IT outsourcing is becoming more and more popular every year. According to Statista, the global outsourcing market is estimated to be worth $92.5 billion. It can bring many business benefits and reduce the problem of software developers’ shortage. However, many outsourcing models differ from each other depending on the distance of the stakeholders (which we described in this article) and the specifics of the cooperation.
In this article, we will compare two popular outsourcing models: project outsourcing and staff augmentation. Read on and check which solution will be better for your company.
Why does your company need outsourcing?
With the rapid development of new technologies, the IT skills shortage continues to grow. For example, according to Solving the UK Skills Shortage, over 70% of UK technology companies are experiencing an IT skills shortage. Furthermore, the European Commission reports that the current IT skills shortage is around 600,000 unfilled jobs. The problem extends to the United States, where The Bureau of Labor Statistics forecasts that the IT shortage in the U.S. will exceed 1.2 million by 2026.
How to solve this problem? One of the most popular ways is actually outsourcing, which can help:
- reduce costs,
- quickly use the help of qualified specialists,
- stop wasting time on recruitment,
- deliver satisfactory results in a short period,
- and much more.
If you are curious about other benefits of outsourcing in general, read our article on this topic.
What is IT outsourcing?
Outsourcing is the assignment of specific tasks to an external company that is responsible for providing employees. In the IT industry, this cooperation depends on the needs of the specific company. The client can delegate all IT operations to an external company or just fill his internal team with even one employee with the company’s competencies.
Due to the distance between the cooperating companies, we can distinguish three types of outsourcing:
- Onshoring — cooperating companies are from the same country
- Nearshoring — outsourcing of employees from a country located in relatively close geographical proximity to the client
- Offshoring — cooperation between companies with a large geographical distance, usually in a different continent and time zone
If you want to learn more about these differences, you can find them in the article: Onshore, Nearshore & Offshore – What Is It?
In this article, we will focus on the division into IT project outsourcing and staff augmentation. Stay with us!
What is project outsourcing?
Project outsourcing is a type of outsourcing in which the client outsources the entire IT project to an external technology partner. The outsourcing company is in charge of hiring and managing employees. Moreover, it is responsible for meeting deadlines and the quality of the delivered product.
What is Staff Augmentation?
Staff Augmentation is a type of outsourcing that involves adding individual specialists or an entire team of experts to a client’s internal project. Employees hired in this model can join the project at any time and are an integral part of the team. In this model, the issues related to recruitment are on the side of the outsourcing company, while the onboarding of the employee is on the client’s side.
To learn more about this model, read the article: What is Staff Augmentation?
Project outsourcing vs. staff augmentation — pros and cons
Are you wondering which model will be a better solution for you? Below you will find a list of the most important pros and cons of each solution.
Project outsourcing — pros
- More money savings — this model is associated with more significant savings than staff augmentation because, in this case, you reduce costs related to office maintenance or benefits for employees.
- More opportunities — by choosing this model, you can also hire a team from another time zone because your internal employees do not have to be in constant contact with the team of the outsourcing company.
- More time savings — when you outsource the entire project, you don’t have to spend time on implementing new employees, managing the project, and possibly fixing mistakes. You can take care of other important business matters.
- Less stress and responsibility — in this model, hiring and managing a team is the provider’s responsibility. What’s more, the outsourcing company is responsible for deadlines, terms of agreement with employees, and the quality of the final product delivered. You are only interested in the result.
Project outsourcing — cons
- Less influence on project work — project outsourcing means that the client gives up direct project management. It results in the risk that the final outcome will differ from your expectations.
- Risk of communication problems — working with an external team may cause communication problems. That is why it is worth choosing outsourcing directions with a similar work culture and good English skills.
- Less knowledge about your company — external employees will not know the goals and mission of your company as internal employees do. They will also work on their own tools and according to their own organizational culture.
Staff augmentation — pros
- Time and money savings— as with project outsourcing, your business partner is responsible for recruitment in this model. It is a huge time saver and a solution to the problem of staff shortages.
- Team working by your company’s organizational culture — by adding employees to your internal team, they all work according to your rules, on your tools, and follow your organization’s culture.
- Influence on project work — in this model, you are responsible for product quality and employee management, giving you more control over risk management.
- Flexibility and scalability — staff augmentation provides a great deal of flexibility, which means you can add as many employees to your team as and when you want.
Staff augmentation — cons
- More responsibility — despite relatively simple contracts with the vendor, you are responsible for the final outcome and delivering results on time.
- More difficult to manage — augmentation means managing an entire team, including outsourced employees, which can be an additional workload for your company, and especially your project managers and team leaders.
- Time required for implementation — in contrast to project outsourcing, employees hired in the staff augmentation model will not start working effectively from the very first day. They will need time to get to know the team, the current projects, the tools, and your company’s organizational culture.
Project outsourcing vs staff augmentation – key differences
Still not sure what model will be better for your organization? We prepared a simple table for you with a comparison of all key issues.
As you can see, there is no “golden solution” – each of the mentioned models has its better and weaker sides. Everything depends on your expectations and the individual needs of your company.
|Additionally, if you start a new IT project, you might be wondering which third parties could be involved in that task. In our different article, we compared the pros and cons of two popular cooperation methods – with a recruitment agency and a software house. You can read it here: “Recruitment Agency vs Software House – Pros & Cons of Cooperation Methods”.|
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