We were lucky enough to shoot a few interviews before the Covid-19 pandemic. The first interview was dedicated to hiring a remote team in Ukraine. Our second guest, Andy Morrey, a Managing Director at Magma Trading, told us about the…
IT Staff Augmentation: All You Need to Know in 2020
The 21st century is an era of technology and rapid evolution. Thus, businesses that want to stay competitive need to comply with the high-tech needs of their clients. The competitive race requires technological innovation, which in great part is determined by an online presence. Companies struggle to provide relevant web and mobile resources and applications to customize user experiences and keep customer satisfaction high. Thus, the trend towards catering for the client’s needs online is here to stay, with technologies getting ever more sophisticated and advanced.
But the bitter truth of online competitiveness is that to succeed, you need expert development staff – the more talented, the better. New technologies and programming languages enter the market every month, so only firms flexible enough to detect these trends and embrace them are doomed to success. So, how can you always have the right size and composition of your development team to address the challenges of the present day if hiring new people is a costly, long, and cumbersome process?
A solution was found, and its name is IT staff augmentation. Here we cover the basics of staff augmentation services, explain its distinctions from other forms of outsourcing, and guide you through every step of introducing staff augmentation into your company to foster its tech potential and optimize software development costs.
Introduction to Staff Augmentation
What does staff augmentation mean? This question worries many forward-looking managers and business owners as it is the future of flexible, cost-efficient staff recruitment. When applied properly, this outsourcing model (also referred to as resource augmentation) promises real gains in terms of team productivity, quicker software development project turnaround, and cost savings at all stages of business functioning.
In a nutshell, staff augmentation is an approach to outsourcing presupposing the recruitment of staff for a concrete project in line with the company’s current objectives and staffing needs.
For instance, you are planning to develop a mobile app for your online store, and you need six developers for the task, while your in-house team contains only three. Finding three more talented programmers with the needed expertise and tech stack may take 1-2 additional months, delaying the launch of your project and depriving you of some projected revenue.
By involving staffing augmentation instead, you get three more developers to your team within 1-3 weeks, achieving quicker software product completion and faster market launch. Besides, after the app hits the market, you don’t need to fire the programmers who worked on it for such a short period of time, thus avoiding the documentation and legal hassle of full-time, official employment.
Why Is Staff Augmentation So Popular Today?
As the staff augmentation definition we just discussed suggests, this approach to hiring offers numerous benefits for businesses, mainly due to the speed of hiring and the employer’s flexibility of adding and removing staff from the augmented team on demand. Such flexibility is never possible in the in-house teams; finding and hiring a new employee is lengthy, requiring much paperwork and official registration. Firing of staff is also burdensome, reducing the value of in-house employment, especially when the new staff members are needed for less than six months.
Here are some more considerations making augmented staff such an attractive option for companies of all sizes and scales:
- In-house hiring is expensive
- Finding new staff takes much time and effort
- Staff turnover is rising today
- It’s hard to focus on talent with cumbersome hiring practices
- Tradeoffs between quality and budgets get tough
Types of Staff Augmentation
After clarifying what staff augmentation is, you might be interested in the variety of its forms. Indeed, it comes in many types, and understanding which one you need can save you much time and money on the staff recruitment.
- Traditional staffing
- Master vendor
- Specialized staffing and consulting
- Gig platforms with access to independent contractors
- On-demand staff augmentation platforms curating the employment and work of staff
- Independent contracting
As you can see, the meaning of staff augmentation is diverse and context-dependent. Only the highly skilled type of staff augmentation is relevant to the IT niche. Thus, to maximize the value of this approach for your company, make sure to analyze your needs, consider the degree of control you’re ready to give away and calculate the budget for this task.
How Does Staff Augmentation Differ from Other Outsourcing Models?
Besides the very staff augmentation, there are many other outsourcing models: managed services, independent contractors (freelancers), dedicated team, time & material, offshore development center, etc. Some of them are already described in detail in our previous article. Now we will focus on comparing them to staff augmentation. We selected 10 points that can be similar or different for these forms of outsourcing. There are:
- recruiting (is the developer available right away? who is responsible for hiring a developer or development team?)
