The difference between managed services and staff augmentation often confuses business owners seeking help in software creation. Meanwhile, both these strategies can bring you to the top of your industry or give you trouble. In this article, we help you choose the best-fitting strategy for your business and find the tech wizards on our IT outstaffing platform.
What Does Staff Augmentation Mean and How It Works
Staff augmentation offers a flexible method of supplementing the workforce on board with a temporary external reinforcement. Following this strategy, you can cover the detected skill gaps in the shortest possible time and in a more cost-efficient way. Without long-term commitment, your project gains flexibility and resistance to workload fluctuations, enhancing the capabilities of the whole team.
Within its process, staff augmentation involves the following stages of work:
- You analyze your current workforce to identify the skill gaps and understand which engineers you need to find.
- You find and sign a contract with a trusted staffing service provider who provides you with the workforce you need.
- With the help of your IT partner, the temporary team members are onboarded into your domestic team to work as part of your management for the contract period.
- Within the specified timeline, or as soon as the goals are achieved, the professionals involved offboard from the project, freeing up your resources for other important tasks.
Its service market is poised for sustainable growth, as more and more businesses see a viable solution for software-connected tasks in the external expertise. We see the fastest-growing demand in areas like cybersecurity, Artificial Intelligence, and cloud computing, but other tech experts are highly wanted too.
With the strategic approach of temporary team extension, your tech team will maintain its capabilities and overcome tech and business challenges to keep your company on the market top.
What Is Managed Software Development Service
In comparison of IT managed services vs staff augmentation the most significant difference lies in the level of the external forces engagement in your specific project. While in team augmentation you involve only individual developers, the managed services mean that the entire software development life cycle is entrusted to a third-party provider.
The Managed Services Provider (or the MSP) covers all the tasks from planning, design, and development, to testing, deployment, and post-release maintenance. When you hire a dedicated development team from Ukraine or your place of residence, you have all these processes handled by a partner.
The MSP is involved before the project begins and responsible for the entire flow:
- You work with your IT partner to develop a project roadmap containing company goals, needs, and technical peculiarities of the project.
- The partner builds a dedicated team that will suit project needs best of all.
- The project owner develops and presents you with a detailed roadmap with key milestones, deliverables, and performance indicators.
- The dedicated team builds software according to the plan, you are involved in reviewing the interim results and making the strategic decisions that will influence the appearance of the future software product.
- The dedicated team conducts an iterative process of testing, deployment and integration. The continuous monitoring, troubleshooting, and upgrading ensure that software stays productive, reliable, and up-to-date.
The studies show that 88% of businesses are using managed software creation because they believe it can positively impact their productivity and free inner resources for strategic work. At the same time, 40% of users reported improved code quality and delivery speed. The secret is in utilizing the benefits of the approach while avoiding its pitfalls. Read further, to learn more about them.
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Drawbacks and Benefits of Staff Augmentation to Consider
Comparing staff augmentation vs managed services, we want to give you a tool that will suit your unique needs and guarantee your success. As the United States and Western Europe face the intensifying tech talent shortage, IT staff augmentation helps to address challenges connected with this trouble.
Pros | Cons |
Enhanced flexibility. Grow or decrease your tech team based on the current needs and tech tasks to solve. | External talent dependency. In a long-term perspective, it may lead to a lack of in-house experts able to maintain your IT products. |
Specialized skills access. Reach out to the world's tech experts to staff your project within the shortest possible time. | Confidentiality risks. Ensure thorough security control to prevent intellectual property and personal information leaks. |
Advanced budgeting. Reduce full-time salary-related costs by engaging experts temporarily. | Higher long-term costs. The temporary workforce often has higher hourly rates that lead to increased expenses in the long run. |
Total control over the project. The additional workforce will come under your project management and follow the flow and rules of your team. | Management overhead. Your internal managers will have more work overseeing the day-to-day work of the remote team members. |
What Benefits and Drawbacks Do Managed Services Provide?
We’ve checked the positive and negative sides of individual staffing. Now, to fulfil the comparison of the managed services model vs staff augmentation, let’s check what to expect if you give your whole software project to the contractors.
