The changes in digital spheres have made it necessary to develop software, web applications, and other digital products. Over the last few years, the rapid growth in IT outsourcing has sparked a debate over which model is better between managed services and staff outsourcing. Many companies find themselves torn between the two models wondering which one to take when considering IT outsourcing. This post will enlighten you on various features when to choose which model and the merits and demerits of each model.
Staff Augmentation vs. Managed Services Comparison Guide
What is Staff Augmentation?
Staff augmentation is a type of outsourcing where an IT company temporarily fills up a niche in its existing department in terms of skilled labor. The company incorporates outside personnel to join a project that needs a specific skillset expanding an in-house team. According to Statista, the global outsourcing market will hit $413.7 billion by the end-of-year 2021. Staff augmentation will form a sizeable share of this growth, especially in the IT sector. Below is the process of staff augmentation.
Staff augmentation process
· Identification of your business needs
· Selecting the suitable staff
· Bringing together the in-house and the augmented staff
· Constant engagements, and
· Rescaling based on future needs.
What are Managed Services?
It is a type of outsourcing where a company requires IT services but lacks a department. Therefore, the company hires a fully functional, fully equipped IT company.
The IT company comes on board with its staff and personnel. The hiring company enlists the services on a long-term basis or until it concludes the project.
Features of Staff Augmentation
The best way to describe staff augmentation is by the word temporary fix. It gives a company the option to work temporarily with the talent and specialized skill set in the market and scale up its resources with short notice.
When there is a spike in the workload or the company is rolling out a new project, staff augmentation services give the temporary solution needed to the hiring company. It is a suitable solution when the current project needs a specialist or there is a need for huge personnel. It gets rid of the cruel and tiresome permanent hiring process. On the brighter side, once the intended project ends, or the workload around the company is manageable by the in-house staff, you can end the contract by release the temporary staff.
The most significant thing to note about this type of outsourcing is that the contract only lasts for the duration. Therefore, it accords a company the resources to see a project to completion with the possibility of scaling and extension. Although staff augmentation has been associated with small and medium-sized companies, it has also proved efficient for well-established companies.
Advantages and Disadvantages of Staff Augmentation
Because of the temporary nature of staff augmentation, various advantages and disadvantages arise from its mode of operation.
Advantages:
Cost Savings & Increased Output
One of the primary reasons most IT companies prefer the staff augmentation model is its substantial cost saving. It costs the company any lesser to staff agminated the team than it would hire permanent employees, especially if the labor needed is just for a short duration for an instant because of a spike in the workload.
This is because they only used the gained staff in the duration, and even if their fee is high, it only runs for the duration. Once the project ends, so does the expense.
The incorporated resources through staff augmentation increase productivity since the in-house employees will cut on multi-tasking and focus on what they do best.
Keep project Control
Since the specialized skill you get through staff augmentation adds to your existent department, you keep the project autonomy. The staff gained helps with the specifics needed. Hence the project will still run according to your preferences. They will also complete the project to your specific instructions.
If you want a new trajectory of the project or an addition to its features, you can make these decisions without a bother.
The outsourcing companies only purpose is to determine your needs and send a specifically qualified person for the job.
Scalability and Flexibility
They provide resources on-demand in the staff augmentation model. For instance, if the required resources at one stage of a project are higher than the previous stage, the staff augmentation provider adds on the wanted staff, and when that phase is complete, he will take the extra staff back.
You can only afford such scalability and flexibility through staff augmentation. Hence, it is an ideal way to fulfill short-term requirements regardless of the complexity of the project.
Easy Employment
Staff augmentation makes the idea of finding the requires personnel easy and efficient for IT companies. To start a contract, regardless of how many employees a company needs or its skills, the staff augmentation services will deliver it on time. Staff augmentation additionally gives a vast talent pool with a quickness to it. Therefore, incorporating a new member into the company’s team is much easier.
Fewer Legalities
The staff augmentation model accommodates an IT company with fewer legalities. It is because the staff augmentation provider technically employs the employees. Therefore, the issues on human resources, payroll, employees benefit, and the company handles taxes.
Hence the sum the IT company handles is the one in the contract with no further complications.
Disadvantages
Long-term costs are higher
In case of unforeseen circumstances that would lead to the prolonging of a project, the retention of the resource will render its advantage of cost-effectiveness void. To some extent, it may lead to higher expenses than those that you would incur while permanently hiring. Hence, it is not suitable for long-term projects.
Internal Bottlenecks
The transition of a new member into an already existent team comes with a fair amount of challenges. Some of these challenges may include rigid internal processes that the new members need to get accustomed to accomplish the company’s set goals. It might take longer than expected, derailing the project and taking more time. The other issue might be the need for basic training for the incorporated team in an ongoing project. They can affect the timeframe of the project as well.
