Any company that develops software — whether for internal use or for sale — needs a competent team of engineers to carry out its vision. Such a team can be formed in a variety of ways. In decades past, the traditional approach was to hire professionals directly as employees and have them work together in a central location. But, as times and conditions have changed, alternative models have been introduced.
For example, employers can have employees work remotely, an approach that became both necessary and popular during the pandemic. Advantages include higher productivity, reduced costs, and more satisfied workers. As an entirely different arrangement, businesses can hand off the hiring process to an outside vendor, a process known as outsourcing, which offers great flexibility to software development teams.
Outsourcing can happen in multiple ways based on (1) where the outsourced teams are geographically located in relation to the companies they work for and (2) the purpose of outsourced team members. Geographically, a team can be located within the same country as the company it is supporting (onshoring), in a distant country (offshoring), or in one that is close to the company (nearshoring). The purpose can be to enhance an existing team (staff augmentation) or to provide an entire team (managed services).
| Staff Augmentation | Managed Services | |
|---|---|---|
| Popularity | Common for businesses needing temporary skilled workers or handling short-term projects. | Common for businesses seeking comprehensive solutions and offloading non-core tasks. |
| Applications | Ideal for businesses that want to maintain control over their projects and need temporary skill enhancements. | Ideal for businesses that want to focus on core functions and outsource the rest. |
| Key Advantages |
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| Key Disadvantages |
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| Cost-Effectiveness | Can be cost-effective for short-term needs, but long-term costs may add up. | Often cost-effective over the long run as businesses can avoid costs associated with hiring, training, and equipment. |
| Infrastructure | Requires existing infrastructure as augmented staff will use your business’s resources. | Infrastructure is typically provided and managed by the service provider. |
| Training | May require some initial orientation or training. | Minimal training required, as the service provider is expected to have the necessary skills and expertise. |
| Communication | Communication can be seamless, as augmented staff work directly with your teams. | Communication mechanisms need to be established; could be less immediate than in staff augmentation. |
| Flexibility | High, as you can scale the team as per project requirements. | Depends on the contract; scaling up may require contract revisions or additional costs. |
| Security | Mid to High; you have control over data, but augmented staff access needs to be managed. Explain: You will have to ensure that the augmented staff follow your security protocols. | High; Managed services providers are expected to follow high security standards. Explain: The service provider is responsible for security and must adhere to agreed-upon standards. |
| Tools and Processes | Follow your company’s established tools and processes. | Tools and processes are typically established and managed by the service provider. |
| Agreements | Short-term or project-based, can be extended as needed. | Often long-term and comprehensive, covering multiple aspects of a business’s IT needs. |
In the following sections, we explore staff augmentation vs. managed services in terms of the advantages and disadvantages of each and which might be better in specific situations. Both software outsourcing models have their place, and it is useful for leaders of companies that develop software to understand where each one fits into successful software development operations.
The Staff Augmentation Model
As noted above, staff augmentation and managed services are both outsourced services. That is, they both involve engaging an agency like BairesDev to enhance or provide a software development team. The staff augmentation model adds staff to an existing team, which helps the team increase or decrease its size based on workload and gain access to skills the core team might not have.
Advantages
We’ll cover the advantages already mentioned and a few more in the following sections.
- Increase or decrease size based on workload
- Gain access to skills the core team might not have
- Remove costs associated with onboarding and hiring full-time employees, and reduce time and cost associated with the hiring process
- Maintain control over outsourced team members
- Work with potential employees prior to hiring them
These advantages lead to higher-level benefits for companies, including higher-quality products and faster time to market.
Adjust Team Size
The amount of work available for a development team is variable, which is why staff augmentation services are so valuable. Companies can use them to adjust the team size up or down depending on what the team has on its plate at any given time.
Gain Access to Skills
A company may have an excellent software development team composed of highly competent engineers. However, the collective skills available on that team may not be sufficient for every project assigned to it. Staff augmentation allows team leaders to expand the skill set of their team to be able to fulfill the goals of any project it takes on.