Pros | Cons |
Cost-effectiveness. Help from the MS provider may be cheaper than hiring, training, and maintaining the in-house crew. | Security vulnerabilities. You have to trust your vendor and be protected by security protocols before sharing sensitive data and intellectual property. |
Expertise access. IT vendors have large talent bases and can build you a team in your country of residence or abroad. | Communication challenges. Cooperation with the foreign or international team brings challenges of different languages and cultural contexts. |
Strategic focus. Software building is a complex task requiring much attention and effort. By outsourcing the IT, you leave more energy for the core business activities. | Loss of control. The vendor is fully responsible for bringing your vision to life, and the external team has much influence on your business. |
Increased scalability. Whenever you need more or less resources for building and maintaining your software product, the dedicated team is ready to scale. | Vendor dependency. When your service provider owns a project, it might be difficult to change vendors or bring the product in-house. |
Core Distinctions Between the Two Strategies
Although the approaches may seem close at some points, the key differences define whether it suits you or not. This table represents major points, on which you will rely when choosing the strategy for your business.
Criteria | Staff Augmentation | Managed Services |
Engagement Model | Temporary involvement of the individual workforce on a contract basis for closing emergency skill gaps in the domestic teams. The project flow, decision-making, and team management are conducted by the stakeholders and domestic employees of the company. | Project-based involvement of the complete software development team that covers all the project-related tasks and processes. The business functions are entrusted to a third-party partner. |
Control and Responsibility | You retain complete control over your project and set up flows and processes. The external resources integrate into your team and accept your rules, workflows, reporting and communication standards, etc. | The responsibility for the project's success is transferred to your vendor. On their side, the team management is conducted, quality tested, and the deliverables provided. |
Cost Structure | Time-and-materials model is chosen for cost savings. You pay only for the hours worked by the involved developers in your project. Being more efficient in short projects, this model becomes more expensive for large-scale solutions. | Managed services require a fixed-cost or a subscription-based contract. It makes it easier to predict budget spreading. In long-lasting software development, such cooperation means a more stable partnership. |
Flexibility and Scalability | Compared to managed services, this strategy offers high flexibility and allows scaling and decreasing your team at the moment you need it. If your business experiences workload fluctuations, it is a good chance to save costs during the off-peak season. | With the dedicated team working for you, you still have a space for easy scaling, but in a more predictable manner. The changes in the team composition require a pre-defined scope and agreement. |
Managed Services vs Staff Augmentation: When Do We Use Them?
These two approaches represent the ideas of software outsourcing and outstaffing. Choosing between them, analyze your current state of the project: whether it is long-term or short-term, requiring niche skills or mass-market technologies, and what are your unique needs. To begin with, check the most frequent use cases and try to find yours.
Best Use Cases for Choosing Staff Augmentation
Staff augmentation enables business owners to grow their software engineering team rapidly while keeping the whole workflow under control. We’ve prepared a list of use cases, where best practices of this strategy brings the biggest benefits. Check whether your case is on the list:
- Niche project creation. If you develop a specific project with narrow expertise required, this approach will give you access to a large pool of niche experts to fill your team.
Talent gaps bridging. The growing demand for emerging technologies like AI, cloud computing, offshore blockchain development services, and others, fosters a lack of the corresponding specialists, which can be covered remotely. - Peak workload relief. Staff augmentation allows growing your team for the seasonal or workflow-based fluctuations when the need for extra hands is urgent.
- New market expansion. The difference between staff augmentation and managed services makes the first option better for expanding into the new markets. It allows involvement of the local expertise for localization, support and other sufficient operations reducing financial risks thanks to the temporary contracting.
- Hiring and training time sparing. In short-term or emergency projects, onboarding and training can consume too much time. Staff augmentation focuses on providing highly expert engineers who can onboard and start working within a few days after being chosen for the role. To streamline onboarding or equipment management, many companies also integrate tools like a QR code generator to give remote teams instant access to training materials, project documentation, or asset tracking.
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Best Use Cases for Choosing Managed Services
If you choose between staff augmentation vs managed services right now, you have two relatively comfortable and beneficial options on your plate. Only the strategy influences your decision. Check the most frequent use cases to match them with your strategy:
- Complex project ahead. If you plan to build something great based on emerging technologies, the lack of in-house expertise may jeopardize the whole project. The MSP will assemble a dedicated team with deep tech expertise and domain knowledge.
- Rapid development is needed. When there is no time to establish a domestic development department and train juniors, the existing team from IT vendors can save the situation quickly. The experts are doing great in rapid product launches, close deadlines, and market shifts.
- Internal resources limitations. If your IT resources are constrained for some reason, it is much easier to go for the comprehensive services of the IT vendor than to build your software engineering department. Startups and SMEs can allocate their resources more efficiently utilizing the help of external partners.
