Staff Augmentation Vs Managed Services: Which is Better?

Nov 03, 2022

Maulik

Innovify

Staff Augmentation Vs. Managed Services

Every business wants to maximize its potential. However, they may lack the human resources to fulfill their objectives under designated timelines.

So, can’t they just hire new workers?

Of course, they can. But many don’t want to go through the painful hiring process, talent development, firing, etc.

As a result, outsourcing is an extensively used method in IT companies. While some companies prefer hiring in-house professionals and experts for streamlined productivity and delivery mechanisms, many join the outsourcing race simply because they don’t wish to go through a long recruiting process.

As per data, the outsourcing industry in 2018 had a net worth of $85 billion which is predicted to reach $482 billion by the end of 2022! This shows that the outsourcing trend is increasing every year.

Presently, two significant IT outsourcing models exist Staff Augmentation and Managed Services.

Let’s dive in to understand these terms and how they function.

What is Staff Augmentation?

Inside an IT company, the core task remains the priority, while the many non-core ones belong to different and specific niches. For instance, an app development company always focuses on developing mobile and web apps under their predefined expertise.

However, there might be a situation when blockchain development might pop up for one assignment. In such a scenario, the company would not require a blockchain developer beyond the given project’s timeline. But it would need one for the given project.

This is when the company can hire a blockchain specialist dedicated to the project where the work is required.

From the above explanation, the definition of staff augmentation can be: The process of understanding the gap and trying to fill it by hiring specialists for a specific niche for a given timeline. It is more project-based work.

The scenarios where companies leverage staff augmentation include:

Increased Capacity

Hiring a specialist would temporarily fill in the work requirements with a spike in work. This majorly caters to seasonal business demands, increased production, and a spike in customer demand.

Bridge the Gap

Hiring a new team for long-term needs that might operate from a different location or work setup.

Fulfilling the requirement of special skills

When the company needs out-of-the-house skills and special or occasional needs like logo design technology set-up and others.

Strategic

Building of a team that would work flexibly while allowing companies to gain a competitive edge in the market.

What are Managed Services?

On the outsourcing spectrum’s other end is Managed Services. In this, an MSP or Managed Solution Provider comes into action and takes charge of the entire management process to help the company attain its long-term goals without hustle.

The third-party resource or an MSP would take charge of processes that include recruiting, managing, and training professionals to prepare them for the company’s work requirements.

Such an outsourcing service provider takes over the given project, the deliverables, and the delivery of pre-defined outputs. While their major work is managing staff, they are also responsible for defining the project’s scope of work, checking the expertise level, hiring the appropriate candidate, and training and polishing them.

The scenarios where the company leverage Managed Services include:

Security and Compliance

Managed Services can progressively contribute to the protection of critical business data stored in the system through their excellent compliance services. From avoiding data from getting breached to taking quick action after the data is breached, their service extends to all such cases.

Efficiency and Reliability in IT Operations

The common reason for inefficiency and unreliability is either lack of skilled employees or overburdened employees. From resolving issues quickly to leading innovation in technology and maximizing profitability and uptime, it caters to all.

Infrastructure Maintenance

With Managed Services, companies do not require to focus on infrastructure maintenance. Companies can have 24*7 dependability on Managed service providers of network connections and other dependabilities.

Budget and Finances

A typical IT budget constitutes maintenance costs, software, hardware, IT labor costs, and many others. Managed service reduces the list and helps save costs while ensuring a higher rate of return on investments.

Differences Between Staff Augmentation And Managed Services

While Staff Augmentation and Managed services are two different outsourcing models; they have considerable differences. Studying the differences will give you an idea of choosing the apt one per the company’s or organization’s needs.

Pros and Cons of Staff Augmentation

Now, let us look at the table that precisely states the pros and cons of Staff Augmentation.

Pros Of Staff Augmentation Cons of Staff Augmentation
Cost Effective
Hiring niche experts does not require full-time employment. Hence it is cost-effective as companies do not have to undergo a long recruitment process.
Introducing Company’s Processes

You need to hire an individual and explain the company’s processes and operations only for him to work temporarily.
Offers Control
The manager would know who’s working on which part of the project and thus puts the control in the hand of the company.
In-house team and augmented staff
In the absence of an airtight process, there can be discomfort between the in-house team and the augmented staff.
Attrition Prevention
A company vests time and resources in hiring and training employees who eventually end up in another organization. Staff Augmentation helps you hire specialists with proven expertise temporarily.
Resource Utilization
The resource utilization still depends on the company that hires the professional.
Easy Management
An augmented staff is managed by the outsourcing company.
Unsure Reliability
The hired candidate might not work for other projects on the same remuneration range after the current project closes.

