Business
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How to Choose the Right IT Outsourcing Partner
Jason Giampetruzzi | Sep 18, 2024
The global outsourcing market is on fire. It’s currently worth over $260 billion and is on track to double by 2030, with IT services taking 75% of contract values.
This explosive growth isn’t happening by chance. It’s because more businesses — from cost-conscious startups to big players — are tapping into external tech expertise.
In fact, around 60% of companies now subcontract app development, and 81% rely on third-party providers for cybersecurity and other routine IT functions.
Among the various IT outsourcing development models, staff augmentation and managed services stand out in accessing elusive tech skills cost-effectively.
But which route is right for your project? In this blog, we unpack and compare IT managed services vs. staff augmentation services to help you decide.
In this article:
- What is staff augmentation?
- What are managed services?
- Difference between Staff augmentation vs. Managed services
- Staff augmentation vs Managed services: Which is right for your business?
What is staff augmentation?
Are you stuck on a project that requires skills you don’t have? Do you need extra hands to share your growing workload?
Staff augmentation can fill those gaps with external talent. These temporary staff integrate into your team — sharing the same processes, tools, and even office space (if they work on-site) — but you don’t employ them in a traditional sense.
You don’t have to pay benefits, taxes, or other employment-related expenses because the staff augmentation provider takes care of that.
It’s a streamlined way to boost your in-house capabilities for as long as (but never more than) you need it, no strings attached!
There are many types of IT staff augmentation, including on-site versus remote and short-term versus long-term engagements.
What are managed services?
Managed services outsource entire IT segments to a third-party provider for ongoing support and maintenance.
In this arrangement, you hire managed service providers (MSPs) to take over critical IT functions (like network security and backup recovery) so you can focus on your core business activities.
MSPs can deliver pre-packaged solutions beyond what your business could implement on its own. They can provide round-the-clock monitoring when needed and promptly fix issues to minimize downtime and ensure continuity.
Pre-established rates also make budgeting easier, removing the surprise costs that often lurk in the shadows of in-house IT management. It’s a good way to boost your IT capabilities without getting tangled in operational details.
Managed Services or Dedicated Teams
In some cases, the term “managed services” is also referred to as “dedicated development teams.”
In response to this evolving landscape, it’s possible to find a holistic approach, bridging the gap between these models to deliver comprehensive solutions tailored to your specific requirements.
So if you’re looking to outsource an autonomous team, whether you call it a dedicated team or managed services, both will:
- Involve hiring a full team of tech talent to work on your project. Much like staff augmentation, you’re adding a whole autonomous team of tech experts to your company, to help you bridge skills gaps or scale quickly. Your dedicated team will work with your in-house team to complete a specific project, giving you more hands-on control.
- Help you manage and monitor individual things like cybersecurity or cloud services. These services are usually managed remotely, letting your providers get to work while you focus on other things.
Want to learn more? Here’s how we do dedicated teams at Cheesecake Labs
What are the key differences between Staff Augmentation and Managed Services?
To better understand the differences between staff augmentation and managed services, we need to compare them in terms of flexibility, costs, and control.
- Both options offer more flexibility than in-house hiring. But IT staff augmentation is more adaptable because it lets you reinforce your team as needed, in contrast with managed that would fit better for an ongoing partnership with a self-managed team.
- Both strategies unlock savings — but in different ways. Staff augmentation is cheaper for short-term needs as you only pay for hours logged. Meanwhile, managed services have predictable monthly or annual costs, so you can plan out your budget efficiently.
- These two IT outsourcing models are markedly different in terms of control. Staff augmentation puts you in the driver’s seat, managing the augmented staff as part of your broader team. In managed services, you hand over the reins to a third party, which could be preferable if you’re looking to focus your internal resources elsewhere.
Staff Augmentation vs Managed Services
| Staff Augmentation | Managed Services a.k.a Dedicated Team | |
|---|---|---|
| Flexibility | Enables on-demand scaling of team size and expertise | Offers less flexibility in immediate scaling but provides comprehensive, ongoing support |
| Costs | Cost-effective, suitable for specific roles or temporary skill gaps | Involves a fixed financial commitment, potentially leading to savings from streamlined budgeting and operations over time |
| Control | Allows hands-on involvements, letting you closely manage projects and timelines | Transfers the burden of execution and management to the provider |
| Applications | Best for projects requiring temporary expertise or when maintaining control is crucial | Ideal for companies looking for all-in-one solutions, long-term engagements, or wishing to focus on core activities while outsourcing others |
Pros and Cons of Staff Augmentation
Exploring the strengths and weaknesses of the IT staff augmentation model can help you decide whether it aligns with your operational needs.
Staff augmentation benefits include:
- Greater control over staff – Augmented team members follow your lead and adhere to your internal methodologies. This keeps project direction and execution firmly in your hands.
- Flexibility to scale up or down – You can dynamically adjust your workforce size based on the ebb and flow of project demands, so your internal teams are neither overburdened nor underutilized.
- Immediate access to skilled resources – Staff augmentation brings in the expertise you need right away, without the lengthy timelines of traditional recruitment.
- Cost-effective – This approach is best for projects with short timeframes or variable workloads. You invest only in the labor needed for the task at hand, sidestepping the direct costs of hiring, training, and maintaining staff.
- Increased flexibility – With this model, you can swiftly respond to project demands and market changes without the constraints of permanent staffing decisions.