- Long-term goals. If you plan for a complex software solution that will take much time to build, outsourcing this task to a vendor is efficient for your internal resources. In addition, your software development provider can offer continuous maintenance and support, enhancing the reliability and security of the solution.
Total Cost of Ownership: Analyzing the Financial Impact
If you think that choosing the right collaboration model is only about convenience, rest assured that it also affects your budget. When deciding between the managed services model vs staff augmentation, don’t just look at the base price.
Experience shows that managers incur significant unforeseen expenses that were neither specified nor discussed. As a result, the company spends much more than expected. Let’s figure out how it works for each model.
Staff Augmentation Pricing
The most significant cost item is the monthly rate or hourly rate. For example, if you decide to hire developers in Latvia, your final bill will depend on their level of qualification and the actual hours worked.
Here’s how it looks in practice:
- Payment for the resource. Yes, you pay mainly for the specialist’s working time.
- Financial flexibility. You can adapt the budget to specific goals. The model allows you to add or remove developers quickly and painlessly.
- Hidden costs. You may encounter management or onboarding costs, but if your vendor is reliable, these costs are already accounted for.
At first glance, the scenario looks pretty transparent, doesn’t it? We had an interesting case where a client planned to scale the project and hired a dozen developers on an hourly basis. If you only count the rate, it looks good. However, their technical leads had to spend a lot of time and resources on synchronization and micromanagement, which was not originally planned.
Managed Services Pricing
By choosing this model, you definitely pay more, but you get a turnkey result. The approach involves monthly payments that cover all costs. You don’t have to worry about onboarding, training, or management of new employees. They do the work, you pay the price.
Advantages of such a financial structure:
- Multi-level packages. This model is not a one-size-fits-all approach. Vendors offer different service packages, so you can get the most suitable one.
- Payment for results. The partner shares the responsibility and risks. In essence, you pay for the performance of specific business tasks and guarantees under the SLA.
- Zero surprises. You won’t get a headache over the resignation of another developer, sick leave, or downtime for other reasons.
Yes, the price may seem quite high at first. However, you pay for your peace of mind. If we evaluate the approach not just in the short term but in the long term, it will definitely be cost-effective because you are investing in a seamless, guaranteed result.
The Hidden Price of Control: Management Overheads You Can’t Ignore
Scaling a team involves much more than just the developer cost per hour. The sooner you understand this, the better you can plan your budget. Have you ever seen a specialist who comes to the company with their tools and starts working autonomously from day one? No, this is not how it works.
Even an experienced engineer, not to mention a junior, requires operational overhead and management at least during the first days of work. Below, we are going to look at the non-obvious costs that you need to consider if you plan to bring in external developers:
- Engineering manager workload. Your tech lead is spending resources on mentoring instead of building the architecture, for example.
- Product owner involvement. Backlog detailing and requirements clarification are essential for effective synchronization.
- Meeting overhead. As soon as you bring in a new employee, be ready to spend more time on calls than usual.
- Coordination tax. You have to overcome communication and cultural barriers that could arise between the internal team and the specialists involved.
- Onboarding and knowledge transfer. A new hire needs at least a week to get acquainted with the processes and at least a month to show some results. Add the creation of additional documentation and an operating manual as well.
- Retention and motivation efforts. Each new hire is an additional expense, so you have to consider employee retention, motivation, and burnout protection.
So, how do you make a final decision? What criteria should you pay attention to first? Ask yourself a few questions. Do you have the managerial resources, and are you ready to work with new people? If so, choose staff augmentation; if not, prefer a ready-made service.
Do you have a limited budget or an unlimited one? Similarly, if limited, choose the first model; if no limits, choose the second one. So, as you can see, both approaches have their pros and cons, as well as their application scenarios. Choose the one that suits your specific conditions best.
Make an Informed Decision Choosing a Model with Talmatic
The software development services market is full of vendors on each taste and budget. Some of them cover both models of software development with assistance, others work in narrow and specific areas.
These tips will help you make an informed decision and choose the IT services provider that suits all your needs:
- Determine your business needs, terms, and budgeting, and compare them with the available resources of your company.
- Analyze the risks and choose to bear the project risks on your own with individual developers or share them with the partner completing the work.
- Choose the vendor that has a proven track record, expertise in the needed areas, and positive feedback from the clients. Make a detailed IT service provider review to evaluate their strong sides.
- Discuss expectations and performance metrics you would like to achieve.
- With the help of your partner, compare the possibilities of the IT managed services vs staff augmentation for your project and choose the best model to follow.
