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Startup & Scale-Up

Staff Augmentation vs. Managed Services: Which Is Your Best Fit Staffing Option?

Looking to quickly solve staffing challenges? Consider this your guide to getting it right the first time.

Whether you need to extend your team’s power with specialized skills, increase bandwidth for a new project, expand your global workforce, or just need assistance keeping things organized, there are different ways to go about sourcing the right talent and strategic solutions to grow, scale, and manage your project, quickly, efficiently and cost-effectively. 

There are a number of reasons as to why using Staff augmentation or managed services solutions are a great solution to your staffing woes, but the strongest might be this one: the hiring process isn't easy. 63% of employers say it is difficult to fill positions, 31% of hirers say they have open positions that they cannot fill.

It’s even harder when looking to fill roles for more niche skillsets. 95% of employers say it’s difficult to find skilled professionals to hire. Hiring is also costly in terms of both budget and time for employers. It’s estimated that, depending on the skill level of the position, employers can spend more than double an employee's yearly salary on recruiting and training expenses. Additionally, Glassdoor estimates that it takes roughly 23 days to complete the hiring process. For very niche skills, it is even more expensive. This can cause delays in reaching your business goals or completing a project.

To alleviate these pressures on your growth, there are two primary models to consider: Staff Augmentation and Managed Services. Though these are often terms coupled together, they are two different approaches to solving common business and staffing challenges -- and are each better suited to different needs. Each offers its own pros and cons, but choosing the right model for your business is essential to maximize your ROI. This guide will highlight the differences between each approach to help you decipher which solution is best for your company, projects, and ultimately, your customers.

staff augmentation

Staff Augmentation

The first option is staff augmentation. Let’s discuss what it is, its benefits, and its risks.

What is Staff Augmentation?

Staff augmentation is a flexible outsourcing strategy that allows a company to scale up or back their personnel based on needs. It fills the gaps by melding in-house and external roles based on wherever your biggest needs are across the business. For example, your IT team is bogged down with its current projects and a new project has just rolled in; or, perhaps you require highly specialized hires or subject matter experts for a short term need; or, you just require extra support to fulfill a business goal. These outsourced workers can allow you to add skilled resources to your team quickly, efficiently, and cost effectively, ​​all while maintaining your brand’s core values and culture. 

There are different types of staff augmentation to consider, based on your needs:

  • Short term staff augmentation, which is best when there is a small project or task that will only last for a short time that requires specialists that you do not have the resources for, whether due to the need for specialized skill sets, or when in-house specialists are occupied on other projects. 
  • Long term staff augmentation, which is best for projects without a specified end-date, or have a longer contract term. This is typically best to fill a skill gap that in-house workers are lacking, and would be too expensive to bring on as a permanent position. This is especially effective when expanding to global locations to take advantage of diversification, cost-savings, and to increase your team’s skillsets and capabilities. 

By finding a partner to help hire resources based on your specific needs, all you have to do is outline roles and requirements -- and usually, within days, you are presented with talent options from across the globe to ramp on to your project. This model allows you to adjust capacity and add or remove skills as needed, saving you time and money.

Pros of Staff Augmentation

In certain situations, staff augmentation boasts its share of benefits. Here’s what your operations can gain from utilizing this outsourcing model.

Scale Your Needs Quickly With Added Flexibility

You don’t have time to waste when a surge in business comes or a rapid-growth project ramps up. And even if there isn’t an urgent need, it’s going to cost your business and put a strain on your current team if you have delays and staffing shortages. Staff augmentation gives you the option to scale quickly so you don’t miss a beat with new projects and customers, and in reaching your business goals. There are fewer strings attached to the staff augmentation model than hiring people in-house, meaning you will enjoy flexibility when scaling. Once the surge subsides or the project is complete, the contract ends, and there’s no need for lay-offs. Long-term staff augmentation also affords you the opportunity to tap a globalized approach, whether it be to keep operations running 24/7 with a follow-the-sun approach, or expanding your global workforce in areas with lower labor costs, at a low risk, and up to 60-70% cost-savings. 

