Staff Augmentation vs Managed Services: Which model to choose?

Technology has entered all spheres of our life. It’s true about our everyday routine and various kinds of business processes. As a result, the demand for software products is growing. However, it is still not feasible for every company to have an in-house development team. That’s when software development outsourcing enters the game.

As flexibility is one of the top business priorities today, it is not surprising at all that there are different models of building cooperation with outsourced partners. You can read about some of the main aspects of outsourcing in one of our previously published blog posts. But in this article, we’d like to pay attention to the most popular business models that are widely applied today by companies of different types and sizes. They are IT staff augmentation and managed services.

If you ask us: “Which of these models is better?”, we will say: “Neither”. And we are not kidding. Neither of these models is a universal variant that will suit everyone. The issue is that both of them have their peculiarities, pluses and minuses. And what is even more important, each of them is appropriate in a particular range of cases. That’s why before making up your mind, we recommend you read this text as a correctly chosen business model is already the first step to the success of your project.

What does staff augmentation mean?

Though our task is to explain the core difference between staff augmentation and managed services, it will be rather wise to start with a closer look at each of these two options.

Actually, that’s the right time to see some controversy in our words. So, if someone already has a development team but the existing resources are not enough, why isn’t it better to hire some specialists and expand the team? Well, the situations can be different. And quite often it may happen so that you need additional help only for one project that will last for 1-2-5 months. After that, it won’t be feasible at all to hire new staff.

So, thanks to the possibility to use staff augmentation services, you do not need to look for new employees on your own, you do not need to deal with HR, legal and administrative procedures related to hiring and onboarding. Your software development vendor will take care of all these things.

As you can see, staff augmentation provides the following benefits:

• Flexibility. With this business model, you can seamlessly change the size of your team. When there is a considerable workload, and you see that your in-house developers can’t deal with all the ongoing tasks, you can add new talents to the team. At the same time, once your team is expanded, it doesn’t mean that the same size should be preserved forever. You can reduce your developers’ number and organize their work more efficiently to avoid overstaffing.
• Productivity. As a rule, outsourcing companies have access to a vibrant pool of talents. It means that it is possible to find experts who will have exactly those skills and knowledge that will be the most valuable for your project. Moreover, these specialists will stay 100% focused on your tasks which will help you achieve the best results in the shortest period.
• Cost- and time-efficiency. It is much easier (and less expensive) to expand your in-house team with external specialists provided by one vendor than to hire your developers. In addition, there isn’t any additional pressure on your HR department, and you do not need to think about onboarding and other administrative processes.

But is this model pitfall-free? Unfortunately, not. And there are some essential things that you have to know.

Disadvantages:

• The language barrier and other issues in communication. Thanks to the internet, there are no borders in the online space. It means that you can hire specialists from any corner of the world (and in the majority of cases, offshore outsourcing turns out to be the most feasible variant). Of course, English is a global language, but you should be ready to face a situation when not all developers will have outstanding language skills. Moreover, there can be such unpleasant moments as time differences and connection issues. But with a reliable outsourcing partner, you will be able to find a solution.
• Lack of internal knowledge. Each project has its peculiarities, and only those working on this project can know them. That's why, when a new person joins a team, they need time to catch up with the others.
• Data privacy concerns. When you establish cooperation with a new service provider, it is crucial to check what approach to security and data privacy this company has. Otherwise, it can happen so that your sensitive data will be revealed to 3rd parties without even notifying you and getting your permission.

When is IT staff augmentation effective?

Let’s look at the situations when this option will be a good choice for you:

• You already have a team of developers and now need to enrich it with new talents;
• You have a limited budget and do not want to extend your staff with additional in-house specialists;
• Your project requires some particular knowledge and skills;
• You need additional resources for the short term only;
• Your project requirements are continuously changing, and you need to have a lot of flexibility.

Managed services model: what is it?

The managed services model also presupposes using the capacities of external talent pools to realize your projects. But in this case, you hire an entire team of specialists (developers, designers, business analysts, QA engineers, project managers) who have the required knowledge and skills.

Often, small businesses that do not have their own IT departments use this model. A managed IT services provider will help you support your tech infrastructure and satisfy your tech needs. Thanks to the cloud platforms, practically all software-related services can be performed remotely. For example, you can hire a team responsible not only for the software development but also for its long-term maintenance. And this is one of the factors that boost the popularity of this approach to establishing cooperation with IT experts.

A hired team will always have all the necessary tools and technologies required for your project realization, and you won’t have to take care of them. Moreover, working with tech experts by this model doesn’t presuppose the introduction of any changes into your corporate structure. As a result, when you end your cooperation with a remote team, no changes are required once again.

Benefits of the managed service model:

• Reduction in costs. From the financial perspective, it is much more sensible for small businesses to work with an external team of tech experts than to invest money into creating their tech department.
• Access to a rich pool of experts and tech stack. Without spending too much time on hiring processes, you can get a team of professionals who will have relevant qualifications to provide the services you require.
• Less control is required from your side. For example, when working with your internal team, only you are responsible for the correctness of process organization and the necessary resources and tools. But when you rely on a service provider, this company will execute all the required control and monitoring. And you can focus more on your crucial business tasks.

Like any other approach, this one has some disadvantages that you need to consider. They are:

• Full reliance on your vendor. If this company decides to get out of business, you will have to look for another service provider, resulting in some losses and additional costs.
• No physical presence. On the one hand, it's cool that most services can be provided remotely, and all your IT experts can work from any corner of the world. But on the other hand, there can be cases when to fix some issues, physical presence is required. It means that you will have to urgently look for somebody to solve the problem.
• Privacy vulnerability. As well as in the case of staff augmentation, external specialists that are not employed directly by your company will have access to your data and information. Therefore, to avoid any risks associated with providing your info to 3-rd parties, you should be very attentive at the stage of choosing your IT partner.

When should you choose Managed services?

This model is more effective in the following cases:

• You do not have your in-house development team;
• You want to outsource the whole project;
• Your project is a long-term one;
• It will suit both cases: when you are just beginning to build a startup and have to start from scratch or when you want to create a software product for your existing business.

Staff augmentation and managed services: How to choose a service provider?

However, regardless of the model you prefer, some general rules can help you find the right company to work with. Unfortunately, today, the market is full of unscrupulous players who attract clients with low prices and further let them down due to the lack of necessary skills and knowledge. That’s why we’ve prepared a shortlist of the most crucial criteria that you have to bear in mind:

• Experience. Make sure that a vendor already has a good reputation in the market.
• Reviews. Check what other customers think about this service provider.
• Rates. They should be adequate, too low rates can be a bad sign.
• Approach to work. Discuss how a vendor organize the inner process and build cooperation with clients.
• Time zone. You should find a team that either has the same time zone as you or that can adjust working hours in order to build your communication efficiently.
• Language barrier. Make sure that you can easily communicate and understand each other.
• Necessary skills and technologies. It is important to determine whether a vendor can cover all your needs.

If you are not satisfied with at least one of these points, we recommend you move further and look for another variant to achieve the highest efficiency of services provided.

Staff augmentation vs. managed services: Top 5 differences

Which model is the best? You say neither. However, you can always choose the one that will be better for your case and enjoy the outcomes.

If you are looking for a company that has a rich pool of talents and solid experience in providing outsourcing software-related services, you have found just the right web page. At Geomotiv, we are always open to cooperation, and our seasoned tech experts are never afraid of new challenges (and successfully cope with them). Contact us to learn more!