Need to improvise
The dependence on the staff augmentation model may sometimes lead to disappointments. For instance, when starting a new project and there is a need for specialized personnel if the needed skill set is not readily available in the market, it may halt the project till the company finds such a person. In contrast, in-house personnel could have avoided this if they invested earlier.
Features of Managed Services
This is a long-term preferable outsourcing model where a different company with a team of professionals controls the IT department, where the mother company did not have an existing one. It is an experience-driven model between a customer and a provider. The provider hires a third-party team that specializes in IT. The hired team comes on board with technologies, specialized skills, and processes to meet the expected targets.
The mother company comes up with a contract between them and the IT company stipulating the terms and conditions of the operation. The two parties also agree upon the desired outcome, the deliverables, and the proposed timeline.
Hence the third-party team takes up the entire IT infrastructure and becomes responsible for the management, maintenance, upgrading, and any task the client requires. However, this leaves the matter of the size of the team upon discussion by the parties. The two parties may decide to leave this with the outsourced company or not.
Also, in this model, both the customer and the client share operational risk because of the project’s execution. Therefore, the IT experts scale the effects, outcomes, and responsibility of the project at every stage.
It is, however, critical to note that in managed services, the outcome purely relies on the subcontracted company, but the hiring company claims the responsibility of the project.
Advantages and Disadvantages of Managed Services
Managed service outsourcing being an outcome-based model has the following pros and cons:
Advantages:
Long-term cost-effective
A company should use managed service as a long-term model to enjoy its cost-effectiveness. This is because it helps in predicting IT costs over the said duration as packaged by the provider. Considering the IT experts come on board with all the equipment and knowledge, it eases the expense on the client.
Incorporating both the equipment and the experienced personnel with a fixed price also contributes to its cost-effectiveness.
Time Effective
As long as you have verified the team picked to be competent and productive, continuous monitoring is unnecessary. It opens up the time and schedule for the mother company to concentrate on running its company with the assurance that the project is in expert hands.
Guaranteed 24\7 Support
Monitoring of IT systems is a necessary but tedious and tasking hassle. However, using managed service puts this task squarely on the outsourced company’s responsibility. Therefore, it puts the mind to rest knowing that someone is monitoring the systems.
In case of an abrupt problem or a system goes down in the middle of the night, a person is on standby to sort it out.
Disadvantages:
Accountability
Entrusting the development and management of an entire department to a foreign company may somewhat prove a risky Endeavor. Therefore, before getting into a partnership, it is advisable to do your due diligence and go through that companies reviews and contact some of its previous partners to find out how the company works.
Lower Flexibility
With an in-house team, it is easier to test out different theories and frameworks. With managed services, this may prove challenging. This is because the provider might choose or have a different preferred method and work with their team purely.
Loss of Autonomy
Because of using managed services outsourcing method, the outsourcing company needs to relinquish total control of its processes and products development which might not be in its best interest.
This type of outsourcing might also leave the company open to potential confidentiality issues.
The Difference Between Managed and Staff Augmentation
These two models differ in various aspects although, they offer almost similar services. The essential differences between these two models include;
- Under the managed services model, you incorporate the outsourced party department, while in staff augmentation, the party works with the in-house team.
- For staff augmentation, it is a requirement for the contracting company to have an existent IT department. In contrast, managed services model does not require the outsourced company to bring with its equipment.
- In managed services, both parties involved share operational risk. In staff augmentation, on the contrary, only the company has operational risk.
- The staff augmentation outsourcing model is ideally a short-term-based type of outsourcing, while the managed services model is ideally a long-term model.
- While using the managed service model, the outsourced company is in charge of maintenance. Conversely, in the staff augmentation model, the parent company is in charge of maintenance.
The Similarities Between Managed Services and Staff Augmentation
On both models, the mother company lacks the required skills and gets them from outside the company. The employment status of the outsourced personnel remains with the outsourcing agent in both managed services and staff augmentation. Last, both models run temporarily. There is an outlined period for the partnership.
What to Choose and When
To make the ideal decision on the model to choose between staff augmentation and managed services model, consider some of the following factors:
- The size of the company
- The duration of the project
- The availability of resources in the mother company, for instance, does it have a functional IT department?
- The amount of control you want to relinquish
Conclusion
Depending on your need for additional staff and skill set, both managed services and staff augmentation are excellent models to choose from. As we have seen above, there are advantages and disadvantages that each method has. Hence, it would be best to consider them among the factors listed above before agreeing with the service provider in any of the above models. Leverage the two to deliver high-quality products on time.