Reduce Red Tape, Staffing and Project Costs

In-house employees require technology, benefits, and office space. All of this adds overhead - and red tape. Staff Augmentation allows brands to source skilled employees from anywhere in the world, without worrying about potential lay-offs, benefits, or other concerns often associated with adapting to the ebbs and flows of business using in-house staff. Not to mention, you’re saving time and costs on things like recruitment and training.

Find the Best Skilled Professionals Based On Team And Project Needs 

Because staff augmentation offers access to temporary and long-term personnel, you’re able to get the right hires based on your real-time demands. Third-party Staff Augmentation will source pros based on your specific needs, giving brands the ability to tap into specialized, often hard-to-find skill sets from global talent markets. Whether it is project-based or a long-term addition to your team, augmented staff effectively fill in the gaps to complement the talent of your core team, making them an invaluable extension to your workforce.

This benefit is particularly useful when in-house team members simply don’t have the skills needed to complete a particular project or talent is hard to find in niche areas, or when you’re ready to source talent globally and require professional expertise in low-cost labor markets. 

Cons of Staff Augmentation

Though staff augmentation offers flexibility and scalability, it also has drawbacks, including:

Hiccups Will Cost You Long-Term

You have to consider how flexible your staffing model is. If you originally look to a short-term augmented staff, you could end up with a long-term problem that costs you. When sourcing on a temporary basis, not all projects go according to plan. If deadlines get pushed back, you’ll need these professionals for longer. The company will continue to bill you for their services, and that will add to overall costs. If your brand has a habit of veering from plans, it may be better to seek long-term staff, whether they be via managed services, in-house team members, or one of many staff augmentation providers that offer long-term support resulting in a partnership extension of your core team.  

Added Oversight From In-House Leaders Is Still Important

One of the pros of outsourcing is that it allows brands to hire seasoned professionals with expertise in your business area, or even specialized technical skills. Another pro is that you remain in control of day-to-day operations; the vendor will then fill in the gaps. But this can also add extra pressure. Since these added team members are coming from the outside, they’ll still need training for your specific brand -- as well as the project, context, and skills needed. Staff augmentation requires a quick ramp, and then just like that, the staff members are leveraged and develop into productive members of your team. Staff augmentation requires constant monitoring and communication to ensure success.

Lack of Dedication

Any time you outsource through a third party, you assume some risk that staff won’t buy into the culture like in-house professionals. Finding a third party known for hiring mature, well-vetted employees is an absolute must and will ensure an easier transition into your business.  

staff augmentation

Managed Services

On the opposite end of the spectrum, managed services are able to provide more long-term solutions with a predictable cost model and a committed scope of work and time. 

In a managed services model, the third party will assume control, just like outsourcing, adhering to guidelines and agreed-upon deliverables outlined in the contract. The managed services provider is responsible not just for staffing, but for the delivery model, people, training, processes, and tools used to complete the work. When working with this type of vendor, you’ll define the KPIs needed to achieve your business goals that will then be included in your service agreement with that vendor.

Using managed services is not only a good way to outsource your operations, but can help find opportunities for ongoing improvement based on your future business goals. 

Pros of Managed Services

Managed services are particularly useful for business leaders looking to scale operations for long-term growth. Often, they cite benefits, including:

Gain Time To Focus On Core Business

When leaders can delegate control and management of one aspect of operations, they can focus on higher-level initiatives. Business leaders can put their efforts into working hand-in-glove with sales and product teams, tweaking customer journey maps, managing up within the C-suite, and overseeing digital migrations. 

Expand the Talent Pool 

Similar to staff augmentation, managed services companies will find veterans in whatever niche you are outsourcing. But unlike staff augmentation, these team members will be around longer-term and the team will take their day-to-day direction from the provider. They’ll get to know your brand and customers. They’ll apply those learnings on calls, in engineering efforts, and more, depending on their role.

