When a software firm, a gaming company, or a corporate IT department need to cut personnel costs, accelerate project timeline, or push beyond the scope of what their in-house resources offer, they often turn to technical staffing services for help. IT service providers may suggest a variety of outsourcing engagement models, such as staff augmentation or project outsourcing, or even managed services, as ways to bring in outside talent. While all of these options can provide you with skilled engineers or designers to assist your development team as it zeroes in on a deadline-focused project, there are some important distinctions between these approaches that you should be aware of.
Let’s take a look at some of the main differences between staff augmentation and project outsourcing (the two most predominant outsourcing models) — and to a lesser extent managed services — to help you decide which approach most effectively fits your current staffing challenges and ongoing software development needs.
According to the non-profit tech association CompTIA, the IT industry is set to hit $5 trillion in 2019. And while the United States is still the largest tech market in the world, other regions, including the Asia-Pacific, India, and even Latin America, have been gaining significant technical ground over the years, which means the design, IT and software divisions of North American companies need to hone their competitive edge in the face of likely challenges coming from domestic rivals, and from overseas. One of the best ways to do this is to keep your costs as low as possible, while still maintaining easy access to top-tier engineering talent when needed.
Staff augmentation, which temporarily boosts your software engineering team’s numbers with capable staff throughout a project, or during specific phases, is one delivery approach an IT staffing agency can provide you with that will help you hold onto your competitive advantage.
Staff Augmentation Benefits
- Staff augmentation offers businesses and corporations a great deal of flexibility when it comes to scaling up or scaling down their teams — minus the hassle of having to worry about recruiting, hiring, and then dealing with the expenses that come with full-time employees (administrative duties are handled by IT staff augmentation vendors).
- Supplemental staff work directly with your in-house team, giving managers direct oversight over how temporary hires integrate and cooperate with your employees. An added bonus is that your full-time staff won’t have to worry about job security, or be threatened by additional talent coming in from technical staffing firms, as these newest team members are only working on a project on a short-term basis.
- The staff augmentation model makes it much easier to locate, and then integrate external engineers into an internal team, as compared to working with an outsourcing vendor’s team, which often comes with deep-seated cultural and technological differences that can be hard to align with your company’s goals, thus creating potential compatibility issues and challenges.
- With staff augmentation, you can quickly fill in-house skill gaps with outside talent. And if used correctly, the augmentation model can also save you money by reducing general overhead costs, and the associated expenditures that come with hiring and training new employees (as we’ve already discussed).
Staff Augmentation Drawbacks
- You’ll have to ensure that your management team is ready to deal with augmented staff members by repurposing managerial resources as needed, or even office space (if selecting the onsite model) as you bring in temporary hires.
- Your IT staffing agency will provide you with the most skilled candidates it can find. That being said, you may still have to devote some resources to training, as well as educating them about how your company operates. Supplemented staff, just like a global franchise entering a foreign market for the first time, may need some time to adjust to and integrate with your team. This can sometimes slow productivity down, at least in the beginning, until your augmented staff gets a handle on your internal business processes and protocols.
Project outsourcing differs from staff augmentation in several key ways, and comes with its own pros and cons. The main difference between project outsourcing and staff augmentation is that with staff augmentation, you are purchasing engineering resources while maintaining direct control over your team (along with the associated risks of a possible negative outcome), while with outsourcing, you are paying for a specific, prearranged outcome, and sharing the burden of risk with the outsourcing vendor, although giving up direct control over certain aspects of your business operations.
An IT outsourcing agency will recruit, train and manage a team of skilled professionals to handle the development tasks you’ve set out for them. This external team will work separately from your firm, and won’t be directly involved with the rest of your internal development activities, or any other in-house programming work.
According to a recent study published by Computer Economics, North American companies are dedicating more and more of their IT budgets to outsourcing (onshore, nearshore and offshore), with midsize and larger companies seeing the most significant increases over the last few years. And with technology hubs popping up all over the world, from often-overlooked domestic options (outside Silicon Valley) like San Diego, or Durham, to more traditional overseas destinations like India, or up-and-coming spots like Brazil (a country now churning out globally competitive tech startups of its own) and Vietnam, project outsourcing is still a remarkably viable option to select when it comes to filling internal skills gaps, finding outside expertise, or cutting costs by offloading less critical business operations to an outside vendor.
