IT Staff Augmentation vs. Project Outsourcing: Which Model Suits You?

The business world is becoming increasingly uncertain as globalization and digitalization continue unabated. The dynamics of the business environment are rapidly changing, throwing up new opportunities and challenges. In such a situation, most IT companies have to reckon with the lack of adequately skilled IT resources.  

Take the example of the COVID-19 pandemic. It has fundamentally changed the way we perceive the world around us—from our work arrangements to our social life—and everything has changed.  

Thankfully, strategies like outsourcing and IT staff augmentation have come to our rescue.   

This article discusses IT outsourcing, specifically comparing IT staff augmentation and project outsourcing. It seeks to explain which option would best suit your company and why.  

So, let’s define staff augmentation and project outsourcing and their respective benefits.  

What is Staff Augmentation?

Staff augmentation services are an outsourcing strategy whereby a company hires resources, temporarily or permanently, through a third-party vendor to meet its business needs and objectives. Resources are often employed temporarily, and the reasons can be multiple.  

Companies opt for staff augmentation to:  

• Increase workforce capacity.   

• Gain access to skilled workers.   

• Add diversity to teams.   

• Fill vacant positions.   

• Ensure timely delivery of projects.   

• Enhance company reputation, etc. 

IT resource augmentation is all the rage these days. No matter how good your IT company is, it does not possess core competencies in all the various lines of its business and may experience resource shortfalls from time to time.  

Let’s use a simple example to explain how resource augmentation works.  

Let’s say Company Z is an IT company approached by a client looking for SharePoint services. However, Company Z’s SharePoint developer has recently gone on maternity leave.   

So, Company Z contacts a third-party vendor, Company Y, to provide a SharePoint developer. Company Y obliges and offers a SharePoint developer to work remotely with Company Z until the latter’s SharePoint developer returns from maternity leave.  

Thus, Company Z uses the resources provided by Company Y to fill a vacant position temporarily. This is how IT staff augmentation operates. There are many ways to implement a staff augmentation strategy successfully. From staff augmentation for startups to well-established multinationals, all companies benefit from staff augmentation.  

Let’s briefly look at the advantages of staff augmentation.  

Advantages of Staff Augmentation

• Staff augmentation enables you to build a talented, multi-skilled workforce that delivers.   

• You save time and precious financial resources by hiring through resource augmentation.   

• IT resource augmentation lets you hire the exact type of resource(s) your company requires.   

• It empowers your company with a flexible workforce.   

• It is an excellent hiring model for companies that operate seasonally.   

• You have significant control over the hired resource(s).   

• Staff augmentation gives you access to a global pool of talented IT professionals.   

Resource augmentation indeed offers immense benefits to a company. But in all honesty, there are times when staff augmentation just won’t cut it for you. In such cases, project outsourcing might seem like a better option. Let’s explore it in further detail.  

What is Project Outsourcing?  

Project outsourcing is the practice of working with another company to complete a project on time. It refers to handing over the entire execution of a project to another company.   

Staff augmentation and project outsourcing both fall under the umbrella of outsourcing. In simple words, outsourcing refers to hiring another company to do your work.  

This includes running your marketing campaigns for you, hiring resources, product designing, project execution, etc.  

IT outsourced services are relatively broad-based partnerships compared to augmentation, as they include a wide range of IT services. These include, but are not limited to, user interface design, user experience design, analytics, quality control and assurance, project management, etc.  

When you outsource an entire project to another company, you naturally have higher stakes in achieving the desired outcome. This enables you to build a more profound and long-lasting relationship with your vendor, which is absent in a staff augmentation partnership.   

Thus, the outsourcing company develops and maintains a close working relationship with the vendor. It is not a one-off transaction; instead, it turns the vendor into a trusted partner for your company.  

Let’s briefly explore some of the significant benefits of project outsourcing.  

Advantages of Project Outsourcing

• Outsourcing is an excellent way to improve the overall efficiency of your workforce, as it provides you with access to talented professionals.   

• It allows your in-house resources to focus on other tasks more critical for attaining the company’s strategic goals. Thus, your employees can focus on building and maintaining core competencies.   

• IT project outsourcing is cost-efficient because you don’t have to worry about software, hardware, and system upgrades. The vendor provides all the infrastructure for project completion.   

• Project outsourcing lets you complete and deliver your projects on time.   

• It enables you to provide faster and better services.   

• It reduces time to market.   

• Project outsourcing gives you access to intellectual property, innovation, and thought leaders. 

Let’s compare the two outsourcing strategies to determine which would suit your company better.  

Staff Augmentation vs Project Outsourcing: What’s The Difference? 

1. Costs & Responsibilities  

The service provider is responsible for recruiting and employing resources in both strategies. However, when outsourcing a project, the vendor pays for the infrastructure, office space, employee training, and licenses. The vendor also ensures that each resource is adequately motivated and looked after.  

