The business world is becoming increasingly uncertain as globalization and digitalization continue unabated. The dynamics of the business environment are rapidly changing, throwing up new opportunities and challenges. In such a situation, the lack of adequately skilled IT resources is a reality most IT companies have to reckon with.
Take the example of the covid19 pandemic. It has fundamentally changed the way we perceive the world around us – from our work arrangements to our social life – everything has changed.
Thankfully, strategies like outsourcing and IT staff augmentation have come to our rescue.
This article discusses IT outsourcing– specifically drawing a comparison between IT staff augmentation and project outsourcing. It seeks to explain which option would best suit your company and why.
So, let’s define staff augmentation and project outsourcing and their respective benefits.
What is Staff Augmentation?
Staff augmentation is an outsourcing strategy whereby a company hires resources, temporarily or permanently, through a third-party vendor to meet its business needs and objectives. In most cases, resources are employed temporarily, and the reasons can be multiple.
Companies opt for staff augmentation to:
- Increase workforce capacity.
- Gain access to skilled workers.
- Add diversity to teams.
- Fill vacant positions.
- Ensure timely delivery of projects.
- Enhance company reputation, etc.
IT staff augmentation is all the rage these days. That’s because no matter how good your IT company is, it does not possess core competencies in all the various lines of its business. And also because it may experience resource shortfall from time to time.
Let’s use a simple example to explain how resource augmentation works.
Let’s say Company Z is an IT company that is approached by a client looking for SharePoint services. But Company Z’s SharePoint developer has recently gone on maternity leave.
So, Company Z reaches out to a third-party vendor, Company Y, to provide a SharePoint developer. Company Y obliges and offers a SharePoint developer to work remotely with Company Z until the latter’s SharePoint developer returns from her maternity leave.
Thus, Company Z uses the resource provided by Company Y to fill a vacant position temporarily. This is how IT staff augmentation operates. There are many ways to implement a staff augmentation strategy successfully. From startups to well-established multinationals, all companies benefit from staff augmentation.
Let’s briefly look at the advantages of staff augmentation.
Advantages of Staff Augmentation
- Staff augmentation enables you to build a talented, multi-skilled workforce that delivers.
- You save time and precious financial resources by hiring through resource augmentation.
- Resource augmentation lets you hire the exact type of resource(s) your company requires.
- It empowers your company with a flexible workforce.
- It is an excellent hiring model for companies that operate seasonally.
- You have significant control over the hired resource(s).
- Staff augmentation gives you access to a global pool of talented IT professionals.
It is true that resource augmentation offers immense benefits to a company. But in all honesty, there are times when staff augmentation just won’t cut it for you. In such cases, turning to project outsourcing might seem like a better option. Let’s explore it in further detail.
What is Project Outsourcing?
Project outsourcing is the practice of joining hands with another company to complete a project in time. In fact, it refers to handing over the entire execution of a project to another company.
Staff augmentation and project outsourcing both fall under the umbrella of outsourcing. In simple words, outsourcing refers to hiring another company to do your work.
This includes running your marketing campaigns for you, hiring resources, product designing, project execution, etc.
Project outsourcing is a relatively broad-based partnership compared to augmentation, as it includes a wide range of IT services. These include, but are not limited to, user interface design, user experience design, analytics, quality control and assurance, project management, etc.
When you outsource an entire project to another company, you naturally have higher stakes in achieving the desired outcome. This enables you to build a more profound and long-lasting relationship with your vendor, something which is absent in a staff augmentation partnership.
Thus, the outsourcing company develops and maintains a close working relationship with the vendor. It is not a one-off transaction; instead, it turns the vendor into a trusted partner for your company.
Let’s briefly explore some of the significant benefits of project outsourcing.
Advantages of Project Outsourcing
- Outsourcing is an excellent way to improve your workforce’s overall efficiency as it empowers you with access to talented professionals.
- It allows your in-house resources to focus on other tasks that are more critical for attaining the company’s strategic goals. Thus, your employees can focus on building and maintaining core competencies.
- IT project outsourcing is cost-efficient since you don’t have to worry about software, hardware, and system upgrades. It is the vendor’s responsibility to provide all the infrastructure for project completion.
