Outsourcing vs Staff Augmentation: Which Cooperation Model to Choose?

When businesses need to reduce costs, meet deadlines, or extend their capabilities, they often seek assistance from technical staffing services. Software development service providers often recommend different outsourcing engagement models, including IT staff augmentation vs outsourcing.

The main difference between staff augmentation vs outsourcing models is that staff augmentation involves hiring IT professionals for software development operations under the client's control, whereas outsourcing typically entails contracting an external organization for building IT projects, often with minimal involvement from the customer's internal team.

This article will help you consider all the questions related to staff augmentation and outsourcing. You will discover the pros and cons of both the variants, and find out their significant differences to make a grounded decision for your business.

IT staff augmentation refers to the strategic outsourcing approach where external professionals are temporarily integrated into a company's existing workforce to supplement and enhance its internal IT capabilities, allowing for flexibility, specialized expertise, and scalability as needed.

You can choose IT staff augmentation for the following reasons:

• Project-based reasons. You require software development experts to work on specific projects, providing expertise and resources tailored to project requirements.
• Filling in skills gaps. Your company has a need to integrate skilled IT specialists to fill skill gaps or support ongoing initiatives, offering continuity and stability.
• On-demand necessities. You look for flexible scaling of IT teams based on fluctuating workloads or project demands.
• Skill-specific needs. You require experts with particular skills or knowledge to address specific technical challenges or tasks, ensuring efficient resolution and optimal results.

Staff augmentation model is perfect for companies already having an in-house development team. It lets them attract people with specific knowledge (industry expertise, technologies) or just extend it with more developers for a short-term period.

According to a Manpower Group employment company’s report, more than 76% of employers in the world reported about the lack of tech talents capable of fulfilling business needs. Let’s discuss how the staff augmentation helps overcome this issue and what else it can bring to your company.

Using IT staff augmentation you can help efficiently lower your operational costs and additional expenses on expanding your in-house team for a short-time period. Additionally, IT staff augmentation can give you the opportunity to tap into specialized skills and expertise without the overhead costs associated with hiring full-time employees.

For example, instead of searching for IT staffing options in regions like North America or Australia (known as skilled but some of the most expensive) you can look for the staff augmentation IT vendor on an outsourcing destination such as Central and Eastern Europe. This will help you get access to a wide pool of skilled IT specialists with an advantageous price-quality ratio.

Staff augmentation not only addresses the challenges of talent scarcity but also fosters a diverse and globalized workforce. Thus, you can access a wide pool of IT talents from different geographical locations, fostering a rich mix of perspectives and experiences that can contribute to innovative problem-solving and enhanced productivity. This globalized approach allows your business to stay competitive while optimizing costs and maximizing the value of specialized skills. Furthermore, offshore IT staff augmentation provides a flexible way to scale your team, ensuring you have the right expertise on demand without the long-term commitments of full-time hires.

You can enlarge your team if you need to speed up the development process or decrease the number of specialists if there are no tasks for them to tackle. Furthermore, the staff augmentation option provides the flexibility for your company to easily scale teams up or down based on your project requirements, without the administrative burden of hiring or layoffs.

For instance, you can begin with two iOS developers, two QA engineers, and a UI/UX designer, and then transition to working solely with iOS or Android developers. Moreover, you can customize your project budgeting, with options such as payment plans, hourly rates, and negotiation of additional terms while collaborating with the vendor.

Staff augmentation can also be beneficial in meeting deadlines for IT projects, enhancing project execution times and meeting aggressive deadlines for those who may be struggling to do so. Thus, onboarding high-quality engineers through team augmentation can help your company achieve growth and success.

Analyzing the above major benefits of staff augmentation, you can see that embracing this model represents a strategic approach for organizations aiming to stay agile, innovative, and ahead in today's dynamic business landscape.

Despite the staff augmentation model’s advantages, it has some drawbacks you should be aware of.

When choosing software development staff augmentation, the responsibility for training new team members can be time-consuming and may temporarily impact project timelines. Unlike in IT outsourcing where the service provider is responsible for ensuring their team's skill sets, in staff augmentation, you take on this necessity.

