While these terms are often used interchangeably, they’re distinct outsourcing approaches with unique pros and cons.
So, it’s crucial that you understand their differences and select the model that best aligns with your specific business needs and goals.
Not sure where to begin?
We’ll also introduce you to the ideal nearshore outsourcing partner — Distillery.
Discover What Nearshore Staff Augmentation Is, Its Benefits, And How To Get It Done Through Distillery.
Explore 10 Reasons Why You Should Outsource to Argentina.
This Article Contains:
- What Is Staff Augmentation?
- What Are Managed Services?
- Staff Augmentation vs Managed Services: A Quick Comparison
- Pros and Cons of Staff Augmentation
- Pros and Cons of Managed Services
- How to Choose the Best Outsourcing Model for Your Business: 8 Factors to Evaluate
- 3 FAQs on Staff Augmentation vs Managed Services
What Is Staff Augmentation?
Staff augmentation lets you hire specialized experts on demand to complete short-term and long-term projects.
You can hire these top-notch specialists onshore (home country), offshore (geographically distant countries), or nearshore (nearby regions). They would integrate seamlessly with your internal team to deliver a specific task or project.
How do you get started?
All you need to do is analyze your in-house project requirements, available resources, and skill gaps. You can then find a credible outsourcing partner and augment your team with the necessary skills for the project duration.
A US-based mobile development company lacks quality assurance expertise. To fill this gap, they can partner with a credible nearshore staff augmentation partner like Distillery and hire a quality assurance expert or an entire team from nearby countries like Mexico.
This strategy helps your business bridge any skill gaps while avoiding long-term hiring commitments.
It also gives your business the flexibility to adapt to changing markets and project outsourcing needs swiftly.
Next, let’s explore what managed services entail:
What Are Managed Services?
In managed services, your company outsources entire projects or functions in areas like cybersecurity, data migration, or software development to a Managed Service Provider (MSP).
Unlike staff augmentation, where external staff work closely with internal resources, MSPs operate independently.
Here’s how it works:
The managed services provider gives you a proposal with a cost estimate and a timeline for the project. Once you approve, they handle the entire project end-to-end. They keep you updated with regular progress reports.
For instance, a retail business seeking to boost its cybersecurity might choose a managed IT service specializing in digital security. The managed IT services provider would assess the business’s needs, create and implement a tailored security strategy, and offer continuous support service and maintenance.
Why do businesses opt for this strategy?
This model is particularly cost-effective for long-term projects since it reduces overhead expenses, simplifies hiring and other HR processes, and streamlines resource management.
Let’s dive into how these two models differ.
Staff Augmentation vs Managed Services: A Quick Comparison
Before we do a detailed analysis, here’s a summary of the differences between staff augmentation and managed services:
|Type of Engagement
|Integrating one or more temporary team members into your team for a specialized skill
|A managed services provider fully manages and delivers a project independently
|For short-term and long-term projects
|Ideal for long-term projects
|Control and Management
|Direct control and management over the hired staff
|Less control since the outsourced team is usually managed by the service provider
|Focus on a specific task or project component
|Focus on overall service delivery
|Provides greater flexibility by allowing you to scale your workforce and skill sets quickly, adapting to project-specific needs
|Less flexible as they involve longer-term contracts and predefined scopes of work, which can limit your ability to make quick adjustments in response to changing business needs
|Variable costs based on fluctuating team and project outsourcing needs
|Typically involves a fixed cost for end-to-end management of a specific project or function
Next, we’ll take a closer look at the pros and cons of staff augmentation to help you determine if it aligns with your business needs.
Pros and Cons of Staff Augmentation
Discover the five benefits of staff augmentation that’s transforming the business landscape, and a few drawbacks to keep in mind.
5 Pros of Staff Augmentation
- Cost-effective, especially for short-term projects: Offers cost savings for short-term projects by letting you hire skilled talent only for the required project duration. This way, you can avoid long-term employment expenses and reduce overhead costs like salary benefits and office space.
- Better control over your team & project: Gives your in-house team direct control over the augmented team. In fact, credible outsourcing partners like Distillery let you retain control of day-to-day operations, ensuring the outsourced work aligns with your specific project requirements and business goals.
