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Staff Augmentation vs Outsourcing: A Comprehensive Comparison

9 min read

Staff Augmentation

Outsourcing

January 3, 2024

Staff Augmentation vs Outsourcing: A Comprehensive Comparison

Staff Augmentation vs Outsourcing: A Comprehensive Comparison

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To Sum Up

The choice between IT outsourcing and staff augmentation depends on the specific requirements of the project, the organization's goals, and its risk tolerance. While outsourcing may be suitable for well-defined projects requiring specialized skills, staff augmentation offers flexibility and control for ongoing projects with changing needs. 

It's essential to carefully evaluate each model's pros and cons based on the organization's unique circumstances and the project at hand. If you have any questions about these collaboration approaches or need assistance choosing the right option for your business, please reach out to the byVoice team. We will be happy to help you make an informed decision.

Choosing between project outsourcing and staff augmentation depends on various factors, including the nature of the project, budget considerations, and your organization's specific needs. Here's a short guideline to help you make an informed decision:

Project Outsourcing vs. Staff Augmentation: How to Choose?

IT outsourcing

Staff augmentation

Project complexity

For well-defined, standalone projects

For ongoing projects with changing requirements

Budget

Fixed costs, providing budget predictability. Initial costs might be higher, but it can lead to long-term savings

More flexible budgeting based on resource needs. Can be cost-effective for short-term or fluctuating resource requirements

Project duration

Commonly used for both short-term and long-term projects, depending on the complexity and scope

More flexible for long-term projects or dynamic projects with changing requirements

Training and onboarding

The outsourcing partner typically handles training and onboarding efforts

Requires in-house training and onboarding efforts, but integration is usually smoother

Control and management

Transfers more responsibility to the external team

Maintains direct control over the augmented team's work and tasks

Scalability

Scalable, but changes in project scope may require renegotiation and additional costs

Highly scalable, allowing for quickly adding or reducing team members as needed

Knowledge transfer

May result in knowledge gaps as the external team may not be fully integrated into the organization

Facilitates knowledge retention within the organization as augmented staff work alongside the in-house team

Risk management

May involve a higher level of risk as control is partially on the outsourcing partner’s side

Offers more control and may be less risky, especially for organizations with a lower risk tolerance

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What can prevent success?

There's a risk of compromised quality if the outsourcing partner meets different standards than the in-house team. Lack of control over the outsourcing process can lead to subpar results.

Quality concerns

When outsourcing, companies may feel a loss of control over certain aspects of their projects or processes. This lack of control can be a source of difficulties, especially for critical functions.

Loss of control

While outsourcing can lead to cost savings, there may be hidden costs such as transition expenses, legal fees, or additional management overhead that weren't initially accounted for. Costs may also increase due to such factors as changes in the outsourcing partner's pricing structure or the need for additional services.

Hidden costs

The drawbacks of this approach largely overlap with staff augmentation disadvantages. Besides mentioned above, we can also add the following:

What strategic value for your company is?

Outsourcing can accelerate project timelines by leveraging the experience and resources of outsourcing partners, leading to quicker product development and market entry.

Faster time to market

Sharing responsibilities with an outsourcing partner can help distribute certain business risks. Outsourcing providers often have expertise in risk mitigation and compliance.

Risk management

You can concentrate on your core business functions by outsourcing non-core activities, such as IT support or software development, to specialized service providers.

Focus on core competencies

Outsourcing partners stay up-to-date with the latest technologies. Engaging with such partners can help companies adopt new technologies and innovative solutions without extensive in-house research and development.

Innovation and technology adoption

Managing an in-house IT team can be resource-intensive. Outsourcing allows companies to reduce the burden of recruitment, training, and day-to-day management of IT personnel.

Reduced management overhead

benefits staff augmentation

Besides the benefits staff augmentation offers businesses, companies can benefit from IT outsourcing services in the following ways:

In outsourcing, communication between the client and the service provider follows a client-manager-project team model. In this model, all matters are discussed between the client company and the manager of the contracting company. The project manager then assigns tasks to their team of specialists and oversees the execution of the work.

It's also important to understand that there is a distinction between personnel outsourcing and business process outsourcing. In the former case, specific tasks are delegated to one of the teams, while in the latter, the contracting team manages an entire segment of work within the client company.

Pros and Cons of Project Outsourcing

IT outsourcing providers offer the following range of services to their clients:

Designing, coding, testing, and deploying software solutions tailored to the client's requirements.

Managing and maintaining the client's IT infrastructure, including servers, networks, and databases; providing ongoing support, updates, and maintenance for existing software applications.

Implementing security measures to protect the client's systems and data from cyber threats.

Analyzing and interpreting data to provide insights for informed decision-making.

Offering expert advice on technology strategies, solution architecture, and IT best practices.

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What pitfalls you can face

Distance and potential language barriers between the in-house team and augmented staff, mainly if located offshore, can lead to communication challenges. Effective collaboration may require extra effort.

Communication challenges

Relying heavily on external providers for critical tasks may create dependency issues. If not managed properly, this dependency can lead to challenges when transitioning between project phases or when there are changes in external resources.

