Staff Augmentation vs. Managed Services: Make the Right Choice for Your Business

Any tech leader will tell you that the lack of tech talent can stifle your project. With that in mind, many companies explore models and types of partnerships that let them bring in the technological expertise they lack on-site. In this journey, companies meet lots of dilemmas, staff augmentation vs. managed services being one of them.

As a company that builds IT teams for tech companies worldwide, we at nCube understand the hardships you may face when looking for the right model to expand your development capacity.

We’ve written this article to help you differentiate between these common approaches and to guide you in choosing a better approach for your company.

Key takeaways:

• The key difference between managed services vs staff augmentation lies in the control over projects. When going with staff augmentation, the client manages the project directly. The managed services model offers a hands-off approach where the client entrusts the provider with project and team management.

• Staff augmentation is generally more flexible than managed services. It offers quick access to specialized skills and the capability to scale up and down whenever you need it. Managed services is a less agile approach that focuses on delivering end-to-end solutions within a long-term cooperation.

• Staff augmentation is a cost-effective solution with billing based on hourly or monthly rates of full-time employees. Managed services assume fixed pricing, offering predictable budgets but limited flexibility for projects with fluctuating needs.

Understanding staff augmentation and managed services models

What is IT team augmentation?

IT team augmentation is a strategy that enables you to integrate IT specialists from other countries into your existing team. Managing such a team implies direct access to each employee, thus contributing to the idea of retaining full control over the project and the team on the client’s side.

Essentially, in this model, the client knows who will work on their project, as they participate in the hiring process first-hand. The team they create together with their team augmentation services provider will be solely dedicated to the client’s project and report to the client directly, without a middleman.

The payment typically consists of a full-time employee’s monthly salary or day rate, plus a fee that goes to the IT augmentation services provider.

What is a managed services model? 

Managed services is an approach to software development that lets you outsource IT functions to a provider based in another region. Your role as a client within this model will be hands-off, which means excluding you from the processes of staffing and managing the project.  

Unlike IT team augmentation, where the client is deeply involved in daily aspects of software development, the managed service provider focuses on delivering a ready-made solution handled entirely by the provider’s team. 

As a result, payment for managed services is typically fixed-price and tied to deliverables, rather than being based on full-time employee rates, as is the case with augmentation. 

Key differences between staff augmentation and managed services

To put the question of staff augmentation vs. managed services into perspective, let’s make a head-to-head comparison of these approaches:

	Staff Augmentation	Managed Services
Pros	Offers a cost-effective solution for urgent projects.	Offers a fixed cost structure and focuses on a long-term partnership with a managed service provider.
	Provides wide access to specialized skills and niche expertise.	Eliminates the trouble of managing IT operations in-house.
	Enables robust team scaling based on project requirements.	Provides access to teams with expertise across multiple domains.
	Provides full control over the project and the external team.	Boosts capacity for managing complex IT needs.
	Bridges temporary skill gaps and complements in-house teams that lack expertise.	Enables internal tech teams to focus on core operations by offloading routine tasks.
Cons	Higher costs for long-term cooperation due to hourly or monthly pricing.	Less flexibility to adjust the project scope without incurring extra fees.
	Requires strong internal