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Staff Augmentation vs Managed Software Projects: Why, When, and How

The modern high-tech market is characterized by high dynamics and rapidly changing business goals and technical requirements. Trying to build your software development team in-house to meet all of the most sophisticated market needs is a rat race, as entrepreneurs risk to waste their energy, time and money on finding and recruiting tech talent rather than completing business goals and launching a project.

Fortunately, as IT industry evolves, so do hiring models. Staff augmentation (aka augmented staff) is one of such models that provides flexibility and tremendous scalability of the team involved in custom software project development. Combining the benefits of outsourcing and internal recruitment, staff augmentation helps companies fill the skills gap quickly, and, thus, ideally meet their innovation and/or digital transformation needs.

Let’s scrutinize this model to find out what types of business can benefit the most from it and how to scale your team quickly and cost-effectively without increasing attrition and churn rates and paying overheads as the project is halfway through.

Staff Augmentation: Definition & Features

According to Wikipedia, staff augmentation is “an outsourcing strategy which is used to staff a project and respond to the business objectives and which entails allocation of dedicated technical resources, usually offshore, hired as overseas development extensions of in-house application development teams on fixed or flexible terms and conditions.”

Simply put, it involves continuous monitoring of your internal development team qualifications and identifying and filling skills gaps at every stage of the project life cycle.

Once the required missing skills are identified, individual team members are hired for short or long term collaboration to complete this or that technical aspect.

This engagement model gains momentum now due to the specifics of IT industry such as extremely high developer rates, limited talent pools/limited access to domestic expertise, brain drain, and fierce competition, and others. Today, the need to quickly and flexibly address HR issues and bottlenecks is as acute as never before.

Thus, IT staff augmentation implies that specific software dev tasks be outsourced to programmers, designers, testers, system administrators and other professionals with the necessary soft and hard skills who have knowledge, experience, and expertise to perform them. As such, many companies today manage to perform most of the tasks with their regular internal teams in cooperation with offshore or nearshore software developers.

This engagement model can be both short-term or long-term.

Short-term staff augmentation

Companies typically use it during their peak seasons (when a certain project development stage has a huge scope of tasks and internal staff isn’t sufficient to perform them all ), or when an in-house specialist is on vacation, sabbatical or sick leave.

Long-term staff augmentation

This type is more suitable for longer and complex projects when you don’t have a specialist with a rare tech stack on your internal team and can’t hire one for a while due to their scarcity or high cost.

Staff Augmentation Benefits

  • Closing the skills gap and reducing time to hire

Companies that lack IT talent in their field hire programmers from outside the country. The main outsourcing destinations are, as a rule, countries with vast yet untapped pools of available software developers and tech specialists, which ensures a shorter time to hire and time to market accordingly.

As innovative domains such as AI, ML, blockchain, FinTech, and others emerge and evolve rapidly, the next-gen of specialists with the appropriate skills has yet to be grown. As such, there’s a massive shortage of tech talent all over the world, so finding one within a home country can be a real challenge. If your time to hire exceeds a couple of months, your company will incur losses. Staff replenishment allows hiring the required skills from anywhere in the world in record time.

  • Reducing payroll costs within the organization

Additional staff is usually hired in places where developer prices are several times lower than in the company’s home country. This difference in average rates helps reduce software development costs.

  • Reducing/eliminating staff turnover

For companies that hire top-level technical staff, it is often difficult to provide a stable workload, so many employees leave or become less productive and unmotivated. This does not happen with the augmented staff, as you can replace your dismissed or unmatched resources more efficiently and faster as a result of having access to vaster talent pools.

  • Cutting operating costs

In North America and Europe, internal employees cost the company much more than external staff. Although staff augmentation providers charge a fee that includes operating expenses, in outsourcing countries, the prices are still lower and already include office rental, internet bills, equipment, furniture, infrastructure, etc.

  • Adding additional flexibility

This model allows you to easily hire developers at a time when it is necessary for the company, not only in the height of the season. For example, you can easily attract several additional specialists to prepare the project for Black Friday without significant time and energy consumption.

  • Freedom from unnecessary documents and legal procedures

If you choose to build or scale your team internally, you’ll have to either build a full-fledged admin and legal department internally or outsource your contracting, payroll and accounting to a 3rd party, which will add significantly to your overall budget.

If you go with staff augmentation, all of this hassle will be handled by your vendor, which will give you the freedom to focus on core competencies and core product development.

How Staff Augmentation Works

The recruitment process in most companies is quite simple and includes three main steps (which, however, are flexible and depend on the individual conditions of each company):

  • Skills gap identification

At this stage, the company identifies the lack of skills it faces internally and uses internal HR or hires external agents to find and hire the necessary specialists.

  • Onboarding of hired employees

Once the required specialists have been identified and hired by the company, they undergo an adaptation process, during which they get to know the internal team, the main technical concept, and vision and are introduced into the client’s working environment.

  • Building and nurturing augmented staff

This stage takes almost as long as the hiring process itself and involves continuous training and development of extended team members to preserve the valuable assets of the internal team and ensure the exceptional value of the project delivery.

Staff Augmentation versus Turnkey (Managed) Project services

As soon as you realize that your core software dev team is not performing appropriately or your time to hire and time to market is too long, it needs to be outsourced.

At this stage, it is crucial to make the right choice of an engagement model, as your entire project success will depend on it.

Let’s analyze extended and managed project teams to determine which model is best suited to which company and what specific resource requirements can be satisfied with each of the options.

The difference between staff augmentation and managed projects is in accountability. 

If you, as a client, hire an outsourced team along with a project manager to take care of project development and be accountable for the delivery, the model is called a managed project.

If it’s your in-house PM/PO who manages the team and its performance and controls project milestones and delivery or if you hire an additional resource to act as your Product Owner on vendor’s site, the model is called staff augmentation.

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Source: Wicresoft

Benefits of a managed project model

  • PM’s availability

As a client, you don’t have to manage the offshore team on your own, as you get a dedicated PM along with your project team who’ll do all the job for you. So you focus entirely on your core competencies while having your outsourcing provider be fully responsible for meeting your budget and delivering on time and with appropriate quality.

  • Results-based collaboration

Managed IT services can be provided at hourly rates. For instance, at 8allocate, we let our clients pay only for what they actually use. Let’s say, you only need a QA resource for two days a week out of 5. Most of outsourcing service providers will insist that you hire and pay for a full-time resource even though they’ll be sitting on their hands for 60% of the time. We provide fractional resource allocation, which eliminates any hidden agenda and helps optimize and save client’s budget for software development.

However, as any other engagement model, it also has some disadvantages, namely:

  • Lack of control

Most of the intermediate decisions regarding your project development and hiring are made by your outsourcing provider, which may imply the lack of transparency and hidden agenda;

  • Reliability issue

It is essential to order managed project services from a reputable supplier, as the team will act as a standalone yet related part of the company’s staff and the provider should have appropriate expertise to handle the project and deliver on time and onbudget without any quality compromise.

  • Integration challenges 

External work still needs to be integrated into internal processes.

To be continued.

In the next part of the article, we’ll explore how to find and hire a reliable staff augmentation provider for your custom software development. Stay tuned!

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