- office facilities (who pays for office rental?)
- payroll (who pays salaries and does accounting?)
- management (client-side or vendor-side?)
- engagement (how much time the hired developer can dedicate to your tasks?)
- overhead costs (who pays the bills, buys equipment, furniture, licenses, etc.?)
- employee perks (who provides benefits – health insurance, gym, extra classes & workshops, etc.?)
- salary review (who raises salary and pays bonuses?)
- rate review (who sets the price for the service?)
- communication (will a client or a mediator communicate with the developer/development team?).
Difference between staff augmentation and managed services
The most evident staff augmentation vs managed services distinction is the degree of control the client gives away to the vendor. While staff augmentation presupposes only the provision of staff needed for the project, and the rest remains under the client’s control, managed services work as a one-in-all solution. Providers of managed services assume external control of the client’s non-core systems, managing all aspects of their functioning.
So, managed services presuppose a greater degree of delegation, which may indeed be a good solution for a company wishing to optimize its resource allocation and focus the in-house team only on core, strategic business priorities.
In addition, managed service providers have developers/teams “on a bench” which means that you don’t need to wait while they hire someone. Thus, you can start your project immediately after signing a contract.
Staff augmentation vs independent contractor
If you hire a freelancer, you will bear responsibility for all the points listed above – payroll, management, communication, etc. – that are covered by the vendor in case of staff augmentation.
On the other hand, hiring an independent contractor means that you do not pay a commission to the vendor and employ the contractor directly. Thus, the fee you pay to the vendor frees you from extra work.
Also, keep in mind that certain limitations apply to the position that an independent contractor can occupy in a company.
Staff augmentation vs dedicated team
On the surface, these two outsourcing models may seem pretty similar, but in fact, the vendor bears more responsibilities when a client hires a dedicated team.
When augmenting your staff, you manage your remote developer directly while a dedicated team works under the vendor’s guidance. Staff augmentation presupposes full-time engagement and a dedicated team can work with a few clients during a day.
It’s a client who reviews salaries in the staff augmentation model. Salaries of dedicated team members are reviewed by a vendor.
Staff augmentation vs time and material
The time and material (T&M) basis of contractual work presupposes the client’s payment for the time spent by a single developer or a team. Staff augmentation works differently as it involves temporary employment of the staff by staff augmentation companies, handling all the documentation, taxation, and administration costs of employment.
As for payroll, if a client wants, he/she can take this responsibility. In general, perks and salary reviews are on clients, however, sometimes it can be a vendor’s job too. You can agree on these points and indicate them in your contract.
Staff augmentation vs offshore development center (ODC)
Imagine the difference between renting an apartment and building your own house. That’s how much IT staff augmentation is different from ODC.
The offshore development center is your representative office set up by a vendor – it recruits staff, finds an office and other service providers (internet connection, furniture, suppliance, etc.) – all these services are included in the fee. When everything is ready, you manage your team and office on your own as it becomes a full-fledged part of your company. So, the vendor prepares you for opening, the rest is on you.
In staff augmentation, when your project is finished, the developer stops working on you and the vendor provides him/her with another one. In fact, nobody fires the developer, he/she remains the vendor’s employee.
Bonus: Staff augmentation vs body shopping
Is staff aug a better option than body shopping? It depends on how you define the latter, as many critics of outsourcing use the term ‘body leasing’ or ‘body shopping’ as a disrespectful synonym for outsourcing.
Why? The term comes from the times when vendors were selling not a service but a developer, “his/her hands” to do the job. That’s how the very term appeared. There was no point in getting a vendor as a mediator between client and contractor and paying it some extra fee.
Currently, vendors offer outsourcing as a service that comes with various bonuses, from project management to the whole development process (managed service), from custom recruiting to onboarding and retention.
Thus, body shopping is an outdated term that has nothing to do with modern outsourcing providers. Of course, if we are talking about respectful and honest ones.
A Guide to Choosing the Right Staff Augmentation Model
As soon as you decide to opt for the software development staff augmentation, it’s imperative to decide which model suits you the most.