To overcome this challenge, it is essential for the your company to establish a comprehensive onboarding process that includes detailed documentation, knowledge transfer sessions, and mentorship programs. Additionally, regular communication and feedback loops should be implemented to address any skill gaps promptly.

Differences in work culture, communication styles, and team dynamics can lead to a disjointed collaboration experience during staff augmented projects. To mitigate this, you should prioritize team-building activities, fostering a sense of unity and shared goals. Regular virtual or in-person meetings, collaborative tools, and open communication channels can help bridge gaps and cultivate a cohesive working environment.

The complexity of managing an augmented team places a significant burden on the client, as they either have to oversee the team themselves. To address this challenge, you can consider establishing a clear project management structure with defined roles and responsibilities. This may involve appointing an experienced project manager who can ensure effective communication, task delegation, and overall project coordination between the you and the augmented team.

Outsourcing software development project means hiring the whole development team from an IT outsourcing company (another called IT vendor/provider). Depending on the location of the software development provider, there are the following types of outsourcing models:

• Onshore IT outsourcing. Outsourcing IT services to a company within the same country or geographical region.
• Nearshore software development. Outsourcing software development tasks to a company located in a nearby or neighboring country, typically with geographical, cultural, and sometimes linguistic proximity.
• Offshore development outsourcing. Outsourcing IT services to a company located in a different country or geographical region, often with significant differences in time zone, culture, and language.

IT outsourcing allows cooperating with different IT specialists, like:

• Business analysts
• UI/UX designer
• QA engineers
• Developers
• DevOps engineers
• Project managers
• Solution Architect.

The number of experts and their roles depend on your project. The outsourcing vendor tends to pick specialists with the skills and knowledge according to your project requirements.

How does the IT project outsourcing work? We, at Cleveroad, start with the Solution Workshop stage and then render Discovery Stage services.

The Solution Workshop stage implies contacting you to answer your initial project questions and define your business issues and needs in communication with the Solution design team. The process involves collaborating to define the project's scope, create a list of features, and establish a solution architecture based on the information given. The specialists consider your company's objectives, development timelines, deadlines, budget constraints, and collaboration preferences. We analyze the data, estimate costs, and create a proposal for your product.

Discovery stage is a complex process intended to change your project requirements into a clear plan helpful to enhance your software quality and speed up the development flow. The Discovery stage includes the following activities before to start your software development process:

• Our team specifies your business flows and requirements (e.g., feature list, platforms to include, third-party integrations)
• Our UI/UX designers work on design concept as well as UX map during UI/UX design services
• We make project specification, rough time estimates and team composition on the basis of the Feature Breakdown List and factors like design idea/UX map, quality attributes, etc.
• Our Solution Architect checks your feature list and offers recommendations to enhance it. However, the choice is always yours.
• We make a detailed cost estimate of your future business software by platforms.

The IT outsourcing industry is quite popular nowadays: Statista researches state that the outsourcing companies’ revenue worldwide reached $460.07 billion in 2023, when it’s forecasted to grow to $512.60 billion by the end of 2024. Let’s discuss the advantages attracting companies to this cooperation model with IT vendors.

Software development outsourcing allows you to access a global talent pool at competitive rates. By outsourcing development tasks, your company can reduce overhead costs associated with maintaining an in-house team, such as salaries, benefits, and infrastructure expenses.

We’ve prepared a table containing the average hourly prices of the major IT specialists divided by the most popular outsourcing regions for you to consider.

The outsourcing region can affect the price. For example, companies from North America charge the highest rates. On the contrary, Asian and African software development vendors have the lowest rates, but their customer service is often questionable. In this regard, we advise you to pay attention to the Central and Eastern Europe software development outsourcing (specifically, Estonia) as it offers a favorable combination of cost-effectiveness and high-quality services.

Estonia, in particular, stands out for its robust IT infrastructure, skilled workforce, and favorable business environment, making it an ideal outsourcing destination for companies seeking reliability and innovation when they outsource software development.

Offloading development tasks to skilled outsourcing professionals, you can focus the company's internal resources on core business activities, accelerating time-to-market for your products and services. Outsourcing eliminates the need for lengthy recruitment processes and training programs, allowing projects to commence swiftly.

