In a post-pandemic world, outsourcing is becoming a new norm as more and more companies are gearing up for IT outsourcing. Finding and hiring an in-house IT staff is a time-consuming and costly practice and is not a sane decision if you have a limited-time project.The two main outsourcing models are staff augmentation and managed services. Many outsourced services such as testing, coding, design, and development can be utilized for the project, or a project can be outsourced. On the Darkside, outsourcing may also possess risks and vulnerabilities due to the client’s low degree of control.[lwptoc skipHeadingLevel="h1,h4,h5,h6"]Most of the time, businesses struggle to choose between staff augmentation and managed services. IT departments that need to introduce innovation or updates will need to outsource them to attain their goal as per plan. This blog post will discuss what project outsourcing is and what it can offer in terms of its subordinates, like staff augmentation and managed services.
What is Project Outsourcing?
Challenging projects require support not only in back-end development but also in Front-end, User interface, project management, software quality assurance, pushing the need for the expansion of IT outsourcing and staff augmentation might not be sufficient enough. It usually happens when launching new products or startups and integrating some advanced features in existing systems or rebuilding systems. The outsourcing vendor then provides extensive services to meet the project’s specific requirements and manage it with great efficiency, mostly via the Agile approach to deliver the product on time and maintain high standards. This collaboration possesses a variety of possibilities and less attention from the client.
Advantages of Working with Project Outsourcing
The nature of this outsourcing model presents the following advantages:
- Cost reduction
- Faster project completion
- High level of expertise
Let’s dive into details.
Companies can enjoy the perks of competitive prices for contracted services, especially if the project or service can be outsourced from an offshore vendor. Furthermore, overhead costs are reduced to nil since the company no longer needs to handle the contracted services internally.
Faster project completion
Cost reduction also provides an opportunity for faster project completion as competitive pricing means more resources for the same investment amount. For instance, you can hire three Indian software developers for the price of one US or UK-based software developer. Furthermore, outsourcing can provide access to tools and methodologies that can accelerate the project life cycle process.
High level of expertise
State-of-the-art expertise can be imported to shape the project. A company no longer has to stay updated with the shift and arrival of technological advances. Instead, it can focus on improving and reshaping its core competencies and hire vendors with the necessary knowledge to work on relevant aspects of the project.
Organizations are no longer dependent upon their resources but can enjoy the perks of extensive projects by combining their resources with the skills of an outsourcing partner. Small or mid-sized organizations can instantly expand their limits by collaborating with foreign talent.
Project Outsourcing Vulnerabilities and Risks
Project outsourcing comes amidst some vulnerabilities and risks.
- Coordination breakdowns
- Loss of Control
- Fear of Conflict
- Security Concerns
Let’s discuss each in detail.
Coordination of experts from an outsourced company can be a headache, especially if the project demands rich communication and mutual compromise over certain aspects. Breakdowns are exacerbated due to a physical barrier in space and mental synchronization with people working in different offices or even different cities. Another barrier is the difference in time zones that remains instrumental in breaking coordinates in cross-continental outsourcing.
Also Read: IT Outsourcing for Healthcare Industry
Loss of control
There is a potential loss of control over the project as the core team depends on other organizations with a lack of direct authority over the employees and management of outsourcing service providers. While the long-term survival of involved entities is directly linked with the performance, a project always remains on the verge of failure if one side fails to deliver as per commitments and true expectations.
Fear of Conflict
Projects are more vulnerable to damage caused by interpersonal conflict since the different participants do not share the same ethical values, perspectives, and culture. The trust factor, which is crucial for the success of a project, can be difficult to maintain due to limited interactions and people from different organizations and cultural backgrounds.
In today’s data-driven world, almost all projects involve a high degree of information sharing between the involved companies, which comes amidst the compromise over trade and business information confidentiality. It turns out to be disastrous if the contractor also works for your market rival. Confidentiality is the biggest ever concern, and companies have to be very careful while outsourcing systems involving payroll, medical transcriptions, and insurance data.
