IT Projects Outsourcing vs Staff Augmentation: Perks and Pitfalls

Companies require skill and extra set of hands to fill in the gaps that arise while working on a major project. There are various alternatives that companies can approach to enhance productivity, scalability, and ROI (Return on Investment).

Two of the popular alternatives are discussed in this article – IT projects outsourcing and staff augmentation.

Which one is the best-fit approach? Before arriving at this, let’s understand the differences between the two.

IT Projects Outsourcing

IT projects outsourcing is a solution for tackling the issue of shortage of skilled technology professionals. According to a report by Gartner, one of the biggest problems of IT companies is that they faced shortage of qualified people. Talent is a major hurdle for companies and is a reason for slow progress of emerging technologies; outsourcing can help to overcome this obstacle.

Perks of IT Projects Outsourcing

1. Access to a Larger Talent Pool

Remote working and work-from-home conditions have enlarged access to a wider talent pool. A live and active database of qualified candidates helps in IT projects outsourcing, as this database is up-to-date with availability, required skills, and experience. This reduces time and improves efficiency while finding the right outsourcer.

Further, talent pooling ameliorates diversity and inclusion amongst the workforce, and disrupts traditional means of applying for a certain role with a criteria, thus allowing for a wider portion of outsourced candidates or vendors to be considered.

Diversity and inclusion promotes company reputation, branding, surges innovations and ideas, and creates a productive work environment. Gaining access to a larger talent pool is an effective way to attract passive outsourced vendors or candidates as they might be open to new opportunities in the future.

2. Reduction in Expenses

IT projects outsourcing helps to reduce expenses in two ways – by averting several overhead costs for bringing in new employees and by paying only for the required services. Companies have to pay their internal teams even if there’s not much work to do, they are required to spend on payroll taxes, and additional benefits such as medical insurance, pension, or travel allowance.

Internal employees can leave anytime, despite of the training and time invested in them, this leaves companies with additional costs to find a replacement. Hence, to avoid such expenses, consider outsourcing for IT projects.

Furthermore, an in-house team needs equipment to work, along with upgrading company’s IT infrastructure to match with the competition. All these leads to energy consumption and money to meet expenditures. However, an outsourced team saves these expenses by bringing in there own equipment and resources for the team.

3. Requires Less or No Training

An outsourced IT team comes with an experience in required niche, hence they require less or no training at all. Consider training an outsourced team during tight deadlines or urgent need of products as this helps to produce and deliver products efficiently and on time.

Further, training an in-house team comes with its set of issues such as administration burden, lack of networking opportunities, or absence of employees from training. These issues result in time wastage and inefficiency.

On the other hand, outsourcing leverages expertise and resources to deploy products efficiently, thus freeing up staff to focus on essential aspects. Apart from this, IT project outsourcing is flexible and provides companies with option to exit a contract without expending huge amount.

Pitfalls of IT Projects Outsourcing

1. No Control Over Projects

IT projects outsourcing results in losing a say over the decisions taken on projects and the overall development process, which in turn impacts the outcome of a project. Communication gap or failing to update about the product development to the company can lead to poor quality of the final product, hence ensure that clear communication channels are maintained with an outsourced team.

Companies loose not only control over projects, but also end up providing crucial information that’s needed for completing a project, thus hampering confidentiality and data security. However, these issues can be resolved by hiring an outsourced team that a company is comfortable with and has a say during the development process.

Further, to take control of projects, take weekly and daily updates through emails or meetings in order to stay involved in the process. Review work weekly or twice in a week and include performance metrics to determine next course of action.

2. Hiring the Right Outsourcing Team

One of the major pitfalls of IT projects outsourcing is to find the right team and companies fail to capture the right outsourced team due to lack of experience with outsourcing. Absence of knowledge with outsourcing creates obstacles in workflows such as difficulties in communicating tasks and conveying vision to others.

Unfamiliarity with common concepts, outsourcing best practices, and workflow management may result in hiring the wrong or unfit outsourced team. Solution for this is to work with experienced IT projects outsourced team or to conduct research on outsourced team before onboarding them.