Moreover, outsourcing partners often work on a flexible schedule, enabling faster project delivery which is also one of the outsourcing benefits leading businesses to choose this IT cooperation model.

Outsourcing partners often employ dedicated project managers who oversee every aspect of your project, from initial planning to final delivery, ensuring smooth communication and alignment with your expectations. Moreover, skilled outsourcing IT vendors like Cleveroad typically utilize advanced software development methodologies and frameworks (e.g., Agile or Scrum) to enhance transparency, collaboration, and accountability throughout the development cycle.

While project outsourcing offers numerous benefits, it is essential to be aware of potential drawbacks that can impact the success of your endeavors when you choose outsourcing vs staff augmentation.

Outsourcing can bring you worries about the language barrier and communication problems. Also, if you and your team are on different continents, you’ll face different time zones. To make communication easy and comfortable, you should schedule meetings beforehand. There are a bunch of cool communication tools like Skype, Slack, WhatsApp or Gmail that’d let you keep in touch with the team.

Moreover, you need to ensure your vendor speaks English (or any other language you need) well in order to avoid misunderstandings and barriers during your collaboration. For example, if you examine our IT experts at Cleveroad, you can find out they all communicate in English sufficiently to understand your project requirements properly.

Outsourcing usually suffers from a lack of face-to-face communication. As a result, you can’t control the whole development process and may not feel well-protected. To overcome this issue and find an answer on how to protect your app idea from being stolen, you need to sign a Non-Disclosure Agreement (NDA) with a vendor before discussing your idea. The NDA agreement covers such development aspects as the procedure of data collection, transfer, access, and more. Also, software development companies should follow the regulations like EU General Data Protection Regulation (GDPR), and so on.

Cultural differences can pose significant challenges in IT outsourcing arrangements, potentially hindering communication, collaboration, and overall project success. Variances in work styles, communication norms, and business etiquette may lead to misunderstandings, delays, and even conflict between teams located in different regions or countries.

For example, differing perceptions of time management or approaches to problem-solving can impede workflow efficiency and hinder project progress. To mitigate these drawbacks, it's crucial for outsourcing partners to invest in cultural sensitivity training, foster open communication channels, and establish clear expectations and protocols for cross-cultural collaboration.

Customers may initially find staff augmentation and IT outsourcing concepts confusing – that’s why we are outlining TOP-3 major differences between staff augmentation and project outsourcing.

There are clear distinctions between staff augmentation and project outsourcing regarding their initial aims and responsibilities. Staff augmentation is a process where separate IT specialists are recruited to supplement your project team for specific tasks. These experts possess specialized experience and expertise relevant to the assigned task, serving customers until completion.

IT outsourcing is an approach when a separate team is hired to handle software development for a customer. This service provider operates independently from your core business, manages outsourcing tasks internally, and has increased control over project management. IT outsourcing offers a variety of services, including mobile app development services, IT consulting services, DevOps services, and so on.

Team augmentation resources can be onboarded quickly and smoothly without the need for extensive hiring procedures. The augmentation vendors often offer their specialists for short-term projects, allowing for a quick onboarding of software developers hired through staff augmentation.

The project outsourcing model requires more time for onboarding compared to team augmentation, due to the intricate nature of the dedicated team. IT outsourcing involves careful consideration in selecting a service provider, negotiating contracts, and managing the onboarding process, requiring a significant investment of time and resources. The onboarding process for this solution may require some time, but once completed, the vendor will typically handle various IT functions for you.

IT outsourcing and staff augmentation are both the collaboration approaches that can help improve software development budget efficiency and lower costs related to internal hiring and training. The cost difference between project outsourcing and staff augmentation is mainly due to investments in infrastructure, staffing, and tools to deliver high-quality output for you.

Staff augmentation providers hire contractors to meet specific job requirements for project managers. The cost of maintaining an augmented team is usually temporary. Contractors hired are not directly employed by your company, so there are no ongoing expenses for things like employee benefits or salaries.

Project outsourcing requires a higher initial investment. This is because project outsourcing involves long-term contracts that cover various services and roles within a dedicated development team services. Moreover, the outsourcing teams handle software development, infrastructure management, and cybersecurity activities.