Reduce or Remove Costs
Hiring full-time employees is expensive. HR teams must search for, vet, interview, and make offers to candidates, all of which takes considerable time, money, and effort. Once employees are hired, they require even more resources for onboarding, training, salaries, and benefits. Staff augmentation enables companies to eliminate the traditional hiring costs and reduce the overall employee costs.
Maintain Control
When a company augments its development team with outsourced employees, those workers come under the umbrella of the company and its methods. This process enables teams to maintain control over how project goals are accomplished.
Work With Potential Hires
Companies can use staff augmentation in another way, which is to work with potential team members before hiring them. Not all outsourcing firms allow this kind of arrangement, but those that do make it easy to vet workers who want to make the switch to a permanent in-house position.
Disadvantages
We’ll cover the disadvantages of the staff augmentation model in the sections below.
- Need for training and management
- Challenges with integration
- Limited availability
These disadvantages can impact the company as a whole by causing discomfort among existing team members that — in the extreme — can lead to reduced productivity, or even attrition, by slowing or even halting some projects.
Need for Training and Management
As with any new hires, team members brought on through staff augmentation require training and management. That means team leaders must take the time to familiarize themselves with the project’s goals, methods, and workflows. Existing team members must be available to answer questions and provide guidance when the team leader is not available.
Challenges With Integration
With all teams, leaders roll the dice when they bring new members on. The same is true for staff augmentation situations. That is, not all new team members will mesh well with the existing team. They may bring their own ways of performing tasks, their own styles of working, and their own personalities. Additionally, existing team members may see them as a threat. Team leaders must take care to use standard methods to instill team cohesion.
Limited Availability
Using staff augmentation is somewhat risky because the hiring agency may not have the right team members available every time they are needed. These agencies go to great lengths to ensure they have a deep bench of available engineers. However, companies that use them should be aware of this possibility.
When to Use a Staff Augmentation Provider
The use of staff augmentation can be helpful in a wide variety of situations, including those listed here.
- A project cannot move forward because it requires skills that are not present among existing team members.
- The company receives project requests that temporarily extend the workload beyond the capacity of the existing team.
- A company wishes to hire new team members and wants the opportunity to work with candidates prior to hiring.
The Managed Services Model
As differentiated from the staff augmentation model, which adds staff to an existing team, the managed services model creates an entirely new team. The primary benefits are offloading work an internal team may not have the capacity for and reducing costs associated with finding, hiring, training, and onboarding new employees.
Advantages
We’ll cover the advantages already mentioned and a few more in the following sections.
- Increase the range of software development skills available
- Make the cost of services more predictable
- Focus on core business concerns rather than software development management
- Improve security
- Reduce the risks associated with software development
These advantages lead to higher-level benefits for companies, including the ability to significantly ramp up operations and cost efficiency.
Increase Skills Available
Companies that use managed services have the option to expand the skill set available for their projects. For example, a company that develops primarily software intended for in-office use may want to start creating apps but not have anyone on staff who specializes in this area. An external managed services team can provide it.
Make Costs More Predictable
Managed services are charged according to specific pricing parameters, so companies that take advantage of them know what the costs will be ahead of time. This predictability makes budgeting and forecasting much more effective.
Focus on Core Concerns
Companies that use managed services for outsourced software development can spend their time and energy on matters more critical to their core mission. For instance, a manufacturing company can focus on R&D and increasing worker efficiency for the products it makes.
Improve Security
Outsourced IT providers are well-trained in the latest cybersecurity standards and practices, so they can ensure companies that hire them are up to speed in this area. As a result, hiring companies can reduce their risks of data breaches.
Reduce Risks
When a managed team takes over a project, it takes on the risks associated with that project. These include guaranteeing the software will perform the functions intended and be delivered on time.
Disadvantages
We’ll cover the disadvantages of managed services in the sections below.
