs. Distributed team – what’s the difference?

Although they might sound like different ways to say the same thing, the two concepts are quite distinct. Outsourcing is when you contract a specialized team to deliver a project or a single piece of work. Outsourcing is usually done on a once-off basis, and you pay for the service per hour, milestone, or per project.

A distributed team is precisely what the name says. In this case, you actually hire individuals that then become employees of your company for all intents and purposes. Once they’re on board, the main difference between them and your regular employees is that they work remotely.

A Pro and Con comparison

Outsourcing reduces overhead and cuts costs

Hiring more employees is one of the main growing pains facing startups. An employee’s cost-to-company can be much higher than their actual salary. More employees mean more admin and more infrastructure as well as supporting departments, like HR.

Outsourcing isolates you from all of this by offloading these responsibilities to the single point of contact between you and the workers.

Another advantage of outsourcing is to tap into the lower wages in other markets. Some think this is unpatriotic or exploitative, but it’s a do-or-die cost-saving measure for many businesses. For the employees, it’s usually still decent money considering the lower living costs and wages in their own countries.

A distributed team providers give you control of who you hire

When outsourcing, you don’t have a say in the individuals that will work on a project. Through a remote team portal, you still get to handpick team members, although the service will help you with the hiring process.

Once again, there’s a tradeoff. The benefits of handpicking someone you like to work with is apparent, however, that also comes with increased employee overhead in the long run. With outsourcing, you are completely removed from the logistics of managing these new “employees”.

Distributed team members are a part of your company

Because you have a more direct relationship with distributed team members, they can be molded to fit your company profile. With time, they will adopt your company culture and do things the way you want them to be done. They can become true and loyal long-term employees as well as brand ambassadors. You won’t have that same connection with a faceless, outsourced team.

Probably the single most significant advantage a distributed team has over outsourcing is that you can expect more consistent working methods and a clearer hierarchy of responsibility. It’s also harder to shift the parameters of outsourced work as it’s based on a pre-work agreement. On the other hand, you can give new orders as you like when it comes to your distributed team.

Focus on your core business processes with outsourcing

As a new, dynamic, and expanding business, you sometimes need to foray into the unknown. Maybe you need a custom, in-house tool developed, or a new client project requires skills you currently don’t have. For example, maybe you are a content and SEO service provider, but you need some web or app development done.

It wouldn’t make sense to hire full-time staff for a once-off job. Developing these skills in-house can also take up too much time and resources. In these cases, outsourcing can help you focus on your core business while still getting the job done.

Outsourcing – The future of our gig economy?

In the end, it comes down to the compromise between budget-saving measures and the level of control you have over your team.

Depending on the particular situation you find yourself in, either one might be the best fit. If you want to hire individuals to fill more specific roles and be a part of your company, a distributed team is the way to go.

However, if you want to stick to a lean business model and reduce overheads, then outsourcing is just the ticket.

In a way, outsourcing provides a certain balance between hiring freelancers on the one end and a distributed team on the other.

Author: Melissa Burns

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