- Enhanced flexibility and scalability: Lets you quickly adjust your workforce size and skill sets in response to changing project demands and market conditions. For example, you can hire additional software developers to scale up your team’s capacity during a product launch and scale back once the project is completed.
- Faster onboarding and reduced training time: Staff augmentation brings in skilled professionals with specialized skills, such as QA experts, who can quickly integrate into your existing team. This approach significantly reduces the learning curve, cutting down the time and resources typically needed to train new, full-time employees.
- Accelerated productivity: Staff augmentation brings in tech talent skilled in Agile and Lean methodologies, introducing best practices that enable quick adaptation to project changes. Some providers offer specialized services like Agile-focused project managers, further streamlining processes and optimizing resource use.
2 Cons of Staff Augmentation
- Requires well-defined internal processes: You need clear guidelines and efficient internal communication protocols to be able to integrate the augmented staff into your existing workflows effectively. Without these, augmented staff may struggle to align with company standards, risking inefficiencies and delays.
- May have hidden costs: Hidden costs may arise due to unforeseen administrative expenses, legal costs, and training the external professionals on specialized tools or company-specific practices. Communication gaps in offshore models may also lead to higher project costs and delays.
Next, let’s explore the managed services model in detail:
Pros and Cons of Managed Services
From cost-efficiency to post-deployment support, here are the benefits of leveraging managed services. Also, learn about the drawbacks of this model.
3 Pros of Managed Services
- Cost efficiency (only for long-term projects): Offers a fixed and predictable pricing model, allowing for better financial planning and resource allocation over the duration of the project. It also reduces the need for frequent technology investments, as the service provider usually ensures that their team has access to the latest tools.
- Reduced administrative burden: Alleviates your administrative workload since the outsourcing company oversees staffing, payroll management, technical customer support, and more. This frees your internal team to focus on core business aspects and goals.
- Long-term support and maintenance: Ensures continuous oversight and updates post-deployment. For example, if you outsource a CRM system to a managed service provider, they will take responsibility for continuous software updates and bug fixes so your product stays relevant and competitive.
5 Cons of Managed Services
- Less control over outsourced processes: Since decision-making and operational processes are primarily managed by external providers, it can limit a company’s direct influence over project execution as compared to staff augmentation. This can lead to project misalignment and deviations from business goals.
- Can be more expensive than staff augmentation for short-to-medium-term projects: The managed services model provides a full range of services that can be costlier than staff augmentation for a medium or short-term project. The cost includes not just labor but also the management, infrastructure, and technology that the service provider brings, which can be more extensive and thus costlier than staff augmentation.
- Potential for misaligned objectives: Since the service provider has complete control over operations, it can sometimes lead to a mismatch between their methods and your expectations. So, they may even deliver a one-size-fits-all solution that doesn’t fully cater to your bespoke requirements or strategic direction.
- Increases your dependency on external providers for critical processes (like data security): Depending on external providers for critical functions like a support service or data security, can limit your internal team’s ability to handle challenges independently and proactively. Plus, if the partnership ends, you may find it difficult to transition to another service provider or meet project deadlines.
- Potential intellectual property issues: You need to share sensitive company information with your managed services provider. As a result, this could lead to risks of IP theft or unauthorized use, especially if there are no clear contracts or data handling protocols in place.
Still unsure which outsourcing model you should opt for?
Not to worry. We’ll cover eight tips to help you make the right decision next.
How to Choose the Best Outsourcing Model for Your Business: 8 Factors to Evaluate
The right outsourcing model depends on your business goals, budget, project-specific needs, and more.
We’ll tell you the eight aspects you need to evaluate and when to pick which model.
1. Business Objectives
To maximize your return on investment, your choice of outsourcing model must align with your business goals and objectives.
Opt for staff augmentation if your objectives are to expand your in-house team’s capabilities temporarily or fill specific skill gaps while simultaneously maintaining broader project control.
But if your objectives are operational efficiency and long-term stability, then managed services would be the comprehensive solution you need, especially for long-term projects where direct oversight isn’t a priority.
2. Skill Requirements
Next, you should assess your project’s skill requirements accurately because this will determine the level of expertise needed for its success.
If your project requires a specific skill that you lack in-house, staff augmentation is the perfect fit.
On the other hand, if you’re looking for a service provider to take over the entire project, managed services could be a better choice.
