Staff Augmentation vs Outsourcing: Choose Your Fighter
10 minutes
February 14, 2023
In this article, we will dive deeper into the subject of staff augmentation vs IT outsourcing. Compare these two approaches and decide which is the best for your business.
Staff augmentation
Staff augmentation refers to the process of hiring additional employees on a temporary or project-based basis to supplement a company’s existing workforce. This can be an effective way to bring in specialized skills or expertise that the company doesn’t have in-house, without committing to a long-term hiring process.
Pros and cons of staff augmentation
PROS
1ACCESS TO SPECIALIZED SKILLS AND EXPERTISE
Staff augmentation allows companies to bring in employees with specific skills or expertise that the company may not have in-house. This can be particularly useful for short-term projects or tasks that require specialized knowledge.
FLEXIBILITY
Staff augmentation allows companies to scale their workforce up or down as needed, without committing to long-term hires. This can be an effective way to meet changing business needs or respond to sudden spikes in demand.
COST-EFFECTIVENESS
Staff augmentation can be more cost-effective than hiring full-time employees, as the company does not have to pay for benefits or incur the costs associated with training and onboarding.
COSNS
2LACK OF CONTROL
When using staff augmentation, the company may not have as much control over the employees as it would with full-time hires. This can make it difficult to ensure that the employees are aligned with the company’s goals and values.
LIMITED COMMITMENT
Staff augmentation employees are not committed to the company in the same way that full-time employees are. This can lead to a lack of loyalty and commitment, which can impact the quality of the work.
COMMUNICATION CHALLENGES
Managing a team of employees with different skill sets and expertise can be challenging, particularly if the team is spread out across different locations. This can lead to communication challenges and difficulties in coordinating work.
Outsourcing
Outsourcing involves hiring an external company or individual to perform a specific task or project, rather than doing the work in-house. This can be an effective way to save time and resources, as the company does not have to invest in training or managing the employees performing the work. Outsourcing can also be a cost-effective way to access specialized skills or expertise that might not be available within the company.
PROS AND CONS OF OUTSOURCING
PROS
1COST SAVINGS
Outsourcing can be a cost-effective way to complete a specific task or project, as the company does not have to pay for employee benefits, training, or overhead costs.
ACCESS TO SPECIALIZED SKILLS AND EXPERTISE
Outsourcing allows companies to access specialized skills or expertise that might not be available within the company. This can be particularly useful for tasks that require specific knowledge or experience.
INCREASED EFFICIENCY
By outsourcing tasks or projects to external providers, companies can free up their internal resources to focus on core competencies, which can lead to increased efficiency and productivity.
CONS
2LOSS OF CONTROL
When outsourcing a task or project, the company may have less control over the final product or outcome. This can be particularly problematic if the external provider does not deliver the expected quality or fails to meet deadlines.
COMMUNICATION CHALLENGES
Managing an external team can be challenging, particularly if the team is located in a different time zone or country. This can lead to communication challenges and difficulties in coordinating work.
LOSS OF INTELLECTUAL PROPERTY
When outsourcing a task or project, the company may be required to share sensitive or proprietary information with the external provider. This can increase the risk of data breaches or loss of intellectual property.
Let’s compare staff augmentation vs outsourcing
Both staff augmentation and outsourcing can be useful strategies for companies that need to bring in additional skills or expertise to complete a specific task or project.
Take a look at the comparative analysis of the two approaches
- Nature of work:
Staff augmentation involves hiring additional employees on a temporary or project-based basis to supplement a company’s existing workforce, while outsourcing involves hiring an external company or individual to perform a specific task or project.
- Cost:
Staff augmentation can be more cost-effective than hiring full-time employees, as the company does not have to pay for benefits or incur the costs associated with training and onboarding. Outsourcing can also be a cost-effective option, as the company does not have to pay for employee benefits or overhead costs.
- Expertise:
Both staff augmentation and outsourcing allow companies to access specialized skills or expertise that they may not have in-house. However, outsourcing may provide a wider pool of expertise to choose from, as the external provider may have access to a larger pool of talent.