Dependency on external providers

Sharing sensitive information with external resources raises security concerns. Companies must implement robust security measures to safeguard their intellectual property and sensitive data.

Security concerns

Despite efforts to hire skilled professionals, there is a risk of a mismatch between the skills of augmented staff and the actual project requirements. This can lead to inefficiencies and the need for additional training.

Potential skill mismatch

How you can benefit

You can avoid the expenses associated with recruitment, onboarding, benefits, and long-term commitments, paying only for the skills and time they need. Moreover, you don't have to provide additional office space, equipment, or other infrastructure for the augmented staff.

Cost savings

Staff augmentation allows companies to quickly access diverse specialized skills without long-term commitments. This is particularly beneficial for short-term projects requiring expertise that may be absent in the existing in-house team.

Specialized skills access

In such a model, companies have complete control over the development process. You can define their requirements and oversee the development process, ensuring an end product meets your business requirements.

Complete control over the development process

Companies can quickly scale their IT teams up or down based on project requirements. Staff augmentation provides the flexibility to adjust the team size and composition, ensuring optimal resource utilization. Moreover, IT staff augmentation allows companies to adapt swiftly to changes in technology and industry trends. They can bring specialists with the latest skills and knowledge, ensuring that projects remain aligned with current technologies.

High flexibility and scalability

Staff augmentation benefits

With staff augmentation, the customer hires a team of specialists from a third-party company to implement a project or specific services and tasks. However, the assignment of tasks and supervision of the work is on the client’s side. Meanwhile, the payment of salaries, provision of necessary equipment, and workspace remain under the control of the third-party company.

Staff augmentation providers offer the following range of services to their clients:

Benefits and Pitfalls of Staff Augmentation

They assist in recruitment, ensuring the client gains access to skilled professionals. They manage the onboarding process, handle paperwork, and facilitate smooth integration into the client's team.

Providers take care of payroll responsibilities, including salary payments, tax deductions, and other financial aspects, relieving the client company of administrative burdens.

They assist in recruitment, ensuring the client gains access to skilled professionals. They manage the onboarding process, handle paperwork, and facilitate smooth integration into the client's team.

Such companies may implement systems for performance tracking, allowing clients to monitor the progress and productivity of the staff engaged.

Providers handle legal compliance matters, ensuring that all employment-related regulations, including labor laws and contractual obligations, are adhered to.

The decision between IT project outsourcing and staff augmentation depends on various factors, and different companies have distinct needs. Understanding your specific situation is crucial for making the right choice. Let's delve into the considerations to help you navigate the decision-making process.

Staff Augmentation vs. Project Outsourcing: What to Choose?

Staff Augmentation Project Outsourcing

When companies need to develop software, they can choose from several ways to collaborate with vendors. The most common and straightforward methods are IT outsourcing and IT staff augmentation.

IT outsourcing involves outsourcing software development to a third party when the customer needs an in-house development team or the team's size needs to be increased to create a new product.

Let's Start from the Base: What is Staff Augmentation and IT Outsourcing?

IT outsourcing has been in the global market for many years and remains relevant. According to Statista, in 2021, the total revenue from IT outsourcing reached $351 billion, and the COVID-19-related restrictions only spurred the demand for this service.

However, if the company already has its team but lacks the required experience, knowledge, or a specific set of technologies, it can expand the team using an external provider’s assistance. This type of collaboration is known as IT staff augmentation. Although IT staff augmentation is relatively new, it has already captured a significant market share. 

Outsourcing and staff augmentation provide companies with significant advantages and cost savings. So, what is the difference?

However, it’s important to note that the concept of a «general-purpose IT technician» is not entirely realistic. Most skilled IT professionals, the kind you’d ideally want to bring on board, have realized that specialization is the key to a more fulfilling job and a more lucrative salary.

IT engineers typically concentrate on specific domains such as infrastructure, networking, cybersecurity, client support, etc. They prefer roles that enable them to expand their expertise in one or two of these areas. Consequently, locating an IT professional who excels in all these areas, a «jack-of-all-trades,» can be exceptionally challenging for supporting your business.

Beyond technical expertise, a quality IT team requires effective leadership. This encompasses both day-to-day management, ensuring prompt issue resolution and user satisfaction, and executive leadership to guarantee that the IT department aligns with the broader business needs of the company.

And don’t forget about tools! Establishing an IT department goes beyond merely recruiting individuals to fill positions. It necessitates providing these individuals with the requisite tools and implementing proven processes for tasks ranging from handling help desk tickets to executing server upgrades.

Now, a logical question arises: what should companies do if they don’t have such budgets? For example, small and medium businesses. They can use staff augmentation or outsourcing services. 

IT outsourcing and IT staff augmentation are two terms that imply the utilization of services from external IT organizations. Due to their similar purposes, both concepts are often considered synonymous, or staff augmentation is assumed to be a derivative of outsourcing.

However, these are two distinct categories of services, each with its own characteristics. What do IT outsourcing and staff augmentation encompass, what are the pros and cons of each system, and how do they differ? Read on in the article.

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