The global outsourcing industry has seen massive growth in recent years. When the covid-19 pandemic disrupted organizational activities worldwide, companies shifted towards outsourcing. This model helped them ensure round-the-clock business continuity and meet their projected goals. As a result, enterprises started working with BPO agencies to fill their skills gap and take on projects that required specific higher expertise.
Outsourcing has two broad categories: Relationship-based outsourcing and location-based outsourcing. When it comes to relationship-based outsourcing, three business models are common namely staff augmentation, managed services, and project-based. Most entrepreneurs often remain confused about which model is right for their business from staff augmentation and managed services.
This article offers a detailed comparison between staff augmentation and managed services discussing their key benefits and limitations.
What is Staff Augmentation?
Staff augmentation is defined as the process of hiring an external team with specific skills and expertise from a BPO provider. Additional resources are hired for a certain period to meet the long-term or short-term staffing needs.
Staff augmentation allows companies to supplement the lack of project-specific competencies for a short period. It helps businesses fill their skills gap and access advanced expertise without bearing the liabilities of full-time employees. In addition, staff augmentation significantly reduces staff hiring, training, and management costs and supports internal teams.
Example of Staff Augmentation
Suppose your team is working on a custom software development project for a high-value international client. Everything is working fine until a bug is reported when the product was about to launch. That bug requires advanced troubleshooting skills that your in-house team lacks.
Since you can’t afford to miss the project deadline, you contact an IT staff augmentation agency. The agency interviews the candidates and recruits the most suitable one with relevant skills and expertise for your project. The outsourced IT expert integrates with your internal team remotely for just two months. Finally, once the bug is fixed and the contract period ends, you pay the staff augmentation agency and continue working on your project.
As a result, the staff augmentation agency helped you meet your short-term staffing need and satisfy your client’s requirements.
Managed Services
In managed services, you outsource full control of your specific business process to a third-party managed services provider. That company works as your outsourcing partner and serves as a team of full-time professionals dedicated for your business.
A fully-equipped and experienced managed services provider has all skills to meet the ever-changing needs of your consumers. This business model enables you to focus on your core business areas without wasting time on hiring and retaining in-house teams.
Example of Managed Services
Suppose you have recently launched a cloud-based project management software targeting small businesses and startups. After a few months, you have started receiving some complaints from your customers regarding software performance. Since you lack essential customer service skills, you start losing your loyal customers one by one.
To address this problem, you contact a managed services provider that specializes in customer service. After the formal agreement, the outsourced customer support team starts handling your customers’ queries professionally. Within a few months, you observe a significant rise in client retention and customer satisfaction rates.
Hence, dedicating your customer support to a managed services provider improved your customer service quality. Besides, it also improved your corporate growth by allowing you to focus on business development.
Staff Augmentation vs. Managed Services: The Key Difference
The primary difference between staff augmentation and managed services is in the level of accountability and delegated responsibilities. See the below side-by-side to learn what differentiates these two outsourcing models:
Staff Augmentation |
Managed Services |
| Involves the provision of additional resources with relevant skills and expertise | Involve management of all aspects of a business from resources, performance, and customers |
| Meets short-term or long-term staffing needs | Meet short-term or long-term operational needs |
| Supplements qualified and dedicated experts | Ensure accountability in results to the client |
| Narrow focus, shorter engagements | Broad focus, extended engagements |
| Ideal for companies looking to access advanced competencies to fill their skills gap | Ideal for companies that lack time, expertise, or resources to manage their internal operations. |
Staff Augmentation vs. Managed Services: Key Benefits
Here are the key benefits offered by staff augmentation vs. managed services for a better evaluation of these two models.
Staff Augmentation
- Staff augmentation offers extended flexibility in hiring specialists by enabling businesses to scale up or scale down the outsourced team as per their staffing needs
- Entrepreneurs need not worry about additional expenses in the form of taxes, employee training, or retention. Instead, all these expenses are covered by the staff augmentation agency.
- The model gives you a sense of security and confidence along with maximum freedom and ease.
- Companies can hire highly qualified and experienced professionals with their desired skills and expertise without bearing the liabilities of full-time personnel.
- You can empower your in-house team by integrating them with outsourced professionals. As a result, this model improves team productivity and efficiency at minimal costs.
- Hiring skilled resources from a reliable staff augmentation agency helps you achieve operational efficiency and improve the quality of your products or services.
- Staff augmentation significantly reduces the hiring time and enables business leaders to make quick decisions to hire skilled resources on short notice.
- Businesses can quickly acquire unique talents and project-specific competencies that are locally unavailable.
- Full integration of augmented staff with your internal team and technical process gives you better control over project results and helps you achieve your desired goals.
- Lastly, staff augmentation can help you expand your consumer base or establish a startup with success while having limited resources.
Managed Services
- The biggest advantage of acquiring managed services is that it gives you access to qualified resources, modern technologies, and advanced competencies simultaneously. Instead of working with different agencies, you can meet all your outsourcing needs in one place.
- Companies can save their precious time, effort, and resources by acquiring managed services at a fixed price for a specific period.
- With this model, the vendor is responsible for monitoring all processes and ensuring the availability of the required tools and resources. Most importantly, business owners ask for project outcomes only rather than processes.
- Managed services providers take the liability of potential risks. You can delegate all responsibilities to the vendor and focus on your business growth with ease.
- The outcome-based pricing structure makes managed services a flexible and cost-effective outsourcing model. You can adjust the price as per your operational needs.