- Control:
With staff augmentation, the company has more control over the employees than it would with outsourcing. However, the company may have less control over the final product or outcome when outsourcing a task or project.
- Commitment:
Staff augmentation employees are not committed to the company in the same way that full-time employees are, while outsourcing involves hiring an external provider to complete a specific task or project.
- Communication:
Both staff augmentation and outsourcing can involve managing a team of employees with different skill sets and expertise, which can lead to communication challenges. However, outsourcing may be more prone to communication challenges due to the distance and potential language barriers between the company and the external provider
Practices of using outsourcing vs staff augmentation
Different companies may have had different experiences with these strategies. However, here are a few examples of how some famous companies have used staff augmentation and outsourcing in the past:
IBM: IBM has used both staff augmentation and outsourcing as part of its business strategy. The company has used staff augmentation to bring in temporary or project-based employees with specific skills or expertise, while it has also outsourced certain tasks or projects to external providers.
Google: Google has used staff augmentation to bring in additional employees on a temporary or project-based basis to supplement its existing workforce. The company has also outsourced certain tasks or projects to external providers, particularly in areas where it lacks in-house expertise.
Apple: Apple has used outsourcing as part of its business strategy, particularly for manufacturing and assembly of its products. The company has outsourced these tasks to external providers in order to save time and resources, and to access specialized skills and expertise.
Amazon: Amazon has used both staff augmentation and outsourcing as part of its business strategy. The company has used staff augmentation to bring in temporary or project-based employees with specific skills or expertise, while it has also outsourced certain tasks or projects to external providers.
What some of the famous business leaders think about outsourcing and staff augmentation
These two strategies are often used in a business context rather than being a topic of public discourse. Here are the quotes from business leaders that touch on some of the key considerations and benefits of outsourcing and staff augmentation strategies:
“The key to outsourcing is to know what you are good at, and what you are not good at.” – Tony Hsieh, CEO of Zappos
“Outsourcing can be a smart way to get things done, but it’s critical to carefully consider the costs and benefits.” – Elon Musk, CEO of Tesla and SpaceX
“The key to successful outsourcing is to find a partner who shares your values and vision.” – Howard Schultz, former CEO of Starbucks
“Staff augmentation can be a powerful way to bring in specialized skills or expertise on a short-term basis, without committing to a long-term hire.” – Mark Zuckerberg, CEO of Facebook
“Outsourcing can be a cost-effective way to access specialized skills or expertise that might not be available within the company.” – Jeff Bezos, CEO of Amazon
Staff augmentation vs outsourcing experience of famous startups
Many famous startups have used staff augmentation or outsourcing as part of their business strategies in order to access specialized skills or expertise or to save time and resources. Take a look at the examples of famous startups that have used these strategies:
Slack: Slack, a popular messaging and collaboration platform for teams, has used staff augmentation to bring in temporary or project-based employees with specific skills or expertise.
Airbnb: Airbnb, a platform for booking vacation rentals and home-sharing, has used outsourcing as part of its business strategy. The company has outsourced certain tasks or projects to external providers in order to save time and resources and to access specialized skills and expertise.
Uber: Uber, a ride-sharing platform, has used outsourcing as part of its business strategy. The company has outsourced certain tasks or projects to external providers in order to save time and resources, and to access specialized skills and expertise.
Pinterest: Pinterest, a social media platform for sharing and discovering ideas, has used staff augmentation to bring in temporary or project-based employees with specific skills or expertise.
Dropbox: Dropbox, a cloud storage and file-sharing platform, has used staff augmentation to bring in temporary or project-based employees with specific skills or expertise.
Staff augmentation vs outsourcing in numbers
It isn’t easy to provide specific statistics on the comparison between staff augmentation and outsourcing, as the use of these strategies can vary widely depending on the industry and location. Nevertheless, here are a few general statistics that may be relevant to the topic:
STATISTICS
- According to a survey by the Society for Human Resource Management (SHRM), 36% of companies in the United States used staff augmentation in 2020, while 44% used outsourcing. This suggests that staff augmentation and outsourcing are popular strategies for companies seeking to bring in additional skills and expertise on a temporary or project-based basis.