This Outsourcing model is based on similar principles as Project Outsourcing but with a notable difference - it demands a continuous delivery of services from the vendor. In this case, a client usually entrusts the outsourcing service provider with a whole process or system. Usually, it comprises a secondary aspect of its operation. The partner has control over it and its outcome so that the company choosing Managed Services can focus on the more crucial and core areas of the business. The service is well-determined and locked under the Service Level Agreement’s pact, an agreement between the service provider and the client. Managed IT services are more lengthy and long-term involvement as it is a continuous and mutual reinforcement for both client and service provider. The Brightside and downside are pretty much the same as in Project Outsourcing, including the advantages of long-lasting cooperation like stability and cost cuts. Managed services are the corporate model that is not always offered by software houses, so you need to consider the more limited domain of finding the right vendor.
Managed Services Perks and Benefits
The nature of this outsourcing model presents the following advantages:
- Saving time
- Access to the best talent
- Focus on your core competencies
- No recruitment headache
- Lower operational & development costs
All of the said perks are not always present in every situation. Everything depends on your requirements, priorities, specifications, circumstances, and especially the outsourcing vendor you choose. So let’s analyze each of them in detail.
The most obvious reason to choose this model is the time factor. Since you don’t have to deal with the management of the developer’s team by yourself and the outsourcing partner deals with everything, you save a big chunk of time. After all, the only thing you need to do is provide crystal clear requirements and specifications and ensure rich communication with the company.
Access to the Best Talent
Software outsourcing companies are the biggest rivals in the HR market. They often mark the victory and win the best developers. It means they restrict the direct access to the best talent, and you cannot directly hire them. Therefore, in many cases, the only way to open access to the best talent worldwide is to work with an outsourcing firm having the best and right developers you need.
Focus on Core Areas
Outsourced team members allow you to focus on core business areas such as growing your business. The outsourcing company deals with the development area so that you can primarily focus on the stuff which best suits and demands your capabilities.
No Recruitment Challange
Like project outsourcing, Managed services free you from running any recruitment drive as the outsourcing firm already has full-time developers onboard. Your outsourcing service provider can further search for and recruit qualified developers based on your customized requirements.
Reduced Operational & Development Costs
Since you don’t need to hire an in-house work team, you cut operational costs as well. After all, you don’t have to provide office space, advanced equipment, payroll, insurance, allowances, and other employee benefits.
Managed IT Solutions Disadvantages & Risks
With some advantages above, there also come certain risks and disadvantages you must be aware of:
- Possible higher costs compared to staff augmentation
- Less control on your side
Let’s discuss each of these in detail.
Higher Costs Compared to Staff Augmentation
Unlike staff augmentation (as we will discuss in the following content), managed services leave the space for the involvement of other stakeholders besides developers themselves. This adds up to the net cost of outsourcing. In some cases, this extra cost makes managing services more expensive than using staff augmentation, as you will see later.
Loss of Control
Control and responsibility on the developer’s side are both a curse and blessing simultaneously. Sometimes little control and utmost liberty are devastating. How much control you need ultimately depends on your specific circumstances, requirements and priorities. If you choose the wrong vendor, then full control on their side does not serve as a sweet dish; instead, it may ruin your project.
Whether you find a reliable outsourcing partner or not is likely to determine the destiny of your project. Reliability is one of the major concerns while choosing managed services. The only way to curb risk here is to carefully and consciously run the partner selection drive.
What is Staff Augmentation?
Instead of absolute outsourcing (that was the case earlier), this solution is based on hiring several developers for a specific time scale or developing a particular project segment. It works like an extension of the existing human resource. The outsourced team members work with the in-house team, contributing their skills and knowledge and offering different perspectives and solutions. Upon opting for staff augmentation, the company focuses on contemporary requirements and hires software developers with the necessary skillset required in the ongoing project.
Also Read: How to Save 70% Revenue Using Staff Augmentation
Advantages of Working with IT Staff Augmentation Companies
Staff augmentation presents some unique advantages:
- Less recruitment headache
- Lower operational costs
- Lower development costs
- Less legal headache
- Access to the rare and needed specialists
- Control on your side
Let’s take a look at each in detail.
No Recruitment Headache
You can free your shoulders from the burden of searching and hiring the right talent. The staffing company does that for you. You provide detailed requirements, and they handle the rest.
Reduced Operational Costs
You don’t have to provide office space, transport facility, and employee benefits to your remote employees. The staffing company handles it for you as well.
Lower Development Costs
Your remote developers are most likely offshore, which in turn reduces the rates and total development costs.
