What should a business do if it cannot maintain a constant in-house team or lacks specific skills in its internal team? More and more companies around the globe are choosing IT outsourcing as a go-to solution for their business needs. This allows them to find new talents from any part of the world, expand their delivery capacity, reduce costs and optimize development processes. You can outsource both within your own country and overseas, but recently the nearshore software development model has been gaining popularity.
The two most common models of IT outsourcing are staff augmentation and managed services. Many organizations hesitate between these models, carefully considering which one to opt for. The choice of model depends on how deep the business wants to dive into the project and who is ultimately responsible for certain aspects of the work.
In this blog post, we will compare staff augmentation vs managed service model and highlight their pros and cons to determine which solution is best for your business. First, let’s deal with the nuts and bolts of both models.
What is the IT staff augmentation model and how does it work
Staff augmentation business model is an outsourcing strategy that allows you to extend your existing team with outsourced IT professionals. Outsourced experts can help with a specific task on a short-term basis or join your team long-term and perform different tasks just as any other in-house team member. Simply put, this strategy enables your business to quickly recruit technical talents for a particular project. They are not your permanent employees but are fully integrated into your team.
Staff augmentation services combine the reliability of in-house employees with the agility of an outsourced team and allow you to scale your delivery organization up or down based on current business requirements. This strategy is not only cost-efficient, but also helps to reduce time spent on recruitment.
- In general, the staff augmentation process in most companies comprises 4 core processes:
dentifying your talent shortfalls. First of all, you should determine what exact knowledge and skills you lack, and figure out what competencies you will require from candidates, such as their expertise or specific qualifications. Moreover, you will need to define how many specialists you need to hire.
- Finding an outsourcing company. The next step is to hire an IT outsourcing agency that will find suitable candidates to join your team. You can validate the skills of the candidates by conducting interviews and tests.
- Onboarding new team members. Once the outsourced specialists have been interviewed and hired, they should be familiarized with the in-house team, your project, business goals, and daily procedures.
- Further management and support. You need to work further with the augmented team members in the same way as with your own employees: set tasks, monitor their implementation, give feedback, etc.
Pros and cons of IT staff augmentation services
Some of the benefits of staff augmentation include:
- Access to a big pool of specialists. You can hire technical talents that are not available locally, and do it fast.
- Team scalability. You can easily add or reduce staff according to demand for the period of time when your company needs them.
- Cost-effectiveness. This option is usually the cheapest among all outsourcing models as it includes the minimum overhead from the contractor side.
- Recruitment time reduction. Outsourcing companies may already have the specialists you need on-board and available. If not, the recruitment time on their end would usually be quite short because they already have a well-established recruiting process, a pool of pre-screened candidates whom they can quickly hire for your project and established presence in the market of your choice.
Staff augmentation model actually has only one, but quite important disadvantage.
- The team management. You need to manage outsourcing specialists yourself. This takes time and, as a result, incurs additional costs. It is also highly desirable that you have previous experience in managing outsourced teams and can adjust your working processes accordingly. Otherwise it would make sense to rely on the service provider to take care of setting-up collaboration and delivery processes, but this normally means that a different outsourcing model (dedicated development center) will be applied.
Typically, the staff augmentation business model is suitable for projects where you need more specialists while already having a delivery team with its own processes and specialists and a manager/management team that controls and handles the development.
What is the IT managed services model and how does it work
Managed IT Services is an outsourcing model where you can delegate certain IT services to a Managed Service Provider (MSP). Services can cover just about anything from DevOps consulting to BI & Big Data development & support, etc. The MSP should meet the quality parameters and specifications defined by the Service Level Agreement (SLA).
Managed Service Providers usually have a responsible manager who monitors the entire project according to SLA and makes sure it runs without any issues. The client completely delegates management, monitoring, and execution to the managed service team. This enables the business to focus on its core mission-critical operations while cutting costs and keeping up with cutting-edge technological advances.
In comparison to IT team augmentation, where the client independently manages the team and is responsible for the timeliness and quality of deliveries, with managed services, team management, distribution of tasks, quality control and timeliness of deliveries are covered by the contractor.
This is why the cost of managed services is usually higher since the contractor spends additional efforts on managing the team and ensuring the quality of service. In case of unforeseen issues, the contractor will also need to fix them at his own expense. The fee for managed services is usually fixed or based on the time spent on the project in real-time (T&M).
Pros and cons of managed services model
Some of the advantages are:
- Guaranteed outcomes. Managed services are backed by SLA, so the provider will make all the efforts needed to meet all commitments to maximize the value of their work and achieve their intended results.
- Less efforts spent on your side. The contractor takes care of all management activities and organizes the delivery process himself in such a way as to comply with your SLA. Good thing is that managed services providers usually have clear and streamlined service delivery processes and know how to fine-tune those for delivering desired results. You just monitor the KPIs and provide feedback on the quality of service.
The key drawbacks of IT managed services:
- Less flexibility. The contractor works according to his own processes which may seem a bit of a black box for you. If you want more transparency, a better understanding of the process and some influence on it, it is crucial to talk with the contractor at the beginning of collaboration and make sure that they can adjust the process accordingly.
- Greater dependence on the contractor. You need to carefully choose your IT partner, go through their previous experiences as well as check reviews, so you can be sure that the provider will deliver a high-quality service.
- Higher price. It is clear that managed services projects are more expensive in comparison to staff augmentation because they place more responsibility on the provider thus increasing the overhead and risks on their end.
Managed service vs staff augmentation: What’s the difference?
The decision of which model is best for your company depends on the nature of your business. The table below shows the main differences between IT staff augmentation and managed capacity model.
|IT Managed Services||Staff Augmentation|
|Hiring||Takes place with no efforts on your side||Recruited by vendor, you need to interview and approve the candidates|
|Engagement||Full-time or part-time||Full-time|
|Pricing||Based on service levels and outcome||Based on the number of FTE involved|
|Communication||Via provider’s Service Manager||Direct|
In fact, none of these models is better or worse than the other – they are tailored for different needs and business goals. Managed services are suitable for organizations that want to receive a service with specific characteristics and do not have the experience to delve into processes, manage a team, etc. With managed services model, they delegate all these tasks to the contractor, while they themselves focus on higher priority tasks.
If you are searching for specific talents to fill gaps in your team, you should consider staff augmentation. This method provides the agility and cost-effectiveness you need to reach your objectives.
Managed services vs Staff augmentation: Bottom Line
IT managed services and staff augmentation are the two most common software development outsourcing models. Each of them has its own pros & cons and they both have enough potential to help businesses achieve their objectives and thrive.
For most companies, the complexity of the IT industry makes it impossible to opt for one model only. Even as businesses become more globally competitive, choosing one model over another may not always be the best strategy. These days businesses tend to maximize the benefits of both staff augmentation and managed services by balancing the two.