Project Outsourcing Benefits
- Reducing costs is one of the most obvious benefits of project outsourcing. In a survey from Statistics Brain, 44% of American companies polled said reducing expenses was their primary reason for selecting the project outsourcing model. Once the contracts have been signed, the burden of setting up, training and managing a remote team falls to the vendor – as does delivering the final product, and with a reputable vendor, hopefully guaranteeing the quality of that final product as well.
- Gaining access to workers with rare, sought-after technical skills is another big plus when it comes to project outsourcing, especially when those expert candidates aren’t available locally. Another survey, this time from CIO Magazine, reported that “recruiting and hiring data science and analytics professionals is far and away CIOs top concern when it comes to talent,” with “42 percent of respondents” sharing this staffing worry.
- By selecting the project outsourcing engagement model, managers can free up the time of in-house employees by delegating certain development tasks to outsourced teams. By offloading some of the coding work to an external team, managers gain more flexibility in how they can utilize their onsite employees, who are now available to be redeployed to work on mission-critical projects, or projects that fall under a company's particular area of expertise.
Project Outsourcing Drawbacks
- Your business will give up direct managerial control when working with an outsourcing vendor and the offsite team your vendor has put together. This can lead to frustration with communication protocols (often compounded by time zone differences), plus you might encounter language and culture barriers as you try to communicate your development goals with overseas workers and managers.
- Because you give up direct oversight with this model, you may run into some quality issues with the final product, which can harm productivity, as well as general team morale as employees, managers and outsourcing vendors try to figure out who is responsible for these issues. Coding errors that fall short of your firm’s rigorous development standards, undisclosed technical debt, or other technical problems originating from an outsourced development team can be time consuming and difficult to resolve.
While we’re primarily looking at the differences between staff augmentation and project outsourcing in this article, managed services is yet another “outsourcing” model you should be aware of — especially since the managed services market is predicted to grow to $282.0 billion by 2023. Managed services do share some things in common with project outsourcing, which can cause some confusion, as experts don’t always agree on an exact definition of this term. In essence, managed service providers offer remote IT solutions on a continual basis, whereas project outsourcing tends to generally engage on a project-by-project basis.
A typical example of how you might use a managed service would be if you contracted a managed services provider (complete with its own staff and IT infrastructure) to support your company’s day-to-day operational needs, including software updates, repairs, or managing the platform-as-a-service (PaaS) or software-as-a-service (SaaS) that keep your offices running efficiently. You would contract a managed services provider on an ongoing subscription basis, and typically pay a flat, monthly fee. This model can potentially give your employees more time to focus on the most pressing mission-critical tasks at hand, rather than wasting their valuable time on internal IT service issues.
Selecting the Best Technology Delivery Model for You
Choosing the right technology staffing partner can be a complex process. There are variables such as a firm’s IT and personnel budgets to take into account, as well as anticipated staffing requirements stemming from projected business growth (or contraction), the technical skillsets available among your current employees, project security and project deadlines, the position of global competitors in international markets, and many other factors, all of which add to this complexity.
If you want a flexible staffing solution that lets you bring in outside technical expertise when needed, with augmented staff able to quickly integrate with your existing team — whether for the duration of an entire project, during certain stages, or for a final software review — then staff augmentation might be the best option for you.
If you don't mind giving up direct control over a project, or you don't have the managerial resources to deal with augmented staff, project outsourcing could be the engagement model for your company. While project outsourcing has its drawbacks (lack of quality control and communication issues), an external development team can help you cut costs, while giving your in-house programmers more time to prioritize their most important development tasks.
At the end of the day, depending on your software development needs, you might end up selecting staff augmentation, project outsourcing, or perhaps a hybrid route implementing both models, with a bit of managed services added in to round out your general staffing approach. As your company continues to grow, you can always alter these engagement models as needed.
The best course of action is to choose an experienced vendor that can help you meet your present staffing challenges, while continuously consulting with you so that you can implement another outsourcing model if and when required, or adjust your current staffing model to make your company run as efficiently as possible, making it more competitive in national and international markets.