Managed services vs staff augmentation is a two-faced dilemma that organizations often face from time to time.
While managed services are a great way of getting things done through outsourced talent, staff augmentation also seems like a nice choice to hire people on a contractual basis to do the same work without any “hassle”.
Kick it up by a few notches, we’re looking at some interesting ‘Fortune Business Insights’ on managed services vs staff augmentation, stating that MS market size is projected to grow to a net worth of $557.10 billion by the year 2028.
Meanwhile, staff augmentation is projected to reach similar heights in an exclusive report by marketing experts at ‘Yahoo News’.
Also, Read: IT Staff Augmentation Service Market Size, Share 2023 (New Research) – Global Industry Statistics, Key Findings, Growth Strategy, New Technologies, Demands, Revenue, Facts & Figures, Investment Opportunities and Forecast 2028 Research
But for new businesses that haven’t had an experience with the dynamics of resource and staff augmentation, things can get a little tricky.
In this post, we’ll look at different aspects of the difference between staff augmentation and managed services, their pros and cons, and whether either one of these strategies is worth pursuing.
Managed Services Vs Staff Augmentation – What Are They?
Managed Services refers to the outsourcing of specific business functions or processes to a third-party service provider.
In this model, the service provider takes full responsibility for managing and delivering the service as per the agreed-upon terms and service level agreements (SLAs). The provider is accountable for the overall performance, availability, and maintenance of the service.
Key Features of Managed Services
- Long-term engagement: Managed Services typically involve an ongoing contractual relationship between the organization and the service provider.
- Service ownership: The service provider assumes ownership of the service and takes care of its management, maintenance, and improvement.
- Fixed fee or subscription-based pricing: Managed Services are often charged on a fixed fee or recurring subscription basis.
- Expertise and specialization: Managed Service providers are usually specialized in specific areas, such as IT infrastructure, cybersecurity, cloud management, or application support.
Examples of Managed Services include IT infrastructure management, network monitoring, and support, cloud hosting and management, managed security services, and application management.
Moving on, staff augmentation strives to achieve the same targets, but with a different approach.
Staff Augmentation involves hiring external personnel or resources temporarily to supplement an organization’s existing workforce.
It is a flexible staffing model that allows organizations to quickly scale their teams, fill skill gaps, or meet project demands without committing to permanent hires. The augmented staff members work under the organization’s direction and supervision.
Staff Augmentation Key Features:
- Short-term engagement: Staff Augmentation is typically project-based or for a defined duration, rather than an ongoing relationship.
- Resource augmentation: The focus is on acquiring additional human resources with specific skills or expertise to enhance the existing team’s capabilities.
- Hourly or project-based billing: Staff Augmentation is usually charged based on the number of hours worked or a fixed project fee.
- Integration with the existing team: The augmented staff members work closely with the organization’s internal team and follow their processes and guidelines.
Examples of Staff Augmentation include hiring developers for a software development project, bringing in specialized consultants for a specific initiative, or engaging contractors for temporary staffing needs.
The choice between Managed Services vs Staff Augmentation depends on the organization’s specific requirements, long-term objectives, and the nature of the engagement needed. Managed Services offer comprehensive, outsourced management of specific functions, while Staff Augmentation provides additional personnel for a limited period to supplement existing teams.
Difference Between Staff Augmentation and Managed Services
The difference between staff augmentation and managed services sporadically spreads in different forms. Both models have their pros and cons, giving complete liberty to project managers and organizational heads to adopt either one of the approaches.
The safe way is to assess your company’s current situation, cash flow constraints, and ongoing project requirements to see which approach will work better. To that effect, smart managers often improvise and make minor adjustments to resource and staff augmentation for better results.
Here are some of the key highlights in terms of the difference between staff augmentation and managed services:
- Engagement Duration:
Staff Augmentation: It is typically a short-term engagement, project-based, or for a defined duration. The augmented staff members join the organization’s existing team for a specific period and work under their direction.
Managed Services: It is usually a long-term engagement with an ongoing contractual relationship. The service provider takes full responsibility for managing and delivering the service over an extended period.
- Ownership and Responsibility:
Staff Augmentation: The organization retains ownership and control over the project or function. The augmented staff members work under the organization’s supervision and follow their processes and guidelines.
Managed Services: The service provider assumes ownership and responsibility for managing and delivering the service. They take care of the service’s management, maintenance, and improvement, and are accountable for its performance.
- Scalability and Flexibility:
Staff Augmentation: It offers flexibility in scaling the team as per project demands. Organizations can quickly add or remove augmented staff members based on their specific needs.
Managed Services: It provides scalability by leveraging the service provider’s resources and expertise. The provider is responsible for ensuring adequate resources to meet the organization’s requirements.
- Skill Expertise:
Staff Augmentation: It focuses on acquiring specific skills or expertise to enhance the organization’s existing team. Augmented staff members are hired based on their specialized knowledge in a particular domain.
Managed Services: The service provider brings specialized expertise in a specific area. They are responsible for providing the necessary skills and knowledge required to manage and deliver the service.
- Cost Structure:
Staff Augmentation: The cost structure is typically based on the number of hours worked by the augmented staff members or a fixed project fee. Organizations have more control over costs and can adjust them based on resource requirements.
Managed Services: It often follows a fixed fee or subscription-based pricing model. The cost is generally more predictable, and the organization pays for the comprehensive management and delivery of the service.
