Tech talent demand in 2023 heavily outweighs its supply, and that’s even despite the wildfires that are recent tech corporations layoffs. Hiring and keeping experienced tech people in-house becomes financially impractical, and that opens the debate for the battle that is IT staff augmentation vs outsourcing.
As a company that offers both of these types of services, we at Mind Studios will use this opportunity to explain the difference between the two models and how to choose the one that will benefit your business more.
First things first, let us define the two terms.
The simplest definition can be found on Wikipedia:
|Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and assets from one firm to another.||Staff augmentation is an outsourcing strategy that is used to staff a project and respond to the business objectives. The technique consists of evaluating the existing staff and then determining which additional skills are required.|
As you can see, staff augmentation is a sub-type of outsourcing. However, as the saying goes, the devil is in the details.
In the IT industry, outsourcing usually means you hire a remote team and entrust them with developing your product. You will have negotiable control over the team, set software requirements and deadlines. The team will most likely discuss everything important with you but, in a nutshell, they’re just a third party vendor.
In contrast, IT staff augmentation is when you have an in-house development team working on the product and you’re lacking some specialists so you hire them from a third party vendor. These specialists may or may not work remotely (though the remote scheme has grown in popularity greatly in recent years) but they will closely collaborate with your in-house team where it matters.
Not all outsourcing companies provide staff augmentation services, and there are companies that only do staff augmentation, not full-scale outsourcing. Mind Studios offers both collaboration options, though. And to help you understand whether you need IT staff augmentation or software outsourcing, we will compare the two below.
IT staff augmentation vs. software outsourcing: Flexibility
Outsourcing and staff augmentation are both models with a high degree of flexibility, that’s one of the main benefits of outsourcing as a concept. This is especially true if you consider hiring remote temporary staff without limiting yourself by borders or continents (i.e. offshore hiring).
Remote outsourcing and staff augmentation both offer you the opportunity to find highly professional employees with necessary skills all over the globe. However, the two cooperation models focus on slightly different things.
IT staff augmentation model offers more flexibility in hiring than outsourcing does, usually. That is because you (or your trusted employee) will be handpicking people for the necessary roles. You will be able — and need — to consider not only their technical skills but also communication skills, work processes they’re used to, and more. At the root, it will be similar to in-house hiring, since the new people will be closely collaborating with your existing team.
In general outsourcing, flexibility is limited to your requirements for the product rather than the team itself. Usually, when you’re partnering with an outsourcing company, the company allocates specialists who:
- fit the requirements for expertise; and
- are free from other projects / have time to take on another project
Since your communication with the team won’t be as close as it is with an in-house IT staff, there’s little need to try and handpick the team. It’s way more sensible to trust the vendor company as they know the synergy among their employees better anyway.
IT staff augmentation vs. software outsourcing: Control
In outsourcing, the control you’ll have over the development is limited by the processes in place in the vendor company. With this cooperation model, you will have an opportunity to:
- set requirements for the product
- decide on acceptance criteria
- choose the frequency and scope of team reports
The internal processes of how the work is conducted will, however, be out of your control, as will be the communication within the team.
In the IT staff augmentation vs software outsourcing stand-off, though, the former offers you more control over hired talent, as they will be, albeit temporarily, your employees and will work in a collaboration with your in-house team. You and your in-house team will be able to closely monitor the work a temp does, as you would with an in-house employee. But you or your in-house tech lead will need to be more involved in project management.
Staff augmentation vs. software outsourcing: Quality and expertise
Even though staff augmentation and outsourcing are two modifications of the same model, they differ quite a bit when it comes to quality of work. That said, it’s not about how one is better than the other.
It all goes back to your (product owner’s) control over the development process.
Being fully in control of handpicking staff for augmentation means you will most likely choose people who will have exactly the expertise and skills you need to enhance your in-house team. Moreover, by closely monitoring the development, you as the product owner will be able to influence the processes as you see fit, making the end product as close to your vision as possible.
Now, with a responsive and experienced outsourcing team, it’s also possible to receive at the end exactly the product you planned. However, this will require more communication and dedication. And one of the reasons business owners choose to outsource their software is that they can entrust the product to professionals and dedicate their own time to other business tasks.
