The current digital transformation is multifaceted and tough in terms of demands that enterprises need to meet. How to follow the zeitgeist if there is an objective lack of IT staff? Where to find necessary digital expertise if ongoing projects do not imply hiring permanent IT employees? Addressing questions like that drives enterprise management to different solutions. They are not numerous. Usually, these are two general models. Staff augmentation (out-tasking) and managed IT services (outsourcing) constitute widely accepted methods of adding an IT component to an enterprise infrastructure. Let’s define managed IT services vs staff augmentation.
The choice between those two models is not apparent in most cases. No one-fits-all blueprint is available since the diversity of projects is significant. A systematic approach to the issue and a clear understanding of the difference between the models will help to find an optimal solution. This post will make the staff augmentation vs managed services dilemma less confusing. It contains some insights based on our rich practical experience outstaffing.
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What should come first?
If you look to strengthen your IT team with third-party experts, start by assessing the gap between the existing business model and a desired one. A vision of how to achieve the required structural transformation should appear as a result. This is about a plan of actual steps and practices to follow.
Such aspects as budget, time, goals, and necessary skills can hint at how to put things in place. They are the ingredients of a cocktail the company leaders are to make digestible for the existing staff, however. The proportion of the ingredients can determine why managed services fit a particular project better than staff augmentation or vice versa.
After an overall vision of the future IT staff’s infrastructure becomes clear, studying the difference between managed services and staff augmentation should begin. And contrary to popular belief, not the budget is always a key factor.
Basic definitions and distinctive features of the models
Staff augmentation, out-tasking, and agile business process outsourcing (BPO) are different definitions of the same process. The latter means that a customer’s internal team is facilitated with IT experts from outside. The key aspect of the staff augmentation meaning can be expressed with only one adjective: temporary. In other words, IT specs join the customer’s team for a specific period. Usually, the complexity of a particular project determines the time during which augmented staff remains a part of the customer’s team. After the project closure, the augmented experts say goodbye to their temporary employer.
A full-time extended team of IT experts providing complete IT management for a customer belongs to what managed service providers mean under outsourcing or managed IT services. This model differs from staff augmentation by the type of interactions appearing with a need to hire no in-house IT specs. In contrast to staff augmentation, managed IT services imply professional IT support coming from a remote service provider whose involvement is not necessarily limited by a certain project.
To put it simply, the actual movement of the labor force distinguishes staff augmentation from managed services. Both models have their own pros and cons that encourage customers to choose one or another variant of cooperation under different goal-setting circumstances.
Peculiarities of staff augmentation
As a temporary solution, staff augmentation is worth using to overcome short-term deficiencies in some IT expertise. A simple contracting model makes this type of employment more feasible than conventional recruiting is. Even a higher hourly rate of the embedded specs can unlikely be stressful for a company’s budget due to the temporary nature of staff augmentation.
At the same time, the external employees who are totally aware of their temporary status can barely share the strategic goals of the company along with its corporate values beyond the project they have been hired for.
In the days when digital technologies keep evolving at an unprecedented pace, any new project may require unique skills from the staff. If a company is not in the relevant niche the task to find some project-critical human resources might occur time-consuming. And the staff augmentation model fits the situation a way that little else does.
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Specificity of managed IT services
The scalability of project requirements makes the managed service model (outsourcing) more attractive for a long-term cooperation period. While augmented staff keeps working over a project under the predefined fixed hourly rate, the suppliers of managed IT services have to approach pricing in a more flexible manner.
Besides, a customer and a service provider share all operational risks associated with project execution. It means remote IT experts ought to scale the responsibility for impacts and outcomes of a project up and down according to every ongoing stage. In other words, the cost of managed IT services depends on the project outcomes. Staff augmentation typically depends on performance.
Another advantage of managed services belongs to a wider range of experts who can be engaged upon request. Circumstances can change when a project is far from its end, and some additional expertise can appear in need. Managed service providers usually have some extra labor resources to work on the project either temporary or permanently, while staff augmentation faces difficulties in the rearrangement of the contracted teams on the go.
Issues to consider in staff augmentation
Knowledge control inevitably becomes vulnerable to some extent when “foreign” staff appears in a team. Staff augmentation can impact a delicate balance of intellectual privacy. In many cases, it has been thoroughly maintained within a relatively stable team.
Embedded contractors get access to the inside non-public information of the organization. Since the information is dynamic and changeable, you can’t be 100% sure about security when different individuals revolve around the company’s secrets.