- Communication can be seamless – Augmented staff integrate directly with your teams and use your established communication channels to make collaborations easier and minimize misunderstandings.
Cons include:
- Less accountability – The responsibility of day-to-day oversight falls on your company, unlike in managed services, where the provider assumes full responsibility.
- Limited by the talent of augmented staff – The success of staff augmentation hinges on the quality and availability of contractors. A sparse talent pool in niche areas can delay projects and affect output quality.
Pros and cons of the managed services or dedicated teams model
Managed services can free up your resources and allow you to concentrate on your core competencies. But like any IT outsourcing model, it has its own set of merits and drawbacks.
Managed services benefits include:
- Access to expert teams – Need a hand in routine IT functions like infrastructure support or backup and disaster recovery? Managed services can take over these specialized areas — no in-house training is required.
- Predictable expenses – Costs are based on specific agreements, so you can accurately forecast your financial commitments and maximize your resources.
- Allows focus on core business – By letting third-party IT experts take the wheel, you can focus on your primary business areas and devote resources to other key functions, such as research and development.
- Often cost-effective over the long run – Managed services can be more economical over time. By leveraging your MSP’s expertise and economies of scale, you can enjoy high-quality capabilities at a fraction of the cost of developing them internally. You also avoid the indirect costs of equipment and technology upgrades.
Cons include:
- Less control over day-to-day operations – Using managed services means relinquishing control over critical IT areas. You are fully trusting your MSP to make decisions that align with your objectives.
- Potential security risks – Outsourcing to an MSP means granting them access to sensitive systems and data. There’s always a risk of a breach, either through provider negligence or malicious intent. That’s why it’s crucial to vet MSPs thoroughly.
- Quality depends on the provider – Picking the wrong provider can lead to suboptimal services, or worse, security breaches that may result in irreparable consequences.
Staff augmentation vs Managed services: Which is right for your business?
When deciding between staff augmentation and managed services, it’s crucial to evaluate several factors to determine which aligns best with your business’s needs, objectives, and constraints. Reflect on these key considerations:
- How does your budget align with the model’s cost structure?
- Do you want to retain direct oversight, or are you willing to entrust the management and execution to an external provider?
- Does your operation require rapid team scaling? How quickly do you need to respond to project demands and changes?
- Do you want to handle operations and problem-solving internally, or delegate these responsibilities to a third party?
Cost
How does your budget align with the model’s cost structure?
Staff augmentation makes sense if you only need a few additional people for a specific project or skill gap, as it’s generally cheaper than engaging an autonomous team for the same purpose. Managed services can be more cost-efficient for long-term or ongoing needs.
Control and management
Do you want to retain direct oversight, or are you willing to entrust the management and execution to an external provider?
Staff augmentation lets you stay completely involved in the development process, supervising your augmented staff as you would your internal team. Managed services provide much less granular control. The managed team works independently, completing tasks according to predefined service level agreements and delivering outcomes based on set objectives.
Flexibility
Does your operation require rapid team scaling? How quickly do you need to respond to project demands and changes?
Staff augmentation is an on-demand strategy that shines in scenarios requiring quick adjustments in team size or skill sets. Managed services provide a stable solution for ongoing tasks, but retainer-based structures limit scalability.
Responsibility
Do you want to handle operations and problem-solving internally, or delegate these responsibilities to a third party?
Staff augmentation is a more hands-on route if you need to maintain close control over deliverables, such as when building a digital product. Managed services free you from day-to-day project and personnel management, but it’s often only suitable for non-core activities.
Choosing the right model for your outsourcing needs
| When are managed services best? | When are managed services best? |
|---|---|
| Staff augmentation hits the sweet spot when you need the right talent for just the right amount of time while keeping a firm grip on management. Choose it if you: | Managed services do well in scenarios that require complete project management offloading or long-term service solutions. Choose it if you: |
| Want to retain control of a project It allows for close supervision to keep external personnel aligned with your goals. | Want to hand over full management of a project Let your autonomous team take complete control so you can free your internal resources to concentrate on core business functions. |
| Need to recruit highly-specialized workers for a limited time frame Tap into a global talent pool to quickly find and hire niche experts for short-term projects, bypassing the lengthy direct hiring process. | Need long-term, permanent staff but don’t want to hire in-house You can outsource essential and continuous IT processes (such as cybersecurity) to MSPs so you don’t have to recruit and maintain a dedicated in-house team. |
| Need to temporarily bridge skill gaps within your existing team You can add experts to your team for short periods to cover specific skill shortages. It’s perfect for meeting deadlines, completing certain project milestones, or integrating new tech into your stack without permanent staffing adjustments. | Want a pre-defined contract with a self-managed team The predefined nature of managed service contracts offers cost predictability and lets you avoid unexpected staffing expenses. |
| Need to increase your workforce to fast-track a product launch Use staff augmentation to shorten your time-to-market and secure a competitive advantage. | |
| Want to recruit cost-efficiently Staff augmentation is more economical than permanent hires, especially for projects with a defined end date. | |
| Want flexible and scalable contracts Staffing contracts can be adjusted in terms of duration and scope. Without long-term obligations, you can modify your team size as your project evolves. |
Conclusion: Which should you choose?
Both staff augmentation and managed services offer unique advantages in accessing specialized skills and scaling IT operations. The right choice is the model that best aligns with your strategic priorities, operational model, and financial constraints.
Are you leaning toward staff augmentation? Cheesecake Labs can deliver top-tier talent tailored to your project. Let’s chat to discuss your needs.
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