- Think of the duration of your project (if it takes less than 6 months, staff augmentation is right for you, while for longer projects, it may be better to choose other models);
- Consider the sensitivity of data you will need to disclose (it’s always wise to sign a staff augmentation contract with NDA terms with the vendor and all programmers, but still, certain privacy risks remain);
- Calculate the costs of training your in-house team for working with augmented staff vs. hiring a dedicated team or outsourcing the whole project (sometimes staff augmentation doesn’t deliver its cost-saving promise if management and communication processes don’t work as they should).
A strategy for avoiding underwater stones of outsourcing is easy: include these considerations into your planning process, always insist on a staff augmentation agreement with an NDA clause, and calculate the costs carefully.
Pros and Cons of Staff Augmentation
Opting for a staff augmentation model is a wise decision in many cases.
Here are the benefits this hiring model promises to businesses:
Access to the global talent pool
Previously, employers used to be dependent on the local labor supply. Thus, they often had to reduce their benchmarks to hire the needed staff because the needed expert was absent in the local market. Today, with staff augmentation services available worldwide, employers no longer need to choose from a limited set of options. They can search around the globe, finding exactly the person they need for their project.
Flexibility of contractual hiring
Finding a proper employee and signing a contract with them is too expensive and time-consuming. Recruiters work on the employee search and selection, screen and interview candidates, negotiate the employment terms with them, and perform all the paperwork. Firing a person usually involves similar steps and presupposes certain payouts, which is often a burden on the employer. Staff augmentation flexibility helps avoid the hassle as all the legal arrangements and paperwork are done between the vendor and the employees.
Outsourcing of any kind helps reduce the costs of labor on many levels. First, you don’t need to pay extras (e.g., taxes, days off, maternity and sick leaves, vacations) to augmented staff. Second, you don’t incur any additional legal or recruitment costs. All these costs are borne by the vendor who charges a premium for the all-in-one service package.
Training cost savings
Besides the recruitment and accounting costs, you save a lot of money on training. The fundamental need of any company is to keep its software engineers abreast of the latest technologies and trends, which typically requires a costly training program. As soon as you decide to augment staff, it is the task of the vendor either to train staff or to recruit programmers with the latest training credentials.
The comprehensive administrative support package also deserves a separate mention. Companies recruiting the staff on their own have to take care of the staff’s daily administration routines, such as providing employees with equipment and software, managing their payrolls, accounting, and legal documentation, team building, and leisure activities. As soon as you augment staff, all these tasks are also delegated to your vendor, freeing more time for your core business tasks.
However, it is always reasonable to keep in mind that augmented services are still a form of outsourcing, so they contain some drawbacks of this approach to employment. Here are the cons to keep in mind:
Augmentation staffing is about outsourcing, meaning that your employees won’t work in your office most probably. Thus, you need to establish effective communication and management channels to keep your in-house and augmented staff well-tuned to each other in the process of project completion. Otherwise, the process may get cumbersome, error-prone, and ineffective for both parts of the development team.
Outsourcing any tasks requires a certain degree of trust. You have to forgo the total privacy of your corporate data protected by stringent NDA contracts and privacy rules in your office for the efficiency and flexibility of the development staff.
In-house training to deal with augmented staff
Task management should be well-organized, which requires some prior training for the in-house team. In case the task streams are chaotic, this may end in the task duplication, conflict of roles and responsibilities, and other avoidable productivity barriers.
Working with a remote workforce is a communication and management challenge for many in-house employees. Thus, it is imperative to establish effective communication channels so that the team works smoothly even in the distributed environment.
Augment Your Staff with Devox Software
As you might have seen from this discussion, business augmentation is a great option for companies of any scale, promising a great deal of flexibility and cost-efficiency. Devox Software has years of experience in the niche of IT staffing and outsourcing, so our recruiters are ready to provide expert advice and competent assistance in filling the staffing gaps in your company and guaranteeing smooth and productive staff augmentation process flows.
Contact our managers today to learn how we can help, request a staff augmentation contract sample to see how we work, and get one step closer to the dream development team.