On the other hand, an employer is the one who manages business processes in which augmented staff is engaged. This differs from a day-to-day routine operated by managed service providers who are in charge of both business processes and employment instead of their clients.
The situation seems contradictory: the deeper the augmented specs descend into the client’s infrastructure the less confident the client has to appear in terms of knowledge control. Such an algorithm is not a dogma, however. The relationships between clients and embedded specs can go within a wide spectrum of contractual obligations regarding data privacy in the staff augmentation paradigm. But clients should be aware of such a sort of vulnerability anyhow.
A subtle difference between managed services and outsourcing
Managed IT Services and IT project outsourcing are often interchangeable in meaning. However, a fine distinction exists between the models. When a business focuses on some core activity without being disintegrated into a multiplicity of various spillover processes the project outsourcing model fits well.
In other words, a project starts running in two parallel workflows when a customer works over the primary aspects with an in-house team while an outsourcer is in charge of some secondary tasks. The non-essential processes outsourced to a third-party provider may, nevertheless, significantly exceed the core aspects in the volume. But in any case, both a customer and an outsourcer have to be in tight day-to-day communication since the general control over the project belongs to the customer.
Similarly to staff augmentation, the project outsourcing model is usually applied to some temporary assignments. A single project with a clearly predefined time frame corresponds to what clients can easily share between their own teams and outsourcing providers.
With regard to managed services, this model usually comes into play when durable cooperation between a customer and a service provider is to cover multiple activities not limited by certain projects. Besides, a managed service provider can get total control over a project along with full responsibility for the project outcomes.
Hence, outsourcing can be called a special case of the broadly conceived managed IT services.
What to choose and when
To make a more comprehensible choice between staff augmentation and managed services it is worth considering some inhibitors and drivers that make customers recognize the value in one or another model.
Since outsourcing keeps gaining popularity in general, it would be legitimate to claim that the inhibitors belong to staff augmentation rather than managed services.
At the same time, biases towards both models might still be available among those businesses that have not been using any sort of outstaffing yet. So, let’s define what prevents potential customers from staff augmentation and what might encourage them to lean towards managed services.
Inhibitors and biases regarding staff augmentation
The below-mentioned factors arise due to specific features of staff augmentation in terms of both the employment type and management style inherent in the model.
- A general operating model of an organization can be affected by the fact of the newly appearing embedded team. Certain capabilities of strategic management should be inherent in the organization leaders that is not so in the case of many small and middle-sized companies
- Quite explainable ambivalence regarding cost efficiency of staff augmentation takes place due to higher hourly rates of embedded specs against the background of a simpler pricing model along with tougher staff management
- No long-term partnership is required while simple contracting is limiting the contractual obligations of both parties
- All operating risks remain with an organization while the simple hourly-rate pricing model implies no responsibility for both the project outcomes in particular and the future success of the company in general
Encouraging factors of managed IT services
Managed service providers relieve customers from many tensions accumulated in collaboration with third-party suppliers. The more inclusive agendas of managed IT services can make this model trouble-free in the eyes of many customers.
- Pricing depends on the scope and level of the delivered services. Managed service providers share the responsibility for project outcomes with customers
- Service providers are in charge of specs’ employment, staff management, workflows, and delivered tools. Reporting to customers occur at the top management level
- Extended control over all stages of project execution belongs to managed service suppliers while knowledge privacy remains in the hands of customers
- Both operational risks and negative aspects of the human factor threaten service providers allowing customers to focus on creativity and execution
- Long-term partnership is a basic factor of successful cooperation under the managed service model regulated by transparent contracting with scalable pricing
There are some key differences between staff augmentation and managed IT services. Organizations that look for strengthening their IT departments should analyze the differences to select the model fitting their goals best.
Summarizing the distinctive features of the models it is worth defining the following three main ones:
- Temporal factor: staff augmentation is good for a temporary project with a predefined time frame. Managed IT services are not limited by the duration of a particular project in general
- Pricing model: the simplest hourly rate-based pricing belongs to staff augmentation while managed IT service providers have to apply more complicated pricing according to the scope and level of the delivered services
- Control and responsibilities: staff augmentation allows businesses to keep control over staff hiring, operations, and processes while sharing no responsibility for the final outcomes of the project. Managed service providers assume control of employment, workflows, and project management to share the responsibility for future success with the customers
Sometimes, it is difficult to figure out what outstaffing model you need. Both project nuances and external circumstances matter. The universal solution in such a case comes to finding a professional service provider whose experiences encompass both models equally. Contact us and we will offer the most appropriate solution for your organization.