Staff Augmentation vs Project Outsourcing vs Managed Services - which cooperation model should you choose?

What is IT outsourcing all about?

In order to launch a successful and high-quality product, more and more companies seek external support in their development processes. The need for manpower is huge, especially in large and time-consuming software development projects. Instead of traditional internal recruitment that would generate higher costs, many companies go for IT outsourcing. This practice is based on hiring a provider outside a company to perform services. In short, the company delegates some components of the process to a third party. Their focus may be on coding, but also on testing or design, depending on the project. Considering benefits resulting from software development outsourcing, it is no wonder that entrepreneurs opt for this kind of partnership quite frequently.
 
Within IT outsourcing, we can distinguish three main models of cooperation, namely Staff Augmentation, Project Outsourcing, and Managed Services.

What is Staff Augmentation?

This solution consists of hiring a number of developers for a specific duration (for example, to create particular components for a web application). It works like an extension of the existing team. Outsourced software developers work along with the in-house team, complementing their skills and knowledge, offering different perspectives and expertise. When choosing staff augmentation, the company focuses on current needs and hires software developers with particular competencies required in the ongoing project.

Pros

• Flexibility and convenience: it is an interim solution used to boost software development, improve existing functionalities and add new ones; once developers finish the tasks, the partnership may end and be revived when the need arises in the future.
• Cost-effectiveness: cooperation is temporary so it does not require full-time wages nor does it generate hiring and de-hiring costs.
• Control: the parent company manages both in-house team and external developers, retaining a high degree of autonomy

Cons

• Short-term solution: focused on current, urgent needs - larger goals are not taken into consideration.
• Costs are higher with time: more staff-augmented resources mean a significant price increase.
• Hard to find a perfect fit: it may happen that the augmented staff will still need some additional training to complete different tasks, which can lead to higher expenses.

What is Software Project Outsourcing?

For more demanding projects, requiring support not only in coding but also in UI/UX, project management and/or software testing, the IT outsourcing cooperation expands and staff augmentation might not be sufficient. It happens usually when creating new products or startups but also when adding some sophisticated features to existing apps or rebuilding systems. The software company should then provide various services to fully meet the specific needs of the project and manage it efficiently usually using Agile approach to deliver the product on time and keep high standards. This collaboration offers more possibilities and less engagement of the client. However, it also requires deeper research from the partner in software development to entrust a great part of work with external experts. 

Pros

• Transfer of responsibility: most tasks are taken care of by the partner company, which makes the software development process time-saving for the client who can now focus on the core business; in fact, the provider not only works on software development but also deals with product design, project management, consultancy, troubleshooting, optimization and monitoring of the progress.
• Wide range of skills: the client works with a multidisciplinary team whose members can satisfy their global needs
• External viewpoint: cooperating with a vendor always ensures the opportunity to meet a different point of view on the project and also get valuable expertise. 
• Well-determined outcome: IT provider has to meet the commitments (like time and budget limits, quality of work, distribution of responsibilities etc.) defined in the agreement. 

Cons

• Less control: the client relies on the provider’s expertise and has less influence on the workflow than in staff augmentation.
• Less flexibility: conditions of cooperation are fixed in advance and they cover more complex areas.
• Additional expenses: compared to staff augmentation, project outsourcing requires higher costs as more experts and more responsibility are involved on the vendor’s side. 
• More complex research: project usually requires more than just technical support so the company has to check the experience in UI/UX, project management and QA while looking for a software development partner.

Managed Services 

This cooperation model is based on similar principles as Project Outsourcing but with a significant difference - it implies a constant delivery of services from the vendor. In this case, a client usually entrusts the external company a whole process or system. Usually, it is a non-core part of its performance and the partner has control over it and its outcome so that the company choosing Managed Services can focus on the meat-and-potatoes of the business. The service is well-determined and is subject to the Service Level Agreement (which is a contract between the provider and the client). Managed IT services are a more complex and long-term solution – it is a continuous, mutual reinforcement for both parties. The advantages and drawbacks are pretty much the same as in Project Outsourcing including the benefits of long-lasting cooperation like stability or savings on the research process. This kind of offer is not always offered by software houses (e.g. in Merixstudio we focus on staff augmentation and project outsourcing) so you need to take into account more limited choice of vendors. 

IT Outsourcing cooperation model - Making the right choice

All models have their advantages and disadvantages and, above all, they work better in different situations. Staff Augmentation is perfect for project scaling when a specific skill set is required and your in-house team members cannot deliver all the solutions. In this case, external software developers will simply fill in the gaps. The temporary nature of such collaboration makes it cost-effective and flexible. On the other hand, Project Outsourcing would be a great option if you are looking for a reliable partner offering diverse competencies to support building a product. The provider shares with you their knowledge and becomes responsible for the outcome of the project, while you can take care of other business-related issues. Finally, when it comes to long-term collaboration, you should consider the Managed Services model. 

That being said, the final choice should be based on your business objectives and the nature of the project. Each company may require a different approach. Therefore, it is crucial to weigh the benefits of all options and then choose the right model for you. After you have made a decision, you should also analyze other aspects related to IT outsourcing, like differences between offshoring and nearshoring or preparing yourself to partner with a top creative software house. By doing the research beforehand, you can find the solution best suited for your needs and provide your company with top-notch experts in the field of software development.