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Staff Augmentation vs Project Outsourcing vs Hybrid Approach: How to Choose the Right Model

Vik Bogdanov
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Whether it’s a startup or an established business, the success of IT projects heavily depends on their ability to deliver on time (and to the specification) and within the budget. Doing all this work in-house can be a good solution, but it can also be risky and expensive.

This is because the IT needs of organizations can change rapidly as enterprises try to keep up with technological innovation. These days, it will be difficult to find businesses with static needs as relying on outdated legacy systems will lead to disaster.

As a result, companies seek out external help to complete IT projects by embracing one of the following delivery models:

  • Staff augmentation
  • Project outsourcing
  • Hybrid approach

Staff Augmentation

Staff augmentation is popular as it allows companies to add and reduce staff based on the skills and support that’s needed during the development process. It also cancels out the extra costs associated with hiring more full-time employees.

When you need specialist expertise, staff augmentation will help you quickly fill in the skills gap. You can also add new skill sets to the team to leverage both external and internal resources.

It’s a great option to have control over staff when you need to carefully manage resources. It’s also easier to integrate with internal processes when compared to aligning these processes with external teams.

Current full-time staff also prefer this model to project outsourcing because they feel less threatened by a few individuals rather than a full blown external project team (so adoption is much easier). It’s one of the best cost-effective models to deal with fluctuating staffing needs, but it’s not a perfect solution.

Staff augmentation isn’t perfect as some training may be required to bring augmented staff up to speed. Further, if you’re heavily relying on internal processes which might be flawed, this will also negatively impact your augmented resources.

This model also lacks economies of scale and increases management overhead. Further, even if you choose to go with a reputable staff augmentation firm, the ultimate responsibility for results will remain within the company.

Check out our partner Intersog's blog to learn more about how to reduce overhead costs in IT projects.

Project Outsourcing

Outsourcing overseas enables companies to execute a whole IT project by utilizing the resources of a 3rd party provider. Sometimes, this can also come in the form of “out-tasking” where specific tasks of a project have been outsourced to an external company.

It’s a highly cost-effective option as the project outsourcing approach helps get the job done without hiring a whole load of new employees. Companies can concentrate on their core operations while taking advantage of the skills and expertise of external experts.

Unlike staff augmentation, the training costs will be completely absorbed by the outsourcing provider. They will also be responsible for the adoption, maintenance, and enhancement of best practices.

It’s also a highly scalable option and there is significant leverage when negotiating large contracts (as providers can take advantage of their own internal economies of scale). There won’t be any additional management overhead as it’s the responsibility of the outsourcing firm. The responsibility of delivering results also falls completely on the outsourcing firm.

While all this sounds great, this model also comes with lack of control. You can’t control how the outsourcing company chooses to handle the project and their employees. But on the plus side, any project failures will be the responsibility of the outsourcing provider.

Furthermore, integration with internal processes can be complex and more difficult if you follow the outsourcing model. There also might be internal resistance from current members of staff that feel threatened by this option.

Hybrid Approach

For most enterprises, it isn’t as simple as following a staff augmentation model or a project outsourcing model. Sometimes there might be an overlap of needs to get the job done on time. So when that happens, a hybrid approach might be the best option.

In this scenario, project outsourcing option and the staff augmentation model are blended to meet the specific needs of the project. It can also be implemented at different stages during the development cycle, but careful planning will be required to map it out in an efficient manner.

As far as hybrid approach is concerned, there's a whole new trend of software development team outsourcing, i.e. you partner with an outsourcing provider to build your own dedicated product development team offshore (2+ time zones away) or nearshore (the same time zone), leverage external tech talent pools and retain as much project control as possible.

That being said, you set up your development team remotely by using your provider's resources, office space, IT infrastructure, etc. and have your outsourcing partner take care of your candidate selection and screening, IT hiring, project management, and deliverables. However, this approach requires that you dedicate certain resources to manage your remote project and get involved in your project development at all stages, from candidate interviewing and hiring to onboarding and training to your product release and evolution.

Considering a tremendous shortage of onshore IT skills and a continuous challenge of saving costs without compromising on product quality, this model seems to be the most effective one.

The advantages are obvious:

  • You rid yourself of HR, IT and admin hassle by offloading team setup and boost work to a professional 3rd party provider.
  • You have full predictability, as your team cost will be recurring from month to month unless you decide to scale it up or down depending on your current financial situation and project needs.
  • You access a new pool of fresh talent not seen elsewhere by local IT recruiters / agencies.
  • In case of offshore team outsourcing, you don't have to extend your office space to host more people in your team and actually pay half the price for your IT talent, which enables you to save money and increase your advertising/marketing spend, etc.

Yet, be ready to visit your remote team on your provider's site often, as this approach implies intense face-to-face communication and knowledge sharing.

Figuring out which model suits your project needs best can be a complex task. What will help support your decision is a detailed cost-benefit analysis. This decision can be made internally or with the help of an external consulting firm.