IT staff augmentation vs. software outsourcing: Cost-efficiency
Pinning staff augmentation vs IT outsourcing when it comes to cost-efficiency is, in our experience, an incorrect approach. The reason for that is this: staff augmentation and outsourcing are traditionally used for different situations.
More often than not, outsourcing is used for larger and more complex products. And while different cooperation models exist within outsourcing, one of the most popular ones is the so-called fixed price model.
When we at Mind Studios estimate projects with our clients, we usually provide an end-cost. It’s adjustable to a degree since we work in the Agile development methodology, but with outsourcing, you usually know the amount of investment you’ll need to pour in. This allows to assess your product beforehand and prioritize features to fit your budget.
In IT staff augmentation, you pay for each employee you hire and only for the time they spend on your product, meaning you can adjust their involvement — say, you can hire them for longer periods but employ them part-time to spread the pay thinner and save money at the moment.
However, with big and complex products in development, this approach might drag the launch out, resulting in later release and possible losses. That’s why staff augmentation is traditionally used either for smaller products or when your in-house team needs only a little help (to speed up routine completion of tasks or to implement specific functionality). You can, of course, hire an entire team as augmented employees, but when the product is big, that kills the point of saving costs as it will be quite expensive.
It all boils down to this: with IT staff augmentation, you pay for employee time whereas with outsourcing, you pay for a completed product.
Advantages and disadvantages of IT staff augmentation
Factors like a bigger pool of talent, higher productivity, and saving costs on talent acquisition and employee retention apply equally to IT staff augmentation and outsourcing. Here, let us highlight some advantages and disadvantages of each model compared to the other specifically.
Advantage of staff augmentation #1: Higher level of control
As mentioned above, with staff augmentation, you bring people aboard your business ship, meaning you’re the captain there. You will have complete control over the processes and the product if you want. Figuratively speaking, you can drop by at any moment and check what everyone is doing, what issues they might have, and what the overall situation with the team building is.
Advantage of staff augmentation #2: Educating your in-house team
When you hire experienced specialists from outside to work closely with your in-house team, you have the opportunity to not only enhance team and project scalability but let your employees learn. New expertise and knowledge sharing will inevitably occur during close communication and collaboration, bringing insights to your employees.
Advantage of staff augmentation #3: Deeper involvement in your business
While augmented employees are but temporary staff, they will still work close with you and your in-house team, meaning they will be involved in your processes and team culture. The cohesion and understanding of your goals will be easier to achieve for augmented employees than for an outsourcing team.
Disadvantage of staff augmentation #1: Need for management
The flip side of higher levels of control is that you will need to exercise that control. An augmented employee will need onboarding and guidance to work efficiently. Unless your company has a project manager or a CTO, this side of cooperation will fall onto you as the business owner or your tech lead. Consequently, the time you or your tech lead would otherwise spend on business-related tasks will be spent on monitoring and helping the new person.
Disadvantage of staff augmentation #2: Higher responsibility
This might sound obvious, but augmented staff is still the staff working for you, so whatever decisions you make regarding the product, the consequences are yours to bear.
Advantages and disadvantages of software outsourcing
Advantage of outsourcing #1: You can focus more on your business growth
By entrusting your whole product development to a third party team, you free your own time you’d spend on project management and exercising control. When starting to work with an outsourcing team, you set up requirements, acceptance criteria, and deadlines, and your only job is to receive updates at a convenient schedule and to accept the product at the end. Aside from that, you can focus on your business’s other needs, like expanding operations or looking for investors.
Advantage of outsourcing #2: Lower responsibility and risks
As long as your acceptance criteria are defined, all the responsibilities for the product lay on the outsourcing team. They will have to do everything necessary to adhere to the criteria you’ve set. This includes research and implementation of features as well as their testing and whatnot.
Since your responsibilities are lower, the risks you bear are also lower. When working with an outsourcing partner, your agreement will include clauses on risk mitigation, meaning you will be compensated for any delays or issues arising from team mistakes.
Advantage of outsourcing #3: Reduced overhead costs
You will not need to spend time and money on interviewing and onboarding new employees since the vendor is responsible for setting up the team for development. You will also save resources in case issues arise with an employee (sickness, accidents, vacation) — your outsourcing partner will find and replace the employee themselves.
