Staff Augmentation vs. Managed Services

IT departments that need to execute new projects often look to outsourcing to efficiently reaching their goals. However, when it comes to IT outsourcing, it is not quite the same across the board. Firms can either choose a “staff augmentation” approach where outside workers join the existing team, or a “managed service” framework that matches traditional project-centric outsourcing. Let us discuss both models and how to choose the best fit for your business.

The Staff Augmentation Approach:

With staff augmentation, companies bring qualified workers in-house to work side-by-side with full-time employees. Firms that provide these staff often offer consultative services where they can help a business assess its needs. For example, they might need help integrating data sources with CRM or SQL specialists.

Consider these core benefits of the staff augmentation approach:

• Decreased staffing costs. Staff members require health insurance, retirement plans (often with matching contributions), and other costs. With augmentation, companies can obtain specialized skills quickly, allowing them to save the budget for selective hiring or to put money directly into IT tech solutions.
• Flexibly adapt to business conditions. When unexpected events occur, IT often needs people with varying skill sets in order to fix problems or seize new opportunities. Augmentation helps with staff shortages that might come from layoffs or people leaving the firm. It’s also ideal for seasonal fluctuations, such as for online retailers that might need to beef up their IT support staff during the holidays shopping season.
• Low impact. Augmentation staff can be added or removed at will and are designed to flow into the work with minimal interruption. They provide an easy way for IT to complete necessary projects without disrupting the operating model.

Despite the potential for reduced costs and other related benefits, staff augmentation isn’t always the right approach. When augmentation becomes a permanent fixture within a business, then its value is often decreased when compared to a managed service setup. Augmentation is better suited to short-term projects with a defined need and endpoint, which keeps costs in check and leverages the enhanced ability to flexibly meet demands.

Here are some drawbacks of long-term staff augmentation arrangements:

• Resource management suffers. As the number of augmentation staff grows and management is more and more comfortable with their services, then it’s sometimes too easy to pull in new resources. An IT manager might choose augmented staff instead of tasking internal team members who hold the proper knowledge and deeper context about the business.
• Staff numbers become unwieldy. An IT manager who utilizes long-term augmentation can find themselves with an overload of augmented staff, with too many high-cost billable hours. The more augmented staff under management, the harder it is to quantify their value to complete mission-critical projects. Managers without metrics can’t hold the staffing company accountable for performance issues.

The Managed Service Approach

A managed service (traditional IT outsourcing) approach can provide IT with a solution that involves less training and internal maneuvering. It’s especially attractive when compared to longer-term augmentation arrangements. A managed service offers multiple benefits including:

• The outsourcing supplier assumes control over their part of a project and offers service-delivery commitments that aren’t typically found with augmentation providers. This structure introduces accountability, so IT managers can better tie costs to quantifiable results.
• Knowledge sharing. During the course of a managed services engagement, the knowledge gained by the outsourcing will be documented and transferred to the hiring firm. With long-term augmentation, it is sometimes difficult to retrieve this knowledge from the augmented staff who create a siloed environment.
• Defined outcomes. A managed service is fundamentally about providing a client with a defined outcome. Perhaps IT needs help with BI implementation. They can task a managed services firm with completing the project in a set amount of time at a defined price which is tied to the completion of the outcome. If the project is more complex or easier than expected, then resources are scaled up or down.

With managed services, the risks involved in meeting project goals and timelines are held by the outsourcer, so they have incentives to complete projects to satisfaction and on deadline. Companies should be wary of instituting “augmentation by default” and review the benefits of managed services, especially for longer-term engagements.

The risks associated with a managed service include reliability and flexibility concerns. However, working with a trusted and experienced partner such as TechBlocks can help to eliminate these concerns. The main point here is to do your homework before choosing a provider!

Looking for an IT partner to help navigate the augmentation vs. managed services landscape? TechBlocks develops sound outsourcing strategies that are tailored to unique business needs. Visit www.tblocks.com to learn more.