Less Legal Headache
The staffing company deals with most of the legal liabilities for the developers as their official employers. Therefore, it only leaves room for very brief paperwork and legal formalities on your side.
Access to the Unique Talent
Staff augmentation expands your boundaries by providing you with direct access to state-of-the-art IT experts around the globe. You don’t always have direct access to them or communicate with them directly, but this model opens you a channel for direct access.
Control on Your Side
Finally, this model provides direct control on your side. Since you are the one who deals with the team directly and manages it, you are the one who has rich control and authority over it.
IT Staff Augmentation Disadvantages & Risks
Staff augmentation is not everyone’s cup of tea. There are certain downsides and risks which you must be aware of:
- Management resources are necessary
- Staff deficit
Let’s break them down in detail.
Management Resources and Capability Needed
With notable benefits, staff augmentation also comes amidst some downsides in managing the remote development team on your own. This usually requires your company to have the right stakeholders who can handle this task effectively.
Just like Managed Services, partner reliability is one of the primary concerns in Staff Augmentation. Getting the wrong staffing partner may ruin your project. For the said reason, it’s crucial to take every step with great caution by ensuring that your potential staff augmentation vendor is a reliable one with rich experience and a track record of dealing with similar projects like yours.
Sometimes it’s not as easy as it sounds to find the right developers at the tip of a finger, or at least not as fast as you’d think. However, that doesn’t happen frequently. Such problems pop up sometimes in staff augmentation, depending upon your requirements and the place where you’re looking for developers.Why not own the R&D Team?Suppose you are gearing up to integrate 40 experts into your team. In that case, you can set up your Research and Development (R & R&D) team with a sustainable business environment and extended domain of tech talent pool. But handling your R&D team comes amidst the responsibilities related to the legal liabilities, learning and adapting cultural dogmas, and running all of the risks independently.
How to Outsource the Best Managed IT Services or IT Staff Augmentation Vendor
There are a few things you have to take into consideration while outsourcing.
This is the most crucial aspect to note when choosing a potential outsourcing partner. The outsourcing firm you are considering collaborating with must-have rich, relevant experience with projects like yours.
You need to ensure that the pricing model is transparent, fair, and free from hidden charges. It has to provide you with the best price possible.
It’s recommended to check the company’s legal information. How long they have been serving, the key stakeholders, and if there have ever been any lawsuits, etc., tells a lot about a company’s reputation.
Ask the outsourcing service provider to provide a detailed portfolio of their developers. Carefully review their expertise, academic qualifications, certifications, and experience.
To eliminate the communication barrier and related problems, you must ensure that the management and development teams know your language or central medium like English. You can ask them to provide any relevant certifications which confirm their level of English fluency.
Testimonials and Reviews
Last but not the least, carefully go through the testimonials & reviews and ensure they are real. It is even better to talk to their past and contemporary clients and ask about their experience while outsourcing with the same company.Of course, there might be many other factors to consider depending upon your needs and specifications. But in general, ensuring these criteria is the most important for any company gearing up to outsource a team, project, or services.
All models have their advantages and disadvantages and, notably, show different efficiencies in different situations. Staff Augmentation is ideal for project scaling when a certain skill set is required, and your in-house employees cannot find all the solutions. In such a case, external developers will simply fill in the voids. This temporary and to-the-point engagement makes it cost-effective and flexible. On the other hand, Project Outsourcing would be a great alternate if you are looking for a reliable partner offering various services to complete a whole project independently. The provider collaborates with you by sharing their expertise & knowledge and becomes responsible for the project’s outcome while focusing on core business areas. Last but not the least, when it comes to long-term engagement, you should opt for the Managed Services model. Every model offers different perks based on its nature and layout, but the final choice should be based on your ultimate business goal and the nature of the project. Each company has its definition of assistance and collaboration. Therefore, it is vital to consider the benefits of all available options and then select the model that fulfills your requirements. Once you decide, you should also ponder other aspects of outsourcing, such as the differences between offshoring, onshoring, and nearshoring or preparing yourself to find a dedicated outsource vendor. By researching in advance between Staff Augmentation Vs Managed Services Vs Project Outsourcing, you can find the outsourcing solution that best suits your specifications and requirements and provide your company with some state-of-the-art and talented experts from the world.