The value of the global IT outsourcing market in 2020 was $556.67 billion.
As digital transformation and, in particular, cloud computing is accelerating (specifically PaaS and IaaS), so do the outsourcing needs for companies dealing with IT infrastructure and services.
Depending on your company’s business model, IT issues, and in-house capacities, you may opt for one of the two common outsourcing models: managed services or staff augmentation.
This article explores the topic of staff augmentation vs. managed services. We will discuss the definitions and differences of the two models, their advantages and when to use them.
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Table of Contents
What is Staff Augmentation, and Who is it for?
IT staff augmentation helps companies scale up or down as a response to their current needs. Rather than investing time and resources in hiring permanent IT personnel, staff augmentation allows you to work with competent IT specialists on a per-project basis.
Staff augmentation approach provides you with access to a talent pool of the best tech personnel in the market as soon as your business requires it.
While there is a belief that staff augmentation is better suited for small to medium-sized businesses, brands such as Spotify, Google, and Disney have been using staff augmentation to scale their processes and products. With this approach, startups and established businesses can increase productivity and save money.
Some of the most notable benefits of staff augmentation are:
- Flexibility: You can quickly acquire missing competencies and skills for your company, and compensate for staff shortages caused by unexpected events. You have the final say in whom you hire and for how long.
- Cost-effectiveness: If you do not wish to hire additional employees permanently, expanding the number of employees can save you money on full-time salaries. You get the assistance of highly trained specialists for the period you require.
- Risk reduction: Staff augmentation gives you ultimate control over the project's outcome and allows you to monitor every step of the process. The team's project manager will prioritize work and ensure a high-quality end product. When you outsource to a third-party supplier, you give up control over the development processes. With staff augmentation, you maintain the entire team in-house and manage the project, reducing the possibility of a subpar product/service.
- Adaptability: Depending on the scope of your project, you may be able to quickly recruit unique skills that would not be available locally or on short notice. You can also scale your team up or down as needed.
- Less time required to recruit: The technique for employing individuals falls on the service provider in Staff Augmentation models. You only need to decide with whom you want to collaborate.
What Are Managed Services and Who Are They For?
Managed services are another outsourcing IT strategy in which you outsource IT processes to another company.
On the other hand, the IT firm agrees to work within the limitations and requirements established by the parent corporation. The managed IT service provider takes charge of IT staffing, management and project execution.
Managed IT services are ideal for businesses that require a specific technological output but lack the resources to be significantly involved in the process. This outsourcing strategy is also suitable for businesses with long-term, labor-intensive development requirements.
Advantages of this outsourcing model include:
- Time and cost-effectiveness: You can use the managed services model to hire a team of skilled and experienced experts equipped with the necessary technology and resources to work on your project. You save time, money, and effort by receiving what you need in this way. Their service price is fixed and change relative to the amount of work completed.
- Monitoring: Throughout the project, the supplier monitors all processes and guarantees that all necessary tools and resources are available.
- Adjustable cost model: As managed IT service providers charge based on results, the price will adapt accordingly if your demand for a certain service rises or declines.
- Control levels: The service provider controls the project from start to completion. Choosing an experienced and respected organization with a track record of producing high-quality goods and outstanding results is vital.
- Broader talent acquisition: Because MSPs are usually larger than staffing agencies, they may be able to provide a broader range of skills, knowledge, and solutions to meet changing customer expectations. Partnering with companies that provide technology services can offer additional layers of expertise and specialized solutions to optimize your business processes further.
- Ensured outcome: A service level agreement (SLA) outlines the scope and length of each project and is used to support managed IT services. Managed service providers will go to great lengths to keep commitments to be reimbursed and increase the value of their employment.
IT Staff Augmentation vs. Managed Services: When to Use Each Model
Staff Augmentation is most useful when you:
- Must reinforce your in-house team: While you have software developers on staff. Some new ventures will necessitate the use of present skills. In this instance, you should beef up your IT crew.
- Are running out of time: From job posting through onboarding, the recruitment process takes a long time. The staff augmentation concept allows you to hire additional developers, regardless of contract type quickly.
- Need specific abilities: You must rapidly increase your workforce by hiring skilled engineers or technicians.
Managed services model is most appropriate when you:
- Look to the future: As your company expands and new employees join your team, security and networking solutions get more complex. Managed service providers can deliver faster and more efficient networking and security solutions.
- Rapidly adopt new technology: With thorough technological preparation, managed service providers can deliver client-centric solutions.
- Need reliable budgeting: Most businesses view IT costs to be an investment. Managed services offer ongoing maintenance, which helps you avoid costly shocks that can wreak havoc on your monthly budget.
- Must comply with regulations: Risks to your data’s privacy and security could land you serious trouble. Working with a managed service provider can assure compliance with rules such as HIPPA or FERPA.
- Want to put together a strong technical team: Your technical workforce requires several unique positions, and filling such roles internally may be costly.
Staff Augmentation vs. Managed Services: Key Differences
Even though both of these models can be used concurrently, they differ in certain areas. Knowing these differences will enable you to choose the best option and develop the best model for your company.
In the staff augmentation model, the customer retains control over the project, so the client and outsourcer must be in touch daily. Two parallel processes occur when a customer manages the project's significant elements with an in-house team and manages certain secondary operations. The volume of non-essential tasks outsourced to a third-party supplier may far outnumber the volume of critical processes. This method is commonly used for short-term projects.
The managed services model applies when a client and a service provider wish to develop a long-term relationship beyond specific projects. A managed service provider may also get complete control of a project and full accountability for the project's outcome.
Managed Services vs. Staff Augmentation Takeaways
Your mission statement and objectives determine which model is best for your company.
The complexity of the information technology sector makes it impossible for most organizations to stick to a single model. Even when organizations grow more competitive, adopting one model over another may not always be the best option.
By balancing the two, you can optimize the benefits of both staff augmentation and managed services.
In general, the managed IT services model is the best solution for forward-thinking companies, especially regarding long-term cost savings and efficiency.