Managed Services Cuts Costs Long-Term

Because managed services require a longer-term commitment, vendors may be willing to negotiate the cost of services to get the relationship started on the right foot. The prices will also be more predictable and easier to estimate as line items in budgets, as they’ll remain consistent versus short-term contractors. 

Cons of Managed Services

Here are some pain points to consider before retaining a managed service provider:

Managed Services Cost More Than Staff Augmentation Overall By Nature

Though you will cut costs from outsourcing, the price tag for a managed services provider will likely be more than staff augmentation. Why? Simply because staff augmentation is usually a short-term solution, or only used for a handful of roles, whereas managed services providers are around for the long haul to handle all operations, and will bill you more often. However, managed services will have a predictable bill, where staff augmentation can vary greatly.

You Will Have To Give Up Some Control

Delegating tasks frees up time, but it also means trusting external staff to handle the tools, processes and manages operational assets of your projects. This loss of control can be difficult if a brand has rigid guidelines.

 Security Issues Become a More Significant Risk

Managed service providers will have access to customer data, such as email addresses and credit card numbers. If using offshore or nearshore providers, you may run into issues where their locality has different data and privacy standards. It’s essential to properly vet managed services providers, including talking about how data is managed and checking references to ask about how the company handled breaches. However, it is important to note that risks are still very much mitigated when tapping a partner for either staff augmentation or managed services. This has become even more true in a post-Covid workforce, where tools, procedures, and sophistication of security measures were heightened even more due to an increasingly at-home workforce. And usually, your partner will use client systems rather than their own, so you can rest assured that if you’ve chosen the right partner, everything will be secure.

Reliability Of Managed Services Providers Is Key

You are bringing on a managed service provider to help with long-term growth. And a big reason is likely so you can focus on core aspects of the business. But if the managed service provider is constantly understaffed, misses meetings, forgets to send data, or causes other headaches, it defeats the purpose. A thorough interview process that involves reference checks can help mitigate this risk.

Staff Augmentation vs. Managed Services: Which Is Best?

When the time comes to choose the best option for your brand, ask yourself the following questions:

Am I scaling for a short-term project or long-term extension of my team?

Staff augmentation is often best for short-term needs or when deciding to expand globally to take advantage of global labor markets, but there are exceptions. Do you need resources for one long-term project, or are you looking to see overall improved results and take the operational pressure off your current staff long-term? 

How much control do I want?

Staff augmentation requires more oversight to ensure the team is an extension of their existing team, which some brands crave. Managed services require executives to be willing to delegate and place trust in providers to provide optimal customer experiences in line with brand objectives.

Conclusion

Outsourcing can save time and money. Two popular models go beyond traditional outsourcing: Staff augmentation and managed services. Both are helpful in solving staffing challenges, and in freeing up your core team’s time and attention to focus on more strategic, high-value tasks -- but depending on your specific business goals and where you’re looking to fill in the gaps, you’d be better off choosing one over the other to start.

Staff augmentation can help add more resources, or highly specialized, hard-to-find skills to your team on a project-basis. Managed services hands over more control of your operations overall. In many cases, brands will start out with a staff augmentation approach, and grow to a managed services approach as the relationship with their chosen outsourcing partner matures and grows. As a partner becomes comfortable with your capabilities and becomes immersed in your culture, they will have a good understanding of your operations, values, and needs. At this point, you may feel comfortable to give up control to focus on more high-value items, or new strategies to grow your business, as the trusted outsourcer takes over. 

In the end, start off where your needs are currently -- you can always grow. It is important to pick the best option for where you are -- not where you expect to be later. Choosing the wrong one could have the opposite effect on operations, driving up costs and causing headaches for leaders who enlisted third-party assistance so they could focus on core business objectives. Choosing the right approach to your staffing needs, however, will have benefits across time and cost savings, save your current staff from burnout, and overall bring you closer to achieving your business goals.


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