- Managed service providers sign a Service Level Agreement (SLA) that offers guaranteed results and better return on investment (ROI).
- The bigger scope of managed services providers allows them to better address changing client demands and deliver impeccable results than staff augmentation agencies.
- Like staff augmentation, managed services also offer several opportunities to grow your business and expand your consumer base without compromising on quality.
- By choosing a reliable managed services provider, you can delegate all your responsibilities to your outsourcing partner and become more focused.
- Managed services also give you access to specialized skills to work on high-value projects.
Staff Augmentation vs. Managed Services: Limitations
Since no business model is perfect, staff augmentation and managed services also have some limitations. Hence, we have highlighted some key limitations of both these models:
Staff Augmentation
- Staff augmentation is mostly suitable for short-term engagements only. For a long-term project, you need to make sure the vendor is qualified enough to meet your business needs for an extended period.
- Managing two different teams working at different locations can be challenging, particularly if you lack basic team management skills.
- Reliance on a single third-party provider can lead to negative consequences on your company’s reputation if the staff augmentation agency is not reliable.
- Sourcing enough talent from a single vendor is impossible. Contacting multiple vendors can create inconsistencies in quality and lead to bad results.
- This model requires strict monitoring as you have to take care of your in-house and augmented teams to get your desired results.
Managed Services
- When it comes to short-term engagements, managed services can be more expensive than staff augmentation and increase complexity with unclear service definitions.
- The reliability and reputation of managed service providers matter a lot. Delegating your entire organizational process to an unreliable outsourcing vendor can be very risky.
- Excessive service specifications can result in poor performance and cause more harm than benefits.
- Although managed services take off the responsibility of the business owner, this “hands-on, eyes-off” approach slows down professional development. Even after years of work, your organization would still be dependent on a third party which is detrimental to business success in the long run.
- Lastly, you have to be very careful about which tasks need to be outsourced to a third-party vendor. Delegating the wrong operations to an unqualified managed service provider can be disastrous. After discussing every aspect of the topic in detail, here is a brief table showing the benefits and limitations of both services precisely:
| Criteria | Staff Augmentation | Managed Services |
| Control and Flexibility | Benefits: Provides more direct control over tasks and projects. Offers flexibility to scale the team based on immediate needs | Benefits: Outsourcing routine tasks provides flexibility. Offers less direct control but allows focusing on strategic initiatives. |
| Expertise Access | Benefits: Access to specific skills and expertise by adding specialized professionals to the in-house team. | Benefits: Access to a broader range of expertise from a managed services provider without the need to hire in-house. |
| Cost Structure | Limitations: Potential higher costs for skilled professionals. May require ongoing management efforts. | Limitations: Initial costs may be lower, but long-term costs may accumulate. May involve fixed or predictable costs. |
| Scalability | Benefits: Easily scalable by adding or reducing resources based on project requirements. | Benefits: Scalability is facilitated by the managed services provider, adjusting resources to meet changing needs. |
| Risk and Responsibility | Limitations: More responsibility for task management and project success falls on the hiring organization. | Limitations: Some level of risk transfer, but the organization may have less direct control over specific tasks. |
| Implementation Time | Benefits: Quick implementation as new team members can be onboarded rapidly. | Benefits: Swift implementation with immediate access to a suite of services without the need for individual hiring. |
| Focus on Core Business | Limitations: Requires internal management efforts for the augmented team. | Benefits: Allows the organization to focus on core business activities while the managed services provider handles routine tasks. |
| Customization | Benefits: Highly customizable based on the specific needs of the project or organization. | Limitations: Some services may have limitations on customization due to standardized offerings. |
| Risk Management | Limitations: Higher reliance on internal management for risk mitigation. | Benefits: Managed services providers often have robust risk management protocols. |
Staff Augmentation vs. Managed Services: Which one is Right for You?
Based on the above staff augmentation vs. managed services comparison, we can now finalize which business model offers optimal results. While both these models are beneficial, their choice depends on the client’s business needs and organizational requirements.
Staff augmentation is ideal for businesses that want to meet their short-term staffing needs. The flexibility and cost-efficiency make this model perfect for startups and SMEs with limited resources. Working with reliable staff augmentation agencies can help you reinforce and empower your internal teams, meet tight deadlines, and access advanced expertise. Consequently, accessing modern technologies can boost your corporate growth and development.
On the other hand, managed services are a lot more comprehensive, costly, and inclusive as compared to staff augmentation. Hence, companies should go for managed services option if they want to focus on growth, quickly adapt to modern technologies. This model allows businesses to gain a competitive edge over other companies while maintaining their data privacy and security. Additionally, managed services is perfect for established enterprises with broad a consumer base and long-term growth plans.
Staff Augmentation with Khired Networks
Finding a perfect outsourcing partner is the primary goal of every business. And when it comes to IT staff augmentation, you can’t find a more trusted and reliable agency than Khired Networks. Because we do not just provide expert resources; rather, we offer value and dedication that comes along with years of experience in the IT staff augmentation industry.
At Khired Networks, we have a pool of highly talented, qualified, and experienced IT professionals who understand the latest IT trends and keep upgrading their skills and expertise with time. Moreover, our IT teams integrate with your internal resources, maintain your company culture, and contribute to your corporate growth while in line with your strategic goals.
Get in touch with our experts today and hire dedicated remote IT experts with your desired skills and expertise.