While most people attribute the current rise in the demand for outsourcing services to the COVID-19 pandemic, the truth is that this industry has been recording tremendous growth for the last couple of decades. Among the sectors that have significantly benefited from this boom is IT, raking in a whopping $512.50 billion yearly, with a consistent annual growth rate of 10.99%.
Today, we’ll delve into two of the most popular IT outsourcing models — staff augmentation and managed services. We’ll compare and contrast them, outline their pros and cons, and discuss how to decide the better option when building distributed LATAM software and data engineering teams.
To start us off, let’s look at the basics…
Defining Managed IT Services
Managed IT is an outsourcing model in which businesses entrust entire IT projects, functions, systems, or tasks to external specialists or third-party companies. The managed service providers (MSPs) usually operate independently and have the autonomy to decide project timelines, scopes, deliverables, and specifications — of course, with regular consultation with the client. This approach is typically ideal for long-term IT projects like network monitoring, setting up and managing backups, and cloud infrastructure maintenance. It can also be perfect for executives who want to transfer the burden of handling time-intensive, recurrent tasks to external teams.
Managed IT services pros
- Access to high-quality IT experts who can start working right away
- No need for conventional recruitment, training, and onboarding because MSPs operate independently — saving you time and effort
- Access to an external dedicated IT team, allowing you to focus on other core business operations
- The MSP is fully responsible for other hiring tasks like rehiring, retraining, or reassignment in case some team members are unavailable
- Enabling access to top-tier tech stack without incurring acquisition and maintenance costs
- Dedicated project management with little input
Managed IT services cons
- Security risks because some projects might require granting MSPs access to your sensitive files and data
- Less control over your projects and processes as most MSPs operate semi-autonomously
- Potentially higher costs, especially for service providers with fixed plans where clients can’t add or drop specific tools or services
- Communication and collaboration difficulties, particularly when offshoring to countries with different time zones
- Potential conflict on who owns the intellectual property rights (such as discoveries and inventions) during the project
What Is Staff Augmentation?
As the name suggests, staff augmentation involves supplementing your existing in-house IT staff with external specialists or teams. The distributed team doesn’t operate autonomously or replace your current software and data engineers. Instead, they work hand in hand with them, bringing on board their industry expertise and leveraging the internal employees’ understanding of your business processes and projects. This model is perfect for both short-term engagements and full-time hires.
Generally, there are three types of staff augmentation:
- Commodity staff augmentation — Hiring external IT staff to complete tasks that don’t need specific specializations or skills (often to free your in-house team to focus on other crucial roles)
- Skill-based staff augmentation — Outsourcing tech talent to help your in-house team handle tasks that require less critical skill levels (typically to fill skill gaps or free your existing employees for other tasks)
- Highly-skilled staff augmentation — Outsourcing IT specialists with advanced skills that your internal staff may not have
Staff augmentation pros
- Ease of scalability — you can hire external specialists on a need-only basis.
- Better control over your projects and processes as the augmenting team will be under the watch of your in-house employees
- Faster onboarding because you already have an internal team with an in-depth understanding of your operations – the internal team can easily train the outsourced staff.
- Cost-effectiveness — you’re not bound to pay for a tool or service you don’t need
- Enabling capacity-building for your regular IT staff by exposing them to more knowledgeable and vastly experienced specialists
- Fewer management issues as you can directly oversee the project or assign one of your in-house IT staff to do so
- Enhancing your other software and data engineers’ productivity by lending a helping hand to prevent burnouts
Staff augmentation cons
- Sometimes not ideal for long-term projects extending beyond 12 months
- You require well-established internal protocols for the augmenting team to blend in seamlessly
- Sustainability concerns because of the model’s dependence on third-party talent
Staff Augmentation vs. Managed Services: Which One Should You Choose?
Are you confused between going the staff augmentation or managed services way? Don’t fret — here are a few factors to help you make the right choice:
Data sensitivity
How sensitive is the data or intellectual property required for the project? Your data is your most valuable asset; you should safeguard it from landing in the wrong hands at all costs. Therefore, if you’re outsourcing talent for a project that requires access to company secrets or highly sensitive databases, staff augmentation is a better option. With this model, you can personally monitor how the external team accesses and uses your data or assign a trusted in-house employee to do so.
Project duration
Generally, staff augmentation is suitable for short-term projects. The model can help you save time and money when hiring temporary software and data engineers for project-specific engagements. However, when outsourcing for long-term projects that require years to complete, it might be way costlier than managed services.
Picture this…
Suppose you have a three-month software development project. In that case, augmenting your staff with a specialized developer would cost you about $8,442 per month. While this might be relatively costly, it’s worth it because you’ll be working with highly skilled and vastly experienced specialists. In any case, you’ll only have them around for the project’s duration.
Comparatively, when dealing with long-term projects, you require a budget of about $119,230 per year per developer. By any standard, this can significantly dent your budget and might not be the most prudent financial decision — especially considering that several MSPs can guarantee access to the same quality experts at more reasonable service fees.
Desired level of control
Are you willing to relinquish the management of the project to a third party? If yes, managed IT can be a viable option. However, when handling sensitive projects that you’d love to monitor closely and retain more control over timelines, deliverables, and progress, go with staff augmentation.
Existing in-house team’s expertise
While the fundamental concept of staff augmentation is filling skill gaps within an organization, the model often works best when the in-house team has at least some foundational knowledge of the upcoming project. For example, suppose your data experts have zero experience in designing data storage systems. In that case, outsourcing an entire ETL team might make more sense than hiring one ETL developer to augment the existing staff.
Our Verdict: Staff Augmentation or Managed Services?
While staff augmentation and managed IT services have their fair share of benefits and drawbacks, we’d recommend augmentation any day. And reasonably so — the model offers more flexibility and control over your projects. It also comes with a greater level of stability. If anything were to go wrong with the outsourced specialists, you’ll have your in-house team to fall back on as you seek other alternatives. For example, in today’s fast-paced business world, where downtime costs up to $5,600 per minute, you cannot afford to have unplanned interruptions because you entrusted your entire network to an unreliable MSP.
Do you have any questions? We are only One Call Away. Reach out, and let’s discuss how to augment your staff with LATAM software and data engineers the DevEngine way!