Staff augmentation vs project outsourcing – which cooperation model is better for you?

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Written by: Marketing Team

Year by year, staff shortages in the IT sector are becoming increasingly apparent. This is due to digital transformations, the dynamic development of automation, and as a result of the COVID-19 pandemic. IT experts are in demand all over the world. The answer to the shortage of IT specialists may be the outsourcing of software services.

Once we decide to partner up with an external supplier, we have two popular models to choose from: project outsourcing or staff augmentation. In this article, you will find a comparison of both of them. If you are looking for IT services for your company and  you are faced with the choice of how to hire IT engineers, then keep reading so you can decide which model of outsourcing services suits your business better. 

Why is outsourcing IT popular?

The development of modern technologies and the dynamic growth of the IT sector have made IT experts highly sought after all over the world. The scale of the problem is huge, as presented by the statistics below.

  •     Poland: currently, the shortage of programmers on the Polish market is estimated at 50,000 jobs (Kodilla)
  •     UK: over 70% of UK technology companies experience an IT skills shortage (Solving the UK Skills Shortage)
  •     USA: forecasts indicate that the shortage of developers in the United States will exceed 1.2 million by 2026 (The Bureau of Labor Statistics)
  •     EU: the current IT staff shortage reaches around 600,000 vacant jobs (European Commission)
  •     Sweden: it is estimated that by 2022 the deficit of people with IT competencies in Sweden will reach approx. 70,000 (Fredrik von Essen)

Outsourcing is one of the most popular solutions to the problem of staff shortages. According to Statista, the value of the global outsourcing market reaches 92.5 billion dollars.

Outsourcing - what is it?

Outsourcing is a business practice that entails delegating specific tasks or work on a project to an external company that provides its employees’ workforce. In the IT industry, outsourcing comes in many forms.

IT outsourcing services may include, for instance:

  •     creating a system or only its functions,
  •     testing,
  •     delegating the creation of a complex digital product to an external supplier.

In all cases, the main goal is not only to save time and money, but also to add competence through qualified professionals.

IT project outsourcing

Project outsourcing means outsourcing IT projects to an external company. This may apply to the entire IT product development or only to some elements of the project, depending on the needs of the organisation.

Outsourcing companies specialise in both project management and software development. When choosing to outsource a project, it is the supplier who is obliged to perform a given task – they are held responsible for its delivery and final outcome. On top of that, they are responsible for recruiting and managing staff, as well as the timely delivery and quality of the product.

This particular model of IT outsourcing  is based on a dedicated and close-knit external team working remotely from the service provider’s or customer’s premises. Most often, a scrum master or project manager is also part of the team. 

What is staff augmentation?

Another type of outsourcing is staff augmentation. This one, on the other hand, involves bringing in experts or a complete team of specialists to an internal project. It’s pretty much about extending your existing team with the external experts. In this case, it will be your job to manage time and be accountable for results. You are responsible for the quality of the product. This model allows you to fill your internal team with developers or testers at various stages of project development.  

The right technology partner ensures a complete and close-knit team that will quickly adapt to your organisation’s processes. New individuals can work either remotely or from the vicinity of your office. Your provider should ensure that the right tools are in place and that roles are assigned appropriately. 

Project outsourcing or staff augmentation - a comparison

Below you will find a summary of the key issues from the client’s perspective. Here you can learn all the advantages and disadvantages of both solutions before making a decision whether to outsource programming or testing services.

Project outsourcing

Advantages Disadvantages
●     Cost reduction – this is one of the key advantages. As much as 70% of entrepreneurs indicated saving money as their main reason for outsourcing (Deloitte). ●     Time-saving – you save time on recruiting and implementing new employees. ●     Less responsibility – it is the partner’s responsibility to hire and manage the project team. They are also responsible for the quality and timeliness. ●     Greater team flexibility – delegating some work to an external team allows your employees to focus on projects and innovations that are important to the company. ●     Communication problems – there is a risk of communication issues caused by different time zones, language barriers, and cultural differences. ●      Lack of business or domain knowledge – an external team of engineers will not know your company’s goals and mission in the same way as internal employees. ●     Risk of lower quality of the final product – lack of direct project management may result in time-consuming and difficult to solve problems such as code errors, technical problems, technological debt, or low quality. ●      Organisation-level differences – the outsourcing company conducts its staff and process management. There may occur differences in the maturity of the organisation and processes’ incompatibility.