In some cases, this responsibility lies with the vendor implementing staff augmentation. Nevertheless, as a rule of thumb, in-house costs are almost always higher than outsourcing costs—even if you cannot identify them. This is because many in-house costs, like insurance, rent, maintenance, etc., are often overlooked.  

2. Organizational Culture  

The members of the outsourcing team (the ones responsible for completing the project) develop close bonds with each other. It is a knowledge-sharing environment where resources benefit from each other’s experiences and skills. This leeway is absent in staff augmentation since the hired resource will likely work offsite and remotely for the company.  

Besides, the IT vendor is responsible for mentoring and providing the right tools to the hired resources under the project outsourcing model. In contrast, staff augmentation resources usually fail to develop an affinity with the outsourcing company as they know they will soon be working for another company on another project.  

3. Project Management  

Under the staff augmentation model, project management remains the outsourcing company’s responsibility, even though external resources might be working on it.   

On the other hand, project management is entirely the software house’s (vendor) responsibility. This may entail hiring a project manager to ensure the project is not delayed. Moreover, a single point of contact is established under the outsourcing model. Thus, it facilitates quick and effective communication between the outsourcing company and the vendor.  

Most importantly, experienced vendors’ forte lies in project management and delivery. They are well-versed in how projects are completed and what possible challenges the vendor might face. Such software houses boast a portfolio of successful projects, proving they know how to get things done.  

4. Relationship Dynamics  

All personal or professional relationships require a certain amount of mutual trust and understanding to succeed.  

However, this becomes even more significant when we discuss project outsourcing. When you outsource a project to another software company, you seek to build a more profound and longer-lasting relationship with it. This lets you understand the vendor organization’s culture and communicate your requirements and expectations effectively.  

This is not the case with staff augmentation. You would still build a relationship with your staff augmentation vendor, but it would not be as deep as the one with the vendor to whom you outsource a project.   

That’s because the scope of your relationship with the staff augmentation vendor is limited to temporarily hiring a few resources—thus, the vendor has no long-term interest in your company’s success.  

Nevertheless, regardless of depth, a viable relationship is still a must under both models.  

5. Talent Hunt  

Under the staff augmentation model, the service provider usually offers an in-house resource to the outsourcing company. If the vendor does not have the resource, it hires one according to the company’s requirements. The company conveys what skillset it is looking for in the hired resource.  

On the other hand, finding the right resources for a project is entirely the vendor’s responsibility. It is their job to put together the right resources, provide them with the necessary tools and infrastructure, and ensure the timely delivery of the project.   

In other words, the outsourcing company only conveys the project’s scope and not the individual skills of the resources tasked with completing it—the vendor decides which resources will best serve the goals of a given project.  

Staff Augmentation vs Project Outsourcing: Pros and Cons 

Here is a comparison showing the pros and cons of staff augmentation vs project outsourcing: 

Staff Augmentation Pros and Cons 

Pros of Staff Augmentation

• Greater Flexibility 

• Scalability 

• Wide Talent Pool 

• Faster Delivery 

• More Control 

Cons of Staff Augmentation

• Inconsistency in Quality 

• Privacy Concerns 

• Cultural Barriers 

• Project Overhead 

• Hierarchal Workflow 

Project Outsourcing Pros and Cons 

Pros of Project Outsourcing

• Scalability 

• Less Overhead 

• Ongoing Support 

• Focus on Core Objective 

• Access to Specialized Skills 

Cons of Project Outsourcing

• Lack of Control 

• Hidden Costs 

• Slow Progress 

• Lack of Scalability 

• Communication Challenges 

Staff Augmentation vs Project Outsourcing: How to Choose? 

When to Choose Staff Augmentation? 

• When you need to scale up or down your workforce rapidly. 

• When you need to fill skills gaps within in-house teams. 

• When you want greater control over your project. 

• When your project is not clearly defined and has varying needs, 

When to Choose Project Outsourcing? 

• When your project is clearly defined with fixed requirements. 

• When you need specialization for specific objectives. 

• When you want less overhead on your internal management. 

• When you want to free up time to focus on core business objectives. 

Wrap Up

Consider these takeaways if you’re still unsure which strategy to choose. As in our earlier example, staff augmentation should always be your go-to hiring strategy when an internal position becomes temporarily vacant. Similarly, if you need only a few resources to fill a skill gap in your workforce, hire them through a trusted staff augmentation vendor.  

However, if you have a serious project you lack the resources to execute; it would be better if you outsourced it entirely to another company capable of achieving it. This would save you time and money because you would not have to hire the resources to complete the project.   

Due to their benefits, staff augmentation and project outsourcing are gaining traction in the IT industry. Both have advantages and shortcomings, and neither can replace the other as the better option.  

Your decision should rest on your requirements and circumstances. We hope this article helps you make the right decision for your company.  

If you want to outsource an IT project or augment your staff with talented IT professionals, contact us at [email protected]. We would love to accommodate your needs!