Staff augmentation is a strategic solution that enables businesses to flexibly expand their workforce with highly skilled professionals, seamlessly integrating them into their existing teams to meet project demands and achieve their objectives.
Heading into 2024, we can reasonably conclude that after the explosive rise in popularity of outsourced services, the future seems to hold no shortage of talent for businesses to draw on. The global talent pool has been cracked open, and remote work has gone from a last resort to an ideal full-time work model that companies are trying to shift towards. Technological progress has led to a global workforce that is not only viable but ideal for business today.
In all this hullabaloo about outsourcing, however, we at EA would like to discuss a nuance that does not get discussed nearly as much as it should be: staff augmentation vs managed services.
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What is Staff Augmentation?
Staff augmentation is a model of outsourcing that is entirely dedicated to filling talent gaps and building connections between businesses and remote professionals.
When you retain the services of a staff augmentation services firm, you are paying for the firm to handle all the HR and other administrative hassle, skipping the cumbersome 30-day hiring cycle, and having the firm connect you promptly to a skilled remote professional that suits your requirements and can then be onboarded directly into your existing team.
Staff augmentation has been making quite some buzz in accounting and IT circles, thanks to how specialized these professions can get. A business may need an audit specialist, a tax accountant the next month, or a fractional CFO for a new project after that. Similarly, an IT department can swap in the needed talent as a project moves along various phases and requires diverse skill sets.
What are Managed Services?
Managed services are what many businessmen think of when they talk about outsourcing. Essentially, the managed services model is where a business hires a third-party service-providing firm to take up a certain business responsibility or even an entire business function.
Customer services are an excellent example of a commonly outsourced business function. Because it is simply too expensive to set up your own call center to handle your customer support in the US, it makes sense to hand over that function to a firm that already has the established infrastructure. Plus, foreign professionals come at much lower costs, so a customer service call center goes from being unachievable to reality with the help of managed services.
Staff Augmentation vs Managed Services
Compared to staff augmentation, which is relatively new and more niche, managed services have been around for a good while now and are the primary model of outsourcing that most businesses are familiar with.
Generally speaking, the reason to retain either of these services is the same: cost savings. Similarly, both of these models are designed to provide you with additional help for your business requirements. The key difference between the two, as you may have surmised, is the level of involvement that the firm has in your business operations.
To that end, our experts at EA have pitted the two against each other to see which model is the better choice for you. The purpose of this exercise is not to declare an ultimate victor but rather to provide entrepreneurs with all the necessary information to make an informed decision regarding outsourcing.
But enough disclaimers, let’s start comparing!
Flexibility is one of the major reasons people leverage outsourcing, and in the context of staff augmentation vs. managed services, we have to give the point to staff augmentation.
For one, while managed services do give you some wiggle room for flexibility, the fact is that they typically are not scaling-friendly. So, for example, if you outsource your accounting division to a managed services firm, they will handle all of your business’ accounting but will most likely not allow for flexibility regarding scaling. Whether the business is experiencing growth or strategically downsizing, the managed services firm will continue to operate on the agreed-upon contract rather than charge you less for a lighter workload.
With staff augmentation, you have far more freedom of movement. For one, you are hiring professionals directly to your team, and while the staff augmentation services provider is acting as the administrative force and handling the logistics and management of it all, ultimately, they are a middle-man that you hired a contractor through.
This gives you much more liberty when scaling, with layoffs and strategic team shuffling being smoother. Plus, if you need to swap your existing professional out for a specialist of some kind, say an IT general technician for a Python coding expert, then staff augmentation will be a much smoother, faster, and more efficient avenue to achieving that end.
Transparency and Control
Control and transparency are definitely two of the biggest concerns for entrepreneurs considering outsourcing. There is a general air of distrust around handing over company data and secrets to a third party, which makes managed services firms a less appetizing prospect compared to staff augmentation.
Staff augmentation, thus, once more scores a point for offering a far higher degree of control and transparency to entrepreneurs. After all, even if it is a remote professional, they are hired directly onto the business team and can be leveraged in any way and strictly monitored through technology. No organizational smokescreens present to obfuscate the truth and scam you out of your money.
This is especially relevant because IT and accounting are at the top of the list for outsourced services. These business functions are immensely sensitive and are at major risk of data leaks and other fatal issues. This is why hiring a professional from an accounting and bookkeeping services provider, for example, offers much stronger professional risk mitigation than a managed services firm to handle all your accounting.
Security is the other major concern for businesses when it comes to outsourcing. While staff augmentation does offer far more control and process transparency, allowing you to be able to scrutinize and make sure you aren’t being hoodwinked, security is where we have to give the point to managed services.
In the grand contest of staff augmentation vs managed services, the latter takes the point in this regard. This is primarily due to the robust infrastructure available to managed services firms. These firms have extremely secure, encrypted data banks and data management measures in place, something that staff augmentation cannot offer to the same degree.
A remote professional hired through staff augmentation services will have the technology and resources to get the job done, sure, but they will be using whatever data security measures the business itself has available. These professionals are hired onto your existing team, so their resources are the same as yours, which means you will have to invest in high-level security infrastructure to maintain your data security, driving costs and making staff augmentation services seem much less pretty.
It’s time to address the elephant in the room: in the contest of staff augmentation vs managed services, which is more cost-efficient.
This is a complicated question, primarily because there are too many variables at play for there to be a generalized verdict on the matter. Cost efficiency must be assessed on a case-by-case basis, and so we declare this round a draw between the two.
While there is no right answer to this question, we can still offer some advice on cases where each outsourcing model excels. In the case of staff augmentation, it is best suited for project-based short-term cases. Say you need a new website made and need an extra programmer; staff augmentation is perfect to get a temporary helping hand for a contractual period of time.
Staff augmentation saves you much money you would otherwise be forced to spend to onboard an additional employee, making it optimal for short-term, project-based endeavors. This isn’t to say that this applies universally to every case. Bookkeeping is an excellent example of a job role that can be handed over to an augmented staff member long-term and can prove a wise choice given all the other points of comparison we listed before.
In the case of managed services firms, they typically work on retainer and will charge you annually or bi-annually, which makes them better suited to long-term business collaborations. Customer service is an excellent use case for managed services, as it is a department that can make full use of a managed services firm’s infrastructure and is a function that businesses would need long-term without much in the way of change needed.
Thus, managed services are highly optimal and save you a bunch of money when you are outsourcing low-maintenance, employee-dense business functions.
Managed Services vs Staff Augmentation: The Verdict
There are innumerable little intricacies and nuances to this discussion that we, unfortunately, do not have the time to delve into, otherwise, we would be here all day. So, cutting the conversation here, let’s deliver the verdict.
Given the points of comparison we chose between the two, based on what our staff augmentation experts at Expertise Accelerated believe to be the topmost considerations for clients, we have to give the upper hand to staff augmentation services. This is not to say that managed services are the wrong way to go. Far from it, managed services are integral to the global business landscape and are absolutely the right choice for bigger corporations that need full teams of professionals and certain business functions like customer support that demand infrastructure and high employee counts.
Staff augmentation excels when it comes to small businesses. Typically, these businesses function just fine with 10-15 employees, if not less, and they require, at best, 4-5 additional hands when a big project is happening. This makes staff augmentation perfect for such businesses, allowing them to operate efficiently on a tight budget and giving access to skill sets typically unaffordable, if not for the estimated savings of up to 60%, as demonstrated by our own bookkeeping and accounting services at EA.
Whichever model you choose, we hope that this short blog was helpful for making an informed business decision and doing right by your business and shareholders. Good Luck!