Staff Augmentation vs. Managed Services: What should you go with?

While many associate the current surge in demand for outsourcing services with the COVID-19 pandemic, the truth is that the industry has grown phenomenally over the past two decades. IT stands out as one of the sectors to benefit the most from this expansion, with an impressive annual revenue of $512.50 billion and a consistent annual growth rate of 10.99% .

In this article DevEngine explores two IT outsourcing models that are prevalent on the market today: staff augmentation and managed services. We’ll explore those differences, weigh their pros and cons, and discuss how to determine the best approach when setting up LATAM’s distributed software and data technology teams.

Let’s start by laying out the basics…

Defining Managed IT Services

Managed IT represents an outsourcing strategy in which companies outsource all IT services, functions, systems, or services to outside experts or third-party companies. Managed Service Providers (MSPs) typically operate autonomously and are free to set project timelines, scopes, deliverables, and specification. In fact, they do so in their regular conversations with the client. This approach is particularly suitable for long-term IT tasks such as network management, backup management, and cloud infrastructure maintenance. It’s also attractive to executives looking to outsource time-consuming, repetitive tasks to external teams.

Benefits of Managed IT Services:

Get experienced IT professionals who can get to work immediately.

Eliminates the need for traditional hiring, training and onboarding processes as MSPs work independently, saving time and resources.

Use a dedicated external IT team, so you can focus on core business functions.

MSPs assume full responsibility for recruitment such as reassignment, retraining, or redeployment in the event of a team member’s absence.

Get access to top-of-the-line technologies without paying for acquisition and maintenance.

Benefit from dedicated project management with minimal customer involvement.

Disadvantages of Managed IT Services:

Potential security risks arise because some businesses may require MSPs to provide access to sensitive files and data.

Experience reduced control over services and processes since most MSPs operate semi-autonomously.

Costs can be substantial, especially when service providers offer standardized plans where customers cannot change specific equipment or services.

Face communication and collaboration challenges, especially when outsourcing to countries with different time zones.

Risk potential conflicts of intellectual property rights (e.g., inventions and discoveries) in the project.

What Is Staff Augmentation?

Staff Augmentation as its name suggests, is adding external experts or a whole team to your existing internal IT staff. This distributed team does not work independently nor does it replace your current software and data engineers; rather, they are one with them. They bring industry expertise and leverage your internal employees’ understanding of your business processes and processes. This model favors both short-term connections and full-time activities.

Broadly speaking, there are three types of staff augmentation:

Increased commercial staffing: Hire external IT staff to complete tasks that don’t require specific knowledge or skills, often freeing up your internal team for other important functions.

Skill-based staff augmentation: Outsourcing technology to assist your in-house team with tasks requiring redundant skills, often to fill skills gaps or free up existing staff for other services.

Increasing the number of highly skilled workers: IT professionals with advanced skills that your internal staff may be short of.

Staff augmentation pros:

Ease of scalability — You can hire outside experts only as needed.

Better control of your projects and processes because the enhancement team will be under the supervision of your internal management.

Faster onboarding because you already have an in-house team with a deep understanding of your business – an in-house team can quickly train outsourcing employees.

Cost-Effectiveness — You don’t have to pay for a tool or service you don’t need.

Enabling their regular IT staff to work in front of more knowledgeable and highly skilled experts.

Less management issues as you can manage the project directly or assign one of your internal IT staff to do so.

Increasing the productivity of your software and other data engineers by hands-on helping prevent burnout.

Staff augmentation cons:

May not be ideal for long-term projects longer than 12-18 months.

You need well-established internal protocols for seamless integration of the enhancement team.

Sustainability concerns due to the model’s reliance on third-party talent.

Staff Augmentation vs. Managed Services: Which One Should You Choose?

Are you confused about adding staff or going the managed services route? Don’t worry — here are a few resources to help you make the right choice.

Sensitive data?

How critical are the data or intellectual resources needed for the business? Your data is your most valuable asset; You absolutely have to keep it out of the wrong hands. So if you’re going for talent for a job that requires access to company secrets or highly sensitive databases, employees are a great option In this model, you can personally monitor how an external team accesses your data and they are used or you will hire internally trusted professionals to do it because.

Duration of the project.

Generally, a larger workforce is suitable for temporary jobs. The model can help you save time and money in hiring temporary software and data engineers for a specific intervention. However, outsourcing long-term projects that take years to complete can be more expensive than managing projects.

Imagine this…

Imagine a three-month software development project. In that case, growing your staff with a specialist would cost about $8,442 per month. While this may be a little expensive, it is worth it because you will be working with highly skilled specialists with a wealth of experience. In any case, you’ll only have them around for as long as the job does.

By comparison, when dealing with long-term projects, approximately $119,230 per engineer is required per year. By any standards, this can be a major drain on your budget and may not be the wisest investment decision – especially considering that several MSPs can guarantee access to the same quality experts at more reasonable service fees.

Level of Control:

Are you open to delegating project management to a third party? If your answer is “Yes”, managed IT services may be an option for you. However, for work requiring close monitoring and keeping control over all KPI’s, deliverables, and progress – staff augmentation is the preferable choice.

Expertise of Existing In-House Team:

Keep in mind that staff augmentation aims to address skill gaps within an organization, it is most effective when the internal team has some foundational knowledge of the project at hand. For instance, if your data experts lack experience in designing data storage systems, outsourcing an entire ETL team may be more practical than hiring a single ETL developer to augment the existing staff.

Our take: Staff Augmentation versus Managed Services?

While both staff augmentation and MSP services have their own advantages and disadvantages, we strongly vote for staff augmentation. This is based on its flexibility, project management control and higher standards. With a larger workforce, you have more control and flexibility. Additionally, your in-house team acts as a reliable back-up if an issue arises with outsourced experts, enabling you to find alternative solutions.  In today’s fast-paced business environment, where every minute of downtime potentially costing up to $5,600, outsourcing your entire network to an unreliable Managed Service Provider (MSP) risks significant disruption to your operation. 

Interesting Related Article: “Enhance Your Cybersecurity with Managed Services