It’s important to evaluate your budget to ensure the chosen approach aligns with your financial resources and cost expectations.
Staff augmentation is particularly budget-friendly for a short-term project thanks to the model’s inherent flexibility and reduced hiring and overhead costs.
Managed services, while initially more expensive, can be more cost-effective for long-term, complex projects.
5. Compliance Needs
You need to make sure the outsourcing model adheres to industry standards and legal requirements relevant to your business operations.
You can directly oversee compliance in the team augmentation model.
On the other hand, if your project requires strict adherence to regulatory standards, managed services might offer more comprehensive compliance solutions.
6. The Need for Internal Knowledge Transfer
This will help you determine if the outsourcing model will facilitate the seamless sharing and retention of critical expertise within your organization.
To retain skills and insights from a project within your organization, staff augmentation is an optimal approach.
This method allows you to integrate external professionals seamlessly into your existing team, facilitating direct knowledge transfer and skill sharing.
Managed service providers typically handle tasks independently, which may limit knowledge sharing with your existing team.
7. Team and Cultural Integration
Evaluating this will ensure that the outsourced staff can effectively collaborate and align with your company’s values and working style.
Opt for staff augmentation if you want a more seamless integration of external resources into the company’s culture and workflows, fostering collaboration.
But if you need little to no cultural integration, managed services would be fine too.
8. Engagement Flexibility
It’s smart to check how flexible the engagement can be – you want something that can dynamically adapt to changing project requirements and organizational shifts.
Staff augmentation provides the flexibility to expand or reduce your external resources in response to evolving project and market needs.
Opt for managed services if you’re looking for a consistent, stable engagement with fewer scope changes.
Have more doubts?
3 FAQs on Staff Augmentation vs Managed Services
Here are some frequently asked questions related to these two strategic outsourcing models:
1. How can you ensure consistent quality and adherence to standards in both models?
When leveraging staff augmentation, a company should:
- Implement thorough virtual or in-person training to align the augmented staff with company benchmarks.
- Maintain clear communication and feedback to monitor and integrate the augmented staff.
- Regularly audit quality and review performance to ensure adherence to benchmarks.
For managed services:
- Clearly define a service level agreement (SLA) and key performance indicators (KPIs) to set measurable standards for the managed service provider.
- Regularly assess provider performance against these benchmarks for compliance and improvement.
- Collaborate closely with the provider, aligning their services with the company’s strategic goals and quality standards.
2. What are the risks to intellectual property (IP) and data security in each model, and how are they mitigated?
In staff augmentation, you may face unauthorized IP access and data breaches due to the external staff handling sensitive information.
There’s a risk of IP theft and data breaches due to external control over IT systems in managed services as well.
Fortunately, you can mitigate these risks by creating non-disclosure agreements (NDAs) specific to each project and establishing strict, role-based access controls. Implement stringent data security protocols, audits, and include specific IP protection clauses in your service agreements.
3. What are the exit and transition plans for staff augmentation and managed services when a project ends or is canceled?
In staff augmentation, the transition plan typically includes:
- A gradual transfer of duties to in-house staff
- Thorough documentation of all work completed by the augmented staff
- Organized knowledge transfer sessions
- Ensuring that access to company systems and data is revoked and all service-specific confidentiality agreements are upheld post-transition
When exiting managed services, the transition plan should involve:
- A structured transfer of service control to an in-house team or a new provider
- Comprehensive data migration and system handovers
- A review of all service documentation to ensure continuity and compliance with company standards
These questions should help you clear your doubts and help you choose an appropriate outsourcing model.
And if you’re looking for a staff augmentation service, we have just the perfect partner for you:
Augment Your Team with Top-Notch Tech Talent from Distillery
Distillery is a trusted and award-winning nearshore software development company that offers the most reliable nearshore staff augmentation services in Latin America.
Wondering how we do it?
- We take care of recruiting, hiring, and onboarding costs and augment your team with premier tech talent within just a few weeks.
- We offer the best skills, ranging from cloud, UX/UI design, and QA to project management.
- Our flexible tech talent integrates with your in-house team perfectly while you retain day-to-day project control and complete visibility.
- Our tailored Service Delivery Approach (SDA) helps optimize project timelines, minimizes risks, and ensures smooth communication.
So what’s holding you back?
Get in touch with Distillery today to fire up your team.