Advantage of outsourcing #4: Lower risks of cost overruns
When working with an outsourcing company under the fixed price model, cost overruns are rare as the project is assessed at the early stages of development. Moreover, your agreement with the partner company may include clauses to manage cost overruns.
Disadvantage of outsourcing #1: Generally higher costs
An outsourced team usually includes some overhead costs to mitigate the responsibilities they carry (for example, replacing an employee or equipment urgently). This makes outsourcing more expensive than staff augmentation in general terms, although cost-efficiency is another issue.
Disadvantage of outsourcing #2: Slower start
In outsourcing, there’s a lot of work to do before the development itself starts. You and your chosen vendor will need to extensively discuss the budget, the requirements and the definition of done, the timeframe for development, etc.
Disadvantage of outsourcing #3: Less control
As we covered above, your control over the development process in outsourcing is limited to pre-scheduled team reports/syncs and acceptance of the product. Who works on the project and how they work, what their performance metrics are — things like these are mostly out of your control.
Staff augmentation vs outsourcing: How to choose
To summarize everything we’ve explained above, let us now outline which factors should affect your choice between outsourcing and staff augmentation.
1. Your business needs
This is the biggest and most important question you need to ask yourself before making a decision: What is it that your business needs, exactly? Is it fast scalability and better resource allocation inside the existing team or is it a product completed to satisfactory levels within a specific timeframe? The former requires staff augmentation, and the latter would probably be more efficient with outsourcing.
Staff augmentation is also a great way to avoid acquiring technical debt (i.e. to fix non-urgent issues before they become urgent).
2. Your in-house team expertise
If you have an in-house team and they’re experienced enough, you won’t need to outsource in most cases. Staff augmentation will be the go-to solution for such cases. Although, there are exceptions.
One of our clients initially partnered with Mind Studios for staff augmentation on a product they were building. As time went by, our collaboration was satisfactory for both sides. At some point, however, this client decided to expand their business and build another product. They moved their in-house team to this new product and switched their partnership with us to entrust us to finish the first product in full.
3. Your budget
Outsourcing is usually more expensive than staff augmentation, in absolute terms. However, the cost of outsourcing is set at the very beginning of work and, if all goes well, rarely overrun. It’s also possible to reduce the cost of outsourcing development, but it usually involves cutting or postponing certain functionality implementation.
Staff augmentation, while cheaper in absolute terms, can go quite high if the product development drags on. Which is why this model is more often used for products of smaller scale.
4. Your completion timeframe
Outsourcing teams are bound by agreements to deliver your product on time, meaning that, unless you decide to implement major changes mid-project, you will get your product before your set date. If the team doesn’t deliver on time, they will have to compensate you.
Staff augmentation, on the other hand, is only as bound as your in-house team is in terms of timeframe. You can fire a temp if they don’t do their job adequately enough, of course, but the completion of the whole product is not the responsibility of augmented employees.
If you need rigid adherence to deadlines in product launch, outsourcing might be the better option. If your project has a floating timeframe or can be postponed or paused for some reason (for example, while you’re looking for investors), staff augmentation is more flexible and easier to handle.
5. How much you are prepared to trust your partners
The issue of control affects the software outsourcing vs IT staff augmentation debate quite heavily. With outsourcing, you need higher trust levels as you basically give away the project to a third party to build. You’re the owner and you’ll have exclusive rights to the source code after the product is built, but you can’t influence how the team works as long as they deliver on time and at proper quality. If you’d rather be your project’s main manager, you might want to choose staff augmentation.
Task delegation, scalability, flexibility, cost reduction, trust — a lot of things go into consideration when you need to choose whether you need IT staff augmentation or software outsourcing. However, it is undeniable that both models can be a great option for a business to have its software product built faster and to be of higher quality.
As the world moves more and more towards remote or combined work, and as the talent demand in the tech sector grows bigger, both outsourcing and augmentation also become more popular. We have laid out our knowledge on the topic, which, we hope, will help you choose the best option for your business.
If you have more questions, or if you’re looking for a partner for either collaboration model, drop us a line and our business consultants will contact you. Mind Studios offers both outsourcing services and staff augmentation, so don’t hesitate to reach out.