Another driver for outsource staffing is the need to reduce costs and improve operational efficiencies. It is achieved through technological innovation powered by an IT team. But maintaining an in-house high-skilled IT staff can be costly since the IT needs of an organization can change constantly in today’s dynamic business environment.
The answer to this problem is IT outsourcing services, which allow a company to optimize the time and cost of a project and access the knowledge of an experienced partner at the IT outsourcing company while letting your staff do the things they can do best.
The most popular models of cooperation with a third-party IT partner are: outsourcing a project and having a dedicated team and staff augmentation. Let’s compare these models and find out the pros and cons each model offers. Before getting to that, we’ll explain the terms.
- What is Staff Augmentation
- Types of Staff Augmentation
- What are the Benefits of Staff Augmentation
- What Is Outsourcing
- What Are the Pros of Outsourcing
- What are the Pros of Staff Augmentation
- Staff Augmentation vs. Outsourcing Comparison – Which One Is the Best Choice for You
- Wrap Up
What is Staff Augmentation?
Staff augmentation is a type of HR outsourcing strategy that allows a company to add staff to its team based on the skills required for a project to augment the staff of the organization temporarily. IT staff augmentation is a remote hiring model allowing a company to build a team of skilled IT professionals (e. g. software developers, web developers, software testers, etc.) to perform particular tasks and fill staffing gaps on projects in compliance with the current business objectives. In this case, staff augmentation services are maintained by an IT partner, who provides official employment, insurance and takes care of taxes for the remote staff.
Types of staff augmentation
There are two main types of staff augmentation hiring – short-term and long term:
- Short-term staff augmentation services are used when there is a short-term need for specialists (engineers, developers, testers, etc.), or when in-house specialists are unavailable.
- Long-term staff augmentation services are used in longer projects when there is a need to fill a skill gap or cut operational costs, or when it is impossible or difficult to hire an in-house staff member.
Staff augmentation can be divided into 3 categories:
- Commodity – when you need a reliable workforce, but you don’t need them to have a specific skill set.
- Skilled – when you need workers with a specific skill set, but the level of those skills is not critical.
- Highly skilled – when you need professionals having very advanced skills that can be attained only through significant training and experience. It is this type of staff augmentation that companies usually seek in the IT outsourcing market.
What are the benefits of staff augmentation?
There are a lot of benefits you get while using staff augmentation:
- You can increase the flexibility and capacity of your team – you hire the specialists exactly when you need them and for the task which is relevant at that time.
- You get high productivity levels as the developers you hire are 100% focused on your project and dedicated to your goals.
- Your Intellectual Property rights are secured as the developers are dedicated to your project from the very beginning.
- You close the skill gap in your in-house IT team with the talent needed to fulfill your current business objectives.
- You save time as IT staff augmentation services allow you to hire IT specialists from around the world on short notice.
- You cut your operational costs as you don’t have to pay administrative and organizational expenses like office rent, utility bills and equipment. All you pay is the vendor’s fee, and the vendor takes care of everything else.
What Is Outsourcing?
Gartner defines IT outsourcing as “...the use of external service providers to effectively deliver IT-enabled business process, application service and infrastructure solutions (including utility services, software as a service and cloud-enabled outsourcing) for business outcomes.”
When you outsource services, the software outsourcing company controls the project hiring the employees to realize the project. They are responsible for the results and quality of the work.
Outsourcing involves handing over control of processes, services, solutions and/or projects to another company to execute.
There are several types of IT outsourcing methods based on the location where the work is done. Here are some options for outsourcing:
- Moving a business/service overseas. Used by US and western European companies to take advantage of lower costs and/or a more favorable economic climate
- Nearshoring. Businesses or services are transferred to a country close to you
- Homeshoring/onshoring. Allows employees to work from home
The most commonly outsourced IT functions are:
- App/software development
- Website/app maintenance and management
- Hosting and web development
- App support or management
- Cloud computing
- Data center operations
- Technical support and telecommunications
- Database development/management
- IT infrastructure
Reasons for outsourcing are:
- Reduction of costs due to lower labor costs, cheaper infrastructure, or an advantageous tax system in the outsourcing location.
- Accelerating time to market. The outsource company is focused on the task - that eliminates unnecessary and time-consuming processes in your own company.
- Taking advantage of external expertise, assets and/or intellectual property, especially if those resources are difficult to find at your location.
- Better use of your company resources. When some tasks or business processes are delegated to a third party specializing in that particular field, your company can focus on its core business, and in-house employees can concentrate on the tasks they do best.
Companies outsource to use a third-party provider’s expertise to perform tasks when the third-party provider can do it better, faster and cheaper than the hiring company can.
What Are the Pros of Outsourcing?
Outsourcing has been gaining popularity over the years. The number of US companies that outsource IT services is difficult to count, but the trend is clear.
According to Grand View Research, “the global IT services outsourcing market size was valued at $520.74 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 7.7% from 2020 to 2027.”
The benefits of outsourcing are no less significant than the benefits of staff augmentation, but this type of remote hiring is different. Here are some of the advantages of this approach:
- The most apparent advantage of IT outsourcing is reduced expenses – both management overhead and training costs. IT service providers in countries with lower production costs offer services that result in lower costs of labor, operations and even equipment.