- According to a survey by the National Association of Software and Services Companies (NASSCOM), the global outsourcing market was valued at $92.5 billion in 2020 and is expected to continue growing in the coming years. This suggests that outsourcing is a significant contributor to the global economy.
- According to ManpowerGroup’s 2020 Talent Shortage Survey, 42% of employers globally reported difficulty filling positions due to a lack of available talent. This suggests that companies may turn to staff augmentation or outsourcing to access the skills and expertise they need, particularly in industries with a high demand for specific skills.
- According to a survey by the International Association of Outsourcing Professionals (IAOP), the top three reasons companies choose to outsource are cost savings (65%), access to specialized skills and expertise (54%), and the ability to focus on core competencies (50%). This suggests that cost savings, access to specialized skills, and the ability to focus on core competencies are key considerations for companies deciding between staff augmentation and outsourcing.
Staff augmentation vs outsourcing: which model is better for startups?s
It is difficult to say which is better for a startup: staff augmentation or outsourcing. The best approach will depend on the specific needs and goals of the startup and its budget and resources. You can consider the following factors when deciding whether to use staff augmentation or outsourcing for a startup:
- Expertise: If the startup requires specialized skills or expertise that it does not have in-house, both staff augmentation and outsourcing can be effective strategies. Staff augmentation allows the startup to bring in temporary or project-based employees with the specific skills or expertise it needs, while outsourcing allows the startup to hire an external company or individual with the required skills or expertise.
- Budget: Staff augmentation can be more cost-effective than hiring full-time employees, as the startup does not have to pay for benefits or incur the costs associated with training and onboarding. Outsourcing can also be a cost-effective option, as the startup does not have to pay for employee benefits or overhead costs. However, it is important to carefully consider the long-term costs of each approach, as outsourcing may be more expensive in the long run if the startup requires ongoing support or maintenance.
- Control: With staff augmentation, the startup has more control over the employees than it would with outsourcing. However, the startup may have less control over the final product or outcome when outsourcing a task or project.
- Commitment: Staff augmentation employees are not committed to the startup in the same way that full-time employees are, while outsourcing involves hiring an external provider to complete a specific task or project.
- Communication: Both staff augmentation and outsourcing can involve managing a team of employees with different skill sets and expertise, which can lead to communication challenges. However, outsourcing may be more prone to communication challenges due to the distance and potential language barriers between the startup and the external provider.
How to make the right choice between staff augmentation and outsourcing?
When deciding whether to use staff augmentation or outsourcing, it is important to carefully consider the specific needs and goals of the company, as well as its budget and resources. These are the steps to follow when deciding between staff augmentation and outsourcing:
- Assess the company’s needs: Determine the specific skills or expertise that the company needs to complete a specific task or project. Consider whether the company has these skills in-house or whether it needs to bring in additional resources.
- Evaluate the cost: Consider the long-term costs of each approach, including any ongoing support or maintenance that may be required. Determine which option is more cost-effective based on the company’s budget and resources.
- Consider the level of control: Decide how much control the company wants to have over the employees or external providers. Staff augmentation allows the company to have more control over the employees, while outsourcing allows the company to have more control over the final product or outcome.
- Consider the level of commitment: Determine whether the company is looking for a short-term or long-term solution. Staff augmentation involves hiring employees on a temporary or project-based basis, while outsourcing involves hiring an external provider to complete a specific task or project.
- Evaluate communication challenges: Consider the potential communication challenges that may arise when working with a team of employees with different skill sets and expertise, particularly if the team is spread out across different locations.
By carefully considering these factors, companies can make an informed decision about whether to use staff augmentation or outsourcing based on their specific needs and goals.
Staff augmentation vs outsourcing: summary
In conclusion, both staff augmentation and outsourcing can be effective strategies for a startup, depending on the specific needs and goals of the company. It is important to carefully consider the pros and cons of each approach and make a decision based on the specific needs and resources of the startup.
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