Furthermore, choosing the right outsourced team depends on company’s budget and project goals, as an enterprise – sized outsourcing costs too much and takes a less personal approach towards the project.

Staff Augmentation

Staff augmentation is the right fit for companies who are unable to expand their teams due to talent shortage in the local market and those who want to stay connected with the team on a daily basis. IT staff augmentation helps to add skilled professionals to the in-house team for either long or short term basis.

Perks of Staff Augmentation

1. Scalability

Staff augmentation allows to scale businesses by expanding team with apt specialists and distribute the workload. An external programmer or developer adds value to the team by bringing in new and innovative solutions to complex project problems.

IT staff augmentation builds efficiency and averts potential errors in projects. Since, companies can hire staff on contract basis, this ensures minimal expenditures and not having to pay them when there’s no work, like in case of in-house employees. Companies save money on full-time employees and invest in short-term hires (remote or in-office).

Furthermore, by recruiting experienced and highly-skilled professionals, companies gain fresh perspectives towards projects and may offer exceptional products to customers. This enhances company’s performance and customer satisfaction rate as well. All these aspects help companies to scale.

2. Control Over Projects

When a company chooses staff augmentation, the entire load of project management falls on the laps of the in-house team and they are responsible for producing results. Hence, by seeking staff augmentation, companies ensure control over the ongoing projects, unlike in the case of outsourcing where there’s little or no control at all on projects.

By hiring staff that fits culturally within the company and have sound technical knowledge helps to build rapport, which in turn assures control over projects and success of the same. Further, companies can identify areas where employees need help and tailor the staff augmentation to fit the requirements.

3. Flexibility in Work

Staff augmentation helps to provide a flexible workforce and workflow by hiring contractors or freelancers, and this gives a competitive edge in the market as well, without having to bear additional expenses of recruiting an in-house staff.

A flexible workforce is capable of modifying and scaling at a faster rate. This helps companies to easily adapt and stay lean as per changing market needs. Flexibility in work is advantageous for small companies who wish to stay agile to iterate and execute quick product delivery cycles.

Pitfalls of Staff Augmentation

1. Insufficient Institutional Knowledge Transfer

Insufficient knowledge transfer to an external team due to security reasons hampers progress and productivity. By leaving the team in dark about developmental style, procedures, mission, vision, media practices, and goals for the future results in unsatisfactory outcome of the project.

Failure to transfer adequate institutional knowledge hinders company’s standards, content requirements, and doesn’t meet the style or tone of the company. Therefore, consider transferring required information to the staff, however companies can debar disclosing crucial data to the team for privacy and security reasons.

2. Language and Time Zone Barriers

Language and time zone barriers arise while considering offshore or nearshore staff augmentation services. These barriers creates communication gap within company infrastructure and team, thus resulting in poor productivity. Communication gap is a major reason for unclear and conflicting expectations, which leads to inefficiency, and time and money loss.

Time zone differences creates hinderances in acquiring clients, as managing time differences impacts working hours, which in turn impacts work-life balance as well.

These barriers can be overcome through regular reviews and ameliorating communication through collaborative tools such as Github, Slack, Zoom, or Microsoft Teams. Periodical changes in working hours helps to manage time zone differences.

Which One is Better IT Project Outsourcing or Staff Augmentation?

Before choosing any one of them, consider assessing the following points within the company –

1. Compare and review case studies of both outsourcing and staff augmentation.

2. Define company expectations, project, and departmental goals for the future.

3. Assess staffing requirements

4. Analyze risks, skill gaps, and estimated budget for the project.

5. Keep in mind company’s structure and culture as well.

Based on the data gathered through above assessments and comparisons, and considering the perks and pitfalls of staff augmentation and IT projects outsourcing, a solution is likely to be emerged. However, decision to choose from both depends on the type of IT project and resources needed. Careful evaluation will help to make a best-fit decision for the company.

As a top rated IT staffing agency with headquarters in the US and 11 years of experience in the software development industry, Arkenea has options of contract staffing, direct hires and contract-to-hire, based on your project requirements. Get in touch with our team of expert consultants to figure out a staffing solution that is the most advantageous for your development project.