Staff augmentation and IT outsourcing offer distinct advantages and cater to different requirements, making the choice a crucial strategic decision. So, let's sum up the earlier given information to find out the key difference between staff augmentation and outsourcing, and make a decision.

You require end-to-end project management. If you're looking for a comprehensive solution where you can entrust the entire project to an external team, IT outsourcing is the ideal choice. The IT vendors handle all aspects of project management, from initial planning to final delivery, allowing you to focus on your core business activities.

You lack in-house expertise. When your project requires specialized skills or technologies that your internal team lacks, IT outsourcing becomes indispensable. Outsourcing IT providers can bring a diverse pool of talent with expertise in various domains, ensuring that your project receives the necessary skills and knowledge to succeed.

You have strict budget and timeline constraints. IT outsourcing provides cost-effective solutions for projects with tight budgets and deadlines. By leveraging resources and streamlined processes of IT outsourcing vendors, you can achieve significant cost savings and faster time-to-market, without compromising on quality.

You need to mitigate risks and ensure compliance. Entrusting your project to a reputable IT outsourcing vendor mitigates risks associated with compliance, security, and regulatory requirements. For example, our Cleveroad IT experts adhere to industry best practices and standards, implementing robust security measures to safeguard your data and ensure compliance with relevant regulations.

You require specific skillsets for short-term projects. Staff augmentation is ideal when you need to supplement your existing team with specialized skills for short-term projects. Whether it's a lack of expertise in a particular technology or a temporary surge in workload, the skilled professionals seamlessly integrate into your team to fill skill gaps and deliver results.

You seek flexibility in team size and somposition. Staff augmentation offers unparalleled flexibility in scaling your team according to project needs. Whether you need to ramp up resources quickly or scale down during quieter periods, IT outsourcing vendors like Cleveroad provide the flexibility to adjust team size and composition on-demand, ensuring optimal resource utilization and cost efficiency.

You want direct control over project management. If you prefer to retain control over project management while augmenting your team with external expertise, staff augmentation is the preferred option. You maintain direct oversight of project activities, task delegation, and timelines, while leveraging the skilled experts to enhance project capabilities and execution.

You aim to enhance productivity and innovation. Staff augmentation fosters a collaborative environment where your team can benefit from the diverse perspectives and experiences of external experts. By tapping into the large talent pool, you can drive innovation, foster knowledge sharing, and enhance productivity, ultimately leading to the successful execution of your projects.

You can make your choice between staff augmentation/outsourcing depending on your business needs. Here, at Cleveroad, we offer not only IT outsourcing and staff augmentation approaches to help you develop your business software, but also managed IT services and dedicated software development team to hire. If you choose a staff augmentation option but doesn’t have a CTO or PM to supervise your project, we can provide you with a CTO as a Service for seamless project management.

Let's quickly revise this staff augmentation vs outsourcing comparison in a view of a table.

Cleveroad is the outsourcing software development company that has been rendering IT services to startups, SMBs and large enterprises across the world since 2011. Our team builds turnkey software development solutions of any complexity for various business domains: Logistics, Retail, Healthcare, Media, Education, Travel, Ecommerce, etc. We offer IT outsourcing and staff augmentation service all over the world: our clients are located in European countries, the US, Australia, Singapore, Saudi Arabia, and others.

The benefit range to cooperate with us includes (but isn’t limited to):

• Flexible collaboration models to meet your business needs: Staff Augmentation, Dedicated Development Team, Time&Material, Fixed Price
• Full-stack outsourcing software development team: business analysts, solution architect, project managers, UI/UX designers, developers, QA engineers, etc
• Project Management Office providing a robust and seamless communication to answer your project needs swiftly and efficiently
• Swift integration into the project through our team's extensive expertise in developing unique software solutions
• Clear vision of your brand identity due to in-depth analysis of your project requirements resulting in building the business software allowing you to boost profits and roll out new products and services
• On-demand team scaling to adapt swiftly to changing project requirements

You can also take a look at our portfolio to get acquainted with the projects we’ve successfully developed for our customers. Reach out now to explore how our expertise can benefit your project!