Pros and Cons of Managed Services

Pros of Managed Services Cons of Managed Services
Flexible Pricing
The pricing is fixed in mutual agreement according to the scope of work. As the scope changes, the prices will change too!
Contract and Budget
The binding contract and the limited budget are always challenging to work on.
Legal Documentation
Everything from work, delivery timeframe, and others are documented in the agreement.
Unassured cost reliability
In case the service provider fails to deliver the output; it can be extremely expensive for the
Accessibility to Versatile Skills
Unlike staff augmentation, Managed services include hiring staff with versatile skills and not just one special skill set.
A Managed Service team would not understand your company’s priorities better than your own employees.

Let us look at the table below to understand the difference more clearly:

Criteria Staff Augmentation Managed Services
Definition Hiring specialists and professionals for specific projects to support the in-house team. Transferring maintenance and anticipated needs to a third-party organization to decrease the load off to the in-house team.
Aim To meet the special needs of projects that the in-house team cannot meet. To reduce the budget and improve efficiency within the organization for a range of functions.
Commitments Committed term and scope Limited Commitments
Expectations Documentation and transfer of Knowledge into the company’s project Vesting Knowledge into the individuals through training and programs
Pricing As per the work and efficiency level of the service and output. As per the agreement, delivery of pre-defined output and vested
Situation When running a small to medium enterprise, Staff Augmentation can help you reduce cost and save on infrastructural expenses as most hired professionals work remotely. When you are on the verge of starting a business but have no idea about domain expertise, industry standards, staffing, or delivery model, the Managed Service team can accommodate the company’s needs.

Why Choose Staff Augmentation for your Business?

With all the listed features of Staff Augmentation, let us look at why you should consider choosing staff augmentation over Managed Services:

Hiring on the Go!

The most beneficial thing about staff augmentation is hiring the right person for the right job only for specific projects. Besides providing a helping hand to permanent in-house employees, they also help reduce the budget extensively as you don’t incur the costs of a permanent employee.

Large Talent Pool

From a company’s perspective, hiring a full-time permanent employee restricts the ability to leverage the market’s talent. With staff augmentation, you have access to newer and better skills. The hiring process is based on a specific domain so that they can bring newer methods to the table.

Operational Cost-Cutting

Staff Augmentation allows companies to hire temporarily. This means that companies do not have to bear the infrastructural cost. The specialist works remotely, and the company needn’t spend the amount it would to hire a full-time employee. However, the specialist is answerable to the company in all cases. This eventually helps the organization to save the infrastructural and operational costs, especially during lean periods.

Upskilling for the in-house team

The in-house permanent team works with the specialist on projects. The employees get an opportunity to learn about things they are not well-versed with. While the company does not pay anything additional for training employees, they get first-hand experience working in a domain they don’t belong to. This enhances the skills of the in-house employees.

Case Study on Staff Augmentation

Background

An IT company based on mobile app services had a client whose work scope was related to blockchain development. The business’s monetary and image profitability could improve after working with such a client.

Challenge

The challenge was that the company did not have any blockchain experts available at that moment. There was no other project where the firm required a blockchain expert. This meant that upon completion of this project, the company would no longer need any blockchain experts. Another big challenge was the hiring dilemma: What if the expert could not meet the industry standards?

Solution

That is when they hire a specialist on an immediate basis temporarily for the project through staff augmentation. It was a 6-month-based project. The project was based on a specific timeframe.

Output

Upon completion, the company has the monetary profit besides the tag to have successfully served such a big client. The company could significantly benefit from staff augmentation with limited time and resources. The specialist could also add to his resume the project and client.

What’s The Best Model For You?

This was a detailed insight into the two models of outsourcing: Staff Augmentation and Managed Services.

While opting for Managed Services is still a lengthy process, staff augmentation has been very helpful in combating immediate business challenges with cost efficiency.

Many IT companies have opted for the Staff Augmentation outsourcing model to increase operational efficiency, reduce costs and meet business standards.

Now that you are well aware of the pros and cons of both models, you can make the right decision for your business and what would be most appropriate for it.

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Prakash Pilley, Client Services Director
Prakash Pilley

Client Services Director