Staff augmentation

AdvantagesDisadvantages

●      Flexibility – it gives a lot of flexibility in scaling teams up or down. Additionally, you do not need to bother with recruiting and looking for another project for the employee when they finish working in the current one.

●     Simpler contracts with suppliers – you sign a contract directly with a company, and not with every individual employee.

●     Saves time and money – no costs of recruiting nor training new employees.

●     Integrated, well-connected team – by delegating only part of the work to external experts, you make it easier for them to integrate with your team and better understand the mission and vision of your company.

●      Ability to act quickly – you rapidly fill the deficit of skills and competences with external resources and start implementing the project right away, skipping the recruitment process.

●     Challenging management – managing both your own team and external employees is often a demanding task.

●      Time for implementation – when joining a new team, even experienced experts need time to adapt and familiarize with the organisation, which at the beginning may reduce their effectiveness and efficiency.

Project outsourcing or staff augmentation - which one is better for your business?

In general, both of IT outsourcing these models prove to be great solutions to the problems of the shortage of staff in the IT sector. Each brings a number of benefits, yet both also have their downsides. So, how do you figure out which model is a better fit for your organisation?

The decision on which model to choose is obviously based on the individual needs of a given company. Staff augmentation is an ideal solution if you want to strengthen your in-house team with external engineers who will perform the task with the anticipated quality and fit into the framework of your organization in a fairly quick  period of time. Project outsourcing, on the other hand, is a cooperation method to be considered by companies that want to outsource the implementation of the entire project. 

Although, in both cases, it’s all about achieving a digital product of the highest possible quality.

Organisational maturity and risk management

Some essential aspects to be taken into account are the partners’ organizational maturity and risk management capabilities.

Every organization that manages projects deals with delegating and accounting for tasks between successive decision-making or executive levels, at specified time intervals. These are, in a way, “mini-contracts” between the business owner and IT, as well as between the project manager and the teams that implement it.

If you can delegate and settle the backlog (to-do list) at the level of the implementation team’s work, you will surely be able to work with both your own team and an external one. Otherwise, the introduction of an external team will be problematic to define, receive, and account for the work. It can lead to delays or even a termination of the contract by the partner.

If you are able to define the business goal, but you find it difficult to decide on the method of implementation, technologies, and production processes, then you should definitely consider involving a partner and delegate these tasks to them, along with the associated risks, as well.

It is also good if you take in to the account the ability to stabilise functional and non-functional business requirements. Both your own IT department and your partner may not be pleased when faced with an unexpected change in requirements during the implementation process. This may sometimes cause downtime and even rejection of some of the created code. This doesn’t mean you can’t change your requirements – surely you can, but it’s worth planning ahead to avoid high-cost modifications in the future.

So, take a critical look at your organisation’s maturity or ask someone for their opinion. The demarcation line between you and the supplier defines the risks, and will affect the result and potential costs.

The aforementioned risk refers to the responsibility for delivering the expected results. The assurance of the continuity of the manufacturing process at the declared costs may be a huge challenge nowadays. Consider whether you will be able to ensure the continuity of the production band, or if it is better to delegate it to another company.

In addition to all this, it is always a good idea to make sure that the partner has implemented ISO standards, such as ensuring the continuity of business processes (e.g. ISO 22301) and information security (e.g. ISO 27001).

In a nutshell, if your organisation is mature, you can consider both the Project Outsourcing and Staff Augmentation models. If it’s a bit less experienced, though, the safer option will be the project outsourcing model, remembering of course to properly manage the variability of requirements.

Summing it up

IT outsourcing allows you to solve your organisation’s problems related to staff shortages in the IT market. Before you come up with the decision, there are few criteria to be considered first. If you’re still wondering which model your business can benefit from, here are some of our customer success stories.

One of them chose staff augmentation and expanded their team with experts experienced in the automotive sector and cyber-security tests in the project of development and testing a secure embedded software.

While the other chose the support of two complete, agile development teams instead, which were fully productive after just two weeks, implementing a PaaS app development project for Fintech.

If you’re still not sure which one you should go for, feel free to get in touch with our specialists, who will be happy to help you make the best decision for your business: project outsourcing or staff augmentation.

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