- Project outsourcing lets you complete and delivers your projects on time.
- It enables you to provide faster and better services.
- It reduces time to market.
- Project outsourcing gives you access to intellectual property, innovation, and thought leaders.
Let’s compare the two outsourcing strategies to determine which would suit your company better.
Staff Augmentation or Project Outsourcing – Which one to opt for and why?
Costs & Responsibilities
The service provider is responsible for recruiting and employing resources in both strategies. But when you outsource a project, the vendor pays for the infrastructure, office space, employee training, and licenses. The vendor also ensures that each resource is adequately motivated and looked after.
In some cases, this responsibility lies with the vendor implementing staff augmentation as well. Nevertheless, as a rule of thumb, in-house costs are almost always higher than outsourcing costs – even if you cannot identify them. This is because many in-house costs are often overlooked, like insurance, rent, maintenance, etc.
Organizational Culture
The members of the outsourcing team (the one responsible for completing the project) develop close bonds with each other. It is basically a knowledge-sharing environment where resources benefit from each other’s experiences and skills. This leeway is absent in staff augmentation since the hired resource will likely work offsite and remotely for the company.
Besides, the IT vendor is responsible for mentoring and providing the right set of tools to the hired resources under the project outsourcing model. In contrast, staff augmentation resources usually fail to develop an affinity with the outsourcing company as they know they will soon be working for another company on another project.
Project Management
Project management remains the outsourcing company’s responsibility under the staff augmentation model, even though external resources might be working on it.
On the other hand, project management is entirely the software house’s (vendor) responsibility. This may entail hiring a project manager to ensure that the project is not delayed. Moreover, a single point of contact is established under the outsourcing model. Thus, it facilitates quick and effective communication between the outsourcing company and the vendor.
Most importantly, experienced vendors’ forte lies in project management and delivery. They are well-versed in how projects are completed and what possible challenges the vendor might face. Such software houses boast a portfolio of successful projects proving they know how to get things done.
Relationship Dynamics
All relationships, whether personal or professional, require a certain amount of mutual trust and understanding to succeed.
But this takes on greater significance when we talk about project outsourcing. When you outsource a project to another software company, you seek to build a deeper and longer-lasting relationship with it. This enables you to understand the vendor organization’s culture and effectively communicate your requirements and expectations.
This is not the case with staff augmentation. True, you would still build a relationship with your staff augmentation vendor; but it would just not be as deep as the one with the vendor you outsource a project to.
That’s because the scope of your relationship with the staff augmentation vendor is limited to hiring a few resources every now and then temporarily – thus, the vendor has no long-term interest in the success of your company.
Nevertheless, a viable relationship is still a must under both models, irrespective of its depth.
Talent Hunt
Under the staff augmentation model, usually, the service provider offers an in-house resource to the outsourcing company. If the vendor does not have the resource, it hires one according to the company’s requirements. The company conveys what kind of skillset it is looking for in the hired resource.
On the other hand, the responsibility to find the right resources for a project is the vendor’s responsibility entirely. It is their job to put together the right resources, provide them with the necessary tools and infrastructure, and ensure the timely delivery of the project.
In other words, the outsourcing company only conveys the scope of the project and not the individual skillset of the resources tasked with completing it – the vendor decides which resources will best serve the goals of a given project.
Wrap Up
Consider these takeaways if you’re still wondering which strategy to opt for. Staff augmentation should always be your go-to hiring strategy when an internal position becomes vacant temporarily, as in our example mentioned earlier. Similarly, if you need only a few resources to fill a skill gap in your workforce, hire them through a trusted staff augmentation vendor.
However, if you have a serious project that you lack the resources to execute, it would be better if you outsourced it entirely to another company capable of achieving it. This would save you time and money because you would not have to hire the resources to complete the project.
Both staff augmentation and project outsourcing are gaining traction in the IT industry due to their benefits. Both have their own advantages and shortcomings, and neither can replace the other as being the better option.
Your decision should rest on your requirements and circumstances. We hope this article helps you make the right decision for your company.
If you want to outsource an IT project or augment your staff with talented IT professionals, contact us at [email protected]. We would love to accommodate your needs!