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Businesses globally have witnessed and experienced extreme market uncertainty post the COVID-19 pandemic. In the new normal, organizations across industries are looking for ways to cut down operational costs, retain competent talent, and increase productivity. However, managing large teams to accelerate sophisticated initiatives like those associated with product development can prove expensive and risky.

That’s precisely why employers are constantly looking for alternative methods to fill gaps and ensure the continuity of development projects. These methods can avoid overburdening existing staff and boost operational efficiency.

Along these lines, the two of the most popular solutions are staff augmentation and outsourcing. Both provide various benefits and help companies as external resources to fulfill their business requirements. Understanding the differences, pros, and cons of staff augmentation and outsourcing can help companies align their business goals and deploy resources adequately for their product development initiatives.

What Is Staff Augmentation?

To reduce costs and skip hiring formalities, many startups and companies across sectors are now working with external resources. Thanks to staff augmentation, companies now have a strategy in place to curb their expenditures associated with recruitment, payroll services, and project implementation.

Staff augmentation allows the hiring of skilled workers for development projects and meeting business expectations. It is a popular method to hire temporary employees as well as keep complete control over the projects. It has also become a lifeline for IT and product development for start-ups who wish to expand efficiently in less time. It also offers flexibility to start-ups by providing long-term and short-term contracts. This is often an easy model to understand even for those who have never worked with a vendor partner before since it’s usually all about finding the right set of people to fill specific gaps in the talent rolls. Apart from being a smart hiring choice, staff augmentation provides numerous other benefits.

Pros of Staff Augmentation
  • Greater project control:Companies can have higher control over the augmented staff and its contribution towards the company tasks, compared to other outsourcing methods.
  • Cost-efficient hiring strategy:Start-ups can deploy staff as and when required instead of hiring permanently. In addition, additional costs related to office rent, lease, and benefits are reduced. Hence, there is a reduction in the overall cost of hiring.
  • High productivity:As augmented staff is focused and dedicated to a particular development project, businesses can realize higher productivity and enhanced outcomes.
  • Access to the right talent:With staff augmentation, businesses are better equipped to land competent workers with specialized skills and quickly upskill the existing department.
  • High flexibility:Companies can design working schedules, payment, and even technology implementations as per business requirements. In addition, project timelines and schedules can be accelerated without any prior notice to augmented staff.

Also Read: A Non-tech Founder Guide on Outsourcing Product Development

Challenges of Staff Augmentation

Though staff augmentation provides flexibility and high control over projects, there are certain limitations that must be addressed:

  • High risk of team conflicts:Bringing augmented staff can create conflicts with existing in-house staff. Hence, the familiarity of augmented staff with company requirements, goals, and culture is important.
  • Additional training expenses:Though the augmented staff is skilled, they presumably lack insight into past projects and workflows. Hence, they need to be trained and oriented regarding company goals, objectives, and vision which can increase the training expenses of the organization.
  • Management issues:Staff augmentation increases management responsibilities. As the augmented staff is recruited into the organization, management is responsible for providing office space, perks, and benefits, thus, adding additional burden.

What Does Outsourcing Mean?

Outsourcing is a broader concept in comparison to augmentation and involves practices such as offloading tasks, deliverables, responsibilities, and even entire departments to an external point of contact or company. This concept is especially looked upon by various IT and product development companies for outsourcing dedicated project teams.

Outsourcing can cover software-related services, such as support, project management, analysis, and design for IT services. Almost 90% of small business owners in the US planned to outsource their tasks in the year 2022. Here are the benefits of the outsourcing model.

Pros of the Outsourcing Model
  • Reduced management responsibilities:The management responsibilities are outsourced, and hence there are no additional overhead costs incurred due to additional employees.
  • Controlled costs:One of the most important benefits is cost savings. Outsourcing the team and software development project reduces the cost of recruiting, payrolls, insurance, and healthcare insurance. In addition, with training and skill development being taken care of by the outsourcing service provider, companies can gain access to skilled talent from various locations without investing heavily.
  • Scalability of operations:Outsourcing simplifies scaling and downsizing resources for any product development project. By deploying resources as per requirement, outsourcing ensures greater flexibility in comparison to staff augmentation.
  • Streamlined results: With an outsourcing team responsible for achieving business deliverables and goals, the desired outcomes are realized in time.

Also Read: 5 Ways an Outsourced Product Development Partner Can Add Value to Your MVP Development

Challenges of Outsourcing

Though outsourcing is highly beneficial for companies, there are certain challenges while adopting this business solution.

  • Less control:The main deliverables and objectives are outsourced and hence challenging to align with the internal working systems. The outsourcing provider controls the actual execution and planning.
  • Finding the right resources: Finding the right outsourcing provider can be challenging – especially when the development requirements are unique.
  • Security challenges: Following strict cyber security protocols and signing NDAs is important for companies before outsourcing their products or teams.

Staff Augmentation or Outsourcing? What to Choose?

For most businesses, saving monetary resources and having flexible options for expansion are of immense priority. To last longer in the business race, they must stick to their schedules and provide timely and precise results. An expert and skilled team is required to achieve the same. Hence, outsourcing proves to be the best course of action as compared to staff augmentation.

Outsourcing is a successful strategy to save both time and money. Outsourcing projects offshore also provides unique benefits and growth opportunities to growing companies. It allows them to attract and employ talented and skilled professionals without investing in their training and development.

At the end of the day, it all comes down to the choice of the outsourcing partner. Be it staff augmentation or outsourcing, it’s essential that the service provider is adept at helping you build a capable team for your product development initiatives. For more information about how an outsourcing partner can help, contact us.

Nitin Tappe

After successful stint in a corporate role, Nitin is back to what he enjoys most – conceptualizing new software solutions to solve business problems. Nitin is a postgraduate from IIT, Mumbai, India and in his 24 years of career, has played key roles in building a desktop as well as enterprise solutions right from idealization to launch which are adopted by many Fortune 500 companies. As a Founder member of Pratiti Technologies, he is committed to applying his management learning as well as the passion for building new solutions to realize your innovation with certainty.

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