IT outsourcing has become a popular choice for lots of companies and there are a bunch of different reasons for that, from the reduction of costs to service delivery improvement. Not to mention revenues IT outsourcing market brings. Today we are going to overview the two main IT outsourcing models, Staff Augmentation and Managed Services. Though some may think of these two approaches as similar or even interchangeable, there are clear differences between them which one needs to know. So, if you are in search of external staff to help you with a project, look through our comparison of Staff Augmentation vs Managed Services and decide which one is better for you.
Staff augmentation is one of the most sought-after outsourcing strategies in recent years. It gives companies an opportunity to hire narrowly-focused tech professionals all over the world to augment their in-house staff temporarily. The strategy is beneficial if one works on a certain project requiring additional skills that aren’t needed on a regular basis. What is more, a parent company reserves the right to manage outsourced staff directly. Not only is staff augmentation cost-effective, but it is also time-saving since a recruitment drive is held by the service provider. However, this approach is beneficial mostly as a short-term solution.
Another well-known outsourcing model in the IT-sphere is called managed services. Within this model, a company hands over responsibilities for management, IT operations and process delivery to third-party organizations, known as Managed IT Solutions Providers (from now on the MSPs).
The managed services model is responsible for delivering results that have been defined beforehand. On top of that, the service providers receive full control over a project which means they take care of everything from maintenance of the system to constant monitoring and support. Unlike staff augmentation, managed services is a great approach if a company needs long-term external assistance. It is also worth mentioning that a parent company that opts for this kind of outsourcing service loses control over the project since it is delegated to the MSP.
Now that you got acquainted with these two popular outsourcing solutions, it is time to single out the benefits and shortcomings of each. We all know well that everything has its drawbacks, and these business strategies are no exception. By having weighed all the pros and cons, you will be able to make the right decision and go with a model that will be the most beneficial for your business.
- A quick way to avoid attrition and fill in the gaps in the skills and capacities required by a project. According to the recent statistics, almost half of all IT specialists are ready to find another employer since the demand for high-quality IT services is getting higher. Unfortunately, no company can ward off the attrition issue. That’s exactly the case where the staff augmentation can come in handy. With this solution up your sleeve, you don’t need to worry about personnel shortage.
- High-level flexibility. The ability to adjust and change whenever it is needed is a powerful tool in the arsenal of any successful company. Information Technology belongs to those business spheres that change rapidly, therefore flexibility is required, to say the least. Thanks to the staff augmentation model, you can close the gaps within your team by finding augmented resources. What is more, such an approach has little to no impact on the operating model of a parent company.
- Complete control over a project. As mentioned before, companies that choose staff augmentation have a high level of autonomy which means they gain complete control of a project and all the processes and operations associated with it. That being said, a parent company is the one and only that makes ultimate decisions regarding a project.
- Cost-effectiveness and transparency of the cost model. The key difference and advantage of the staff augmentation solution is its cost-effectiveness. There is no need to pay full-time wages every month if you need a certain amount of work to be done during a certain period of time. For this purpose, you hire external staff when you need them.
- Recruitment time reduction. Independent recruitment can be a long and difficult process. Moreover, if the process drags on for some reason, a company starts losing money. By delegating this task to an IT staffing company, you will find the needed personnel quickly and less costly.
- Higher labor costs as a long-term solution. Costs associated with overheads and profit margins may stand in the way when you go with staff augmentation as a long-term solution.
- Commitment to work hours only. Since contractors that you are hiring for a certain period of time are committed to nothing but work hours, there is a decent chance that they will be putting off the important tasks in order to earn more. With this model, it will be difficult for you to get a full grasp of what work is really done by the external staff.
- A parent company is responsible for the result. As a parent company that only gets help with certain tasks, you will be fully responsible for the result you get. It is neither good nor bad, it is just the way it is.
- Cost-effectiveness. Just like with staff augmentation, you save money by getting help from managed IT services vendors. The difference is, a customer pays for the outcome which means the pricing is tightly tied to the result one wants to get.
- Focus on the guaranteed outcome. The delivery of needed services is insured by a service level agreement (SLA). This document indicates the amount of work that has to be done and sets a time limit that has to be met by a services provider. Due to this, managed services vendors are interested in doing their work as efficiently as possible.
- Substantial saving of time. Since the organizations that provide managed IT services are quite large and offer a variety of different skills, equipment, and knowledge, client-companies can find the required solutions much faster and with lower expenses.
- Financial clarity. Basic services which a vendor provides a client-company with are established as a complex in advance. Therefore, prices are also established in advance. Of course, there might be some additional costs associated with specific services needed, but it usually happens with non-typical projects.
- Vendor’s responsibility for the execution. When it comes to the question of who is responsible for the process of management, things are a bit different in managed services than in staff augmentation. A vendor takes full control over management, maintenance, and result delivery. All that is needed from a client are clear tasks and details that have to be taken into account by a provider of services.
- Dependency on an MSP. Owing to the vendor’s full control of the workflow, a client-company takes big risks when giving its resources away. Even though such risks are worth taking, it is always a good idea to get acquainted with the reviews and recommendations from those who have had experience working with a certain services provider.
- High prices on the services of qualified providers. As we were saying, one of the best things about managed services vendors is that they give you access to all the necessary technical equipment, knowledge and skills. Needless to say that all of these tools require substantial expenses. The prices are much higher than if you would go with staff augmentation meaning this can be considered as a disadvantage.
Having read that, take a quick look at the things you need to do when comparing staff augmentation vs managed services:
- Define your goals;
- Take into account flexibility or accountability factors;
- Decide what degree of parent company autonomy you need;
- Determine the duration of cooperation;
- Think of the project scaling ease.
So, what is the difference between staff augmentation and managed services? One is more appropriate as a short-term solution while the other one follows a long-term relationship between a parent company and an MSP. One allows a high degree of autonomy, the other one takes it away. The question which you have to ask yourself is which model meets your business objectives better. Both outsourcing models have their own advantages and disadvantages, and they both have enough potential to help IT companies reach their goals and flourish. Look through the benefits of each solution and make a thought-through decision based on your needs and expectations. We can’t define a winner in the battle between managed services model vs staff augmentation, but you can!