- The client has more time because they have fewer management responsibilities, thus saving money and the time of in-house management teams.
- Access to expertise and talented staff is another benefit. Outsourcing companies often have the technical expertise and highly skilled professionals, which may be unavailable in your own company and can be very expensive to hire in your home country.
- Time savings is another great benefit thanks to established business processes and procedures in place at your outsourcing partner’s facility.
- Outsourcing is results-centric – the quality of the product/solution is the vendor’s responsibility because the outsourcing company controls the project from A to Z.
Outsourcing models, however, can create challenges. The cons of outsourcing sometimes are closely related to the pros.
The disadvantages of outsourcing include:
- Heightened security risks due to the exchange of proprietary information or sensitive data. You must carefully analyze and verify a potential partner’s security policies, measures and procedures.
- Lack of control as there is no direct participation in or control of the development process.
- Lack of a clearly defined project scope, which can result in higher costs.
- Time zone differences can be a problem if an outsourcing partner is located overseas. It can hamper communication, especially between management teams.
- Long distance can be a problem as well as it can make business trips more time-consuming and expensive.
- Language and cultural barriers can also hamper communications between your in-house and outsourced teams.
What are the Pros of Staff Augmentation?
- You hire professionals while not dealing with the usual employment routines, such as setting up a legal entity, paying insurance and taxes, or the cost of other infrastructure investments.
- Flexible hiring models offer the opportunity to increase or decrease staff depending on the tasks and the project you are working on. It also reduces the time spent on recruitment.
- You can leverage existing resources and involve expertise from specialists depending on your project needs.
- No geographical limitations, as the staff can be augmented with professionals from all over the world.
- Competent augmented staff with the necessary skills can quickly add value to your project.
- You have access to every member of the team and have control over the development processes. Remote team management is also under your total control.
- You can increase or decrease team members’ expenses, and you are in charge of the payroll.
- Lower hourly rates compared to other hiring models, and it’s cheaper than hiring in-house employees.
- You can use staff augmentation as a trial run for potential full-time team members.
The disadvantages of staff augmentation are related to the remote nature of the hiring model.
- Communication issues may arise due to different time zones, language and cultural barriers. Thus you have to choose high-quality communication channels and control the quality of communication.
- The delivery of the product is the responsibility of the client and his team.
- Service issues on the provider’s side can hamper the work of a remote team.
- Having augmented staff may be training intensive as you have to ensure all team members get the necessary information about the project.
- Increased management overhead as you control the whole management team.
Staff Augmentation vs. Outsourcing Comparison – Which One Is the Best Choice for You?
Choosing the model can be a complex decision. Let’s compare outsourcing vs. staff augmentation. What are the differences? And what are the key advantages/disadvantages when choosing the proper model for you?
If your in-house employees are not great with technology and you don’t have appropriate management processes and procedures in place, it’s better to outsource. If your company is technology-focused, it can probably control workflow and development processes. And if you have well-established processes and managers to handle the remote team, then staff augmentation can be a good choice.
The most typical reasons for IT staff augmentation are:
- the company has a limited budget and wants to save money
- the company already has a team of engineers working on the project, and it wants to extend the team
- the company is launching a new project, and extra staff is needed
- the project requires specialized skills and knowledge
- the company needs to test the product before release
When you use staff augmentation:
When you use outsourcing:
|You can personally choose the candidates and manage them with the methods you prefer||The partner that provides outsourcing services offers the team structure and the methods they prefer|
|You get specialists with particular skills (e.g., engineers)||You can get engineers, analysis and design, UI/UX design, quality assurance (QA), project managers (PMs) and/or support and maintenance|
|You will have a dedicated team of software developers that work on your project. You control the development process||You get the services of highly skilled IT professionals that have expertise in the field you need. There is no need to oversee the work of professionals, especially if you don’t have in-house specialists|
|There is a high level of control over remote resources||The vendor is responsible for the project outcome and controls the effective use of their own resources|
|There are fixed charges for the completion of the project without hidden fees||Charges will depend on the time spent on the project, and hourly rates are usually higher than those for staff augmentation|
|Your project will be completed quickly||The time of project completion depends on how well the tasks are assigned and how the project is managed|
When selecting a vendor, you should choose one which provides both staff augmentation and project outsourcing services. Such a partner can offer your business the best of both worlds, and you don’t have to manage multiple vendor relationships.
Team management is your ticket to success.
Irrespective of the hiring model you choose, there are main points you have to keep an eye on. Project management is always critical for successful project completion.
If you choose an outsourcing model, check if your provider has appropriate procedures to manage your project. If your choice is staff augmentation, be sure you have those procedures in-house. Develop a detailed project plan and follow it. Set the tasks for your team and control the progress.
Cprime | Archer has a large portfolio of staff augmentation services. We offer flexible team augmentation services based on our broad pool of high-skilled IT professionals - developers, QA engineers, testers and technical writers. Tell us about your needs and requirements - and we’ll make all arrangements to select the best candidates for you. We’ll provide you with staff that will be exclusively dedicated to your project development, and will carry out the support services necessary for the smooth integration of your remote development team.