- Focus and Management:
Staff Augmentation: The organization maintains direct control and manages the augmented staff members’ work, including task assignment, supervision, and performance evaluation.
Managed Services: The service provider assumes the responsibility for managing and delivering the service. They take care of the day-to-day operations, monitoring, maintenance, and improvement of the service.
Resource and Staff Augmentation Use Cases For New Project Heads
These are general use cases for resource and staff augmentation. The reason we used this approach is to give you a hypothesis of different possible scenarios about managed services vs staff augmentation.
They’re all very much applicable to real-life scenarios – hence giving way to suggested strategies and innovation that you might need to get the desired results.
|Resource Augmentation||Staff Augmentation|
|Use Case: When a new project head requires additional resources and tools to effectively manage and execute a project.||Use Case: When a new project head needs specialized expertise or skills to complement their existing team and successfully deliver a project.|
|Objective: Provide project heads with the necessary resources, such as equipment, software, or facilities, to ensure project success.||Objective: Enhance the capabilities of the project head by providing additional team members with specific skills or knowledge.|
|Engagement Duration: Typically short-term or project-based, aligned with the project timeline and resource requirements.||Engagement Duration: This can be short-term or long-term, depending on the project’s duration and complexity.|
|Ownership and Control: The organization retains ownership and control over the project, while the augmented resources supplement the project head’s team.||Ownership and Control: The organization retains ownership and control over the project, while the augmented staff members work under the project head’s direction and supervision.|
|Flexibility and Scalability: Provides flexibility to quickly scale up or down the resources as per project needs, accommodating fluctuations in workload.||Flexibility and Scalability: Offers flexibility to augment the project head’s team with specialized skills or expertise based on project demands, allowing for quick adjustments to the team size.|
|Cost Structure: Typically based on the additional resources or tools required, which can include equipment costs, software licenses, or facilities expenses.||Cost Structure: Typically based on the number of hours worked by the augmented staff members or a fixed project fee.|
|Focus and Management: The project head manages and oversees the project execution while leveraging augmented resources and tools to support their objectives.||Focus and Management: The project head manages and directs the augmented staff members’ work, assigning tasks, providing guidance, and evaluating their performance.|
Which Approach Is Ultimately Better?
In the long run, it eventually comes down to choosing between managed services or staff augmentation.
If you want to be on the safe side, adopt both approaches and then adapt accordingly. There might be constraints, such as the recent COVID-19 incident that prevailed for a few years.
Due to worldwide healthcare policies, businesses were forced to foreclose or hire people remotely. The in-house or on-site work trend almost diminished. From a different angle, isn’t remote hiring part of staff augmentation?
Of course, it is.
You hire people remotely through different channels and get them working on a contract basis. The same approach can be applied to managed services where work is outsourced to remote employees.
Before the COVID-19 lockdown, the whole idea of remote hiring seemed like something that wouldn’t work. Businesses insisted on having people on site, but the pandemic caused a shift in this trend.
That’s why, try both models and see whether managed services or staff augmentation works better for you. In the long run, alternate between these strategies as per circumstantial constraints at that point in time. This is a safe, tried, and tested approach with minimum requirements to risk mitigation in the long run.
What are the limitations of staff augmentation?
While staff augmentation offers various benefits, it also has certain limitations to consider:
- Limited Control and Alignment: With staff augmentation, the augmented staff members are not direct employees of the organization.
This can result in limited control over their work, priorities, and alignment with the organization’s culture, values, and long-term goals. Communication and coordination challenges may arise when integrating augmented staff with the existing team.
- Onboarding and Integration: Integrating augmented staff members into existing teams may require time and effort for onboarding, training, and ensuring they understand the organization’s processes, systems, and workflows.
- Dependency on External Resources: Staff augmentation relies on external resources, such as contractors or consultants.
Organizations may face challenges if the augmented staff members become unavailable or if the service provider cannot provide suitable replacements promptly. Dependence on external resources can introduce risks related to resource availability, reliability, and commitment.
- Limited Long-Term Planning: Staff augmentation is often a short-term solution to meet immediate resource needs.
While it provides flexibility, it may not be suitable for long-term strategic planning. The transient nature of augmented staff members can hinder long-term project continuity, team cohesion, and knowledge retention within the organization.
- Cultural and Team Dynamics: Augmented staff members may have different work styles, communication preferences, or cultural backgrounds compared to the existing team.
Integrating diverse individuals into a cohesive team environment can be a challenge and may require additional efforts for fostering collaboration, trust, and effective teamwork.
- Intellectual Property and Confidentiality: Organizations need to consider intellectual property protection and confidentiality when sharing sensitive information with augmented staff members.
Ensuring proper safeguards, non-disclosure agreements, and data security measures become crucial to safeguarding proprietary information.
- Cost Considerations: While staff augmentation can provide flexibility in managing costs, it may not always be the most cost-effective option.
Hourly rates or project-based fees for augmented staff members can be higher compared to permanent employees. Additionally, costs may vary depending on the specific expertise required, market conditions, and the reputation of the service provider.
It’s important to evaluate these limitations and potential risks against the specific project needs, resource requirements, and organizational context before opting for staff augmentation. Organizations should carefully assess the trade-offs and consider alternative solutions if the limitations outweigh the benefits for their particular situation.