- Potential for getting locked into a bad deal
- Security risks
- Limited control
These disadvantages can impact the company as a whole by introducing problems that could result in wasted money, time needed to correct major errors or security breaches, or projects not completed to satisfaction.
Potential for Bad Deal
Providers of managed services sometimes issue agreements that could end up working well for them but not for their clients. Agreements that lock clients into situations that don’t serve them end up costing those clients in time, money, and aggravation if they don’t get what they’re paying for.
Security Risks
While managed services can improve security, as noted above, they also have the potential to damage it. When a company hires an outsourced provider, it must grant access to some of its sensitive systems and data. Unscrupulous providers or individuals who work for them could take advantage of this information for nefarious purposes.
Limited Control
Managed services enable companies to hand over entire projects, which can be helpful. But it also limits the amount of control those companies have over the project.
When to Use a Managed Service Provider
The use of managed services can be helpful in a wide variety of situations, including those listed here.
- A company doesn’t want to hire an in-house software development team but needs software development services performed.
- The company wants to expand into types of software development that in-house resources cannot accommodate.
- A company wants costs related to software development to be more predictable.
Staff Augmentation Vs Managed Services: A Comparative Table
The following table sums up the differences between staff augmentation and managed services. However, the choice doesn’t have to be either or between these two options. Companies can effectively use both staff augmentation and managed services to achieve a variety of goals. They can also opt for a third possibility: software outsourcing, which involves completely handing off software development to an outside party. This option is described more in the following section.
| Aspect | Staff Augmentation | Managed Services |
|---|---|---|
| Scope of Work | Specific skills or staff provided | Complete solution or service offering |
| Control & Management | Client retains control and management | Service provider manages the entire process |
| Cost Structure | Hourly or monthly per resource | Fixed or subscription-based pricing |
| Flexibility | High (easily scale up or down) | Usually a fixed contract with specific terms |
| Skill Set | Specialized skills for a project | Comprehensive, including strategy and operations |
| Duration | Short-term or project-based | Long-term and ongoing relationship |
| Responsibility | Client is responsible for outcome | Provider is responsible for outcome |
| Focus | Task-specific | End-to-end solutions |
| Integration | Integrates into existing team | May work independently of the client’s team |
| Use Case | Temporary skill gaps, project-specific | Long-term, ongoing services |
What Are Other Options?
Companies that are considering outsourced services in the form of staff augmentation or managed services should keep in mind that other outsourcing options are available. For example, in addition to staff augmentation and dedicated team services (the equivalent of managed services), BairesDev offers software outsourcing. With this full-cycle custom software development service, companies provide the specifications, and we deliver the end-to-end solution. This service is excellent for the following scenarios:
- A company doesn’t have an in-house development team.
- The in-house team lacks expertise for particular development specifications.
- The in-house team is at capacity and unavailable to take on a particular project.
Like staff augmentation and managed services, software outsourcing involves working with an outside vendor to accomplish a specific task. Benefits include access to world-class talent and not having to worry about hiring or maintaining a development team.
Organizations that need outsourced help should keep in mind that both staff augmentation and managed services may involve working with professionals within the same country (onshoring), in a country located in a distant location (offshoring), or in a country located close by (nearshoring). While onshoring is often more convenient and offshoring typically less costly, nearshoring provides considerable benefits, including similar time zones, languages, and culture, as well as reasonable costs.
Companies might also consider hiring contractors, who may be found as individual providers or through contracting agencies. This option is closer to staff augmentation in its structure but may require less of a commitment.
Conclusion
Staff augmentation and managed services are both highly useful approaches to gaining skills and support to achieve ambitious company goals. Which to choose depends on a wide variety of factors, including company objectives, current capabilities, budget, working style, and long-term plans. Often, outsourcing providers can help potential clients determine which offering, or combination of services will work best in a particular situation.
Still wondering which option is best for your project or team? BairesDev professionals specialize in helping you find the most effective method for your needs. We invite you to reach out to us today for a no-obligation consultation. We look forward to hearing from you.
