The worldwide IT outsourcing market is expected to reach up to $481.37 billion by 2022. Companies worldwide are looking to cut down on the considerable amount spent on IT and at the same time focus on their core business functions and retain their technical ability. For this exact purpose, businesses choose either one of these two IT outsourcing models- a) managed service model and b) the augmented staff model to address the mentioned challenges. Let’s take a closer look.
Staff Augmentation Model
In simple terms, staff augmentation model refers to when a client chooses dedicated developers for hire from a service provider that complement their in-house staff. This model only refers to the short-term use of resources, when the client doesn’t need the staff on a permanent basis. Here are some of its key advantages –
If you need the staff on a temporary basis, then what is the reason to pay them annually and keep them permanently? With Augmented staff model, you hire dedicated developers that are highly professional but only when your business needs them.
It’s flexible, low-risk & gives you control
Being adaptable in the business is very crucial, it helps you sustain. With Staff Augmentation Model you can effortlessly access skills and scale your IT team size according to the project scope.
Furthermore, one of the greatest risks when it comes to software development is full-outsourcing. Giving up full responsibility of the development to someone lowers the level of control you’ve on the project. Staff Augmentation model means you get the same benefits as outsourcing but you keep them in-house- you can oversee the dedicated developers for hire and can react to any issue whenever a situation arises.
Many times companies find it difficult to hold on to permanent staff. Studies show that up to 50% of IT staff are ready to look at other employment opportunities as the economy improves. As the attrition in the IT space cannot be avoided during an economic uptake, the augmented staff can fill in the requirement of needed software specialists.
There are of course disadvantages of adopting a staff augmentation model. The primary reason being that augmented staff is a temporary solution. A company that wants to sustain a high-level of technical ability will need development services for a long time. This can lead to high labor costs. Even contracting freelancers is not feasible as it entails higher administrative costs.
Managed Service Model
Those that hire dedicated developers on the basis of the Managed service model, look beyond the traditional outsourcing criteria or hiring a short-term staff in order to get a longer-term benefit that they expect from their IT partner.
Managed Services Model is described as “the complex of the services which imply external control of one company’s non-profile systems”. What this means is – the client in this scenario is not only obtaining the maintenance of the system but wholly delegates full control of it, this means- maintenance, support, control of the main business affecting indicators, monitoring, reports. A traditional managed services delivery model allows the client company to look beyond the initial cost-savings and plan ahead for long-term- to outsource the management, operations and delivery of the processes effectively to lower the business’ total costs.
Saves time and offers control
One of the primary benefits of the managed services delivery is time-saving. Having the available resources- like skilled dedicated developers, knowledge and the equipment relieves the client from excessive time and financial expenses.
Moreover, it offers you control. The managed services model wouldn’t be called managed if it didn’t offer control. This is not only in regards to control over software/hardware but about creating business ideas directly. Like for instance, if the data transferring service is provisioned by the software development outsourcing company then you should control that data is transmitted qualitatively rather than just monitoring that the channel remains operable.
Offers financial simplicity
Standard services provided by the software outsourcing company are preliminarily created with a preliminary designed price model. It only varies by the level of services required and additional options.
Service delivery is reinforced by a service level agreement (SLA), where the scope and limits of the service are well-documented. Service providers try to meet all the commitments on the agreement and are incentivized to maximize their value of work.
Meanwhile, the disadvantages of managed service model are similar to that of staff augmentation model – like the reliability and risk of selecting a particular vendor.
As the client puts his resources at risk with no major influence on the work flow, the reliability of the vendor is very important. One of the major advantages of the managed service model is the accessibility of rare and varied skills and equipment. But those aren’t cheap, so to access the qualified personnel and services of an experienced vendor, you’ll have to incur major expenses. Of course, comparatively it still significantly cheaper than doing it yourself.
Summing up staff augmentation vs managed services
It seems like the managed services vs staff augmentation dilemma significantly depends upon your cost-benefit analysis. In case your company needs specialized services that are not adequately filled by your in-house staff at a period of time- the staff augmentation model is right for you.
If you are searching for a continuous operating model with a cost model that you can predict, an on-demand scalability with fewer delivery risks, then you can choose a managed IT services delivery model.
Whatever your needs may be, you must ensure you are getting the best return on your investment and thus find a like-minded software outsourcing company that believes in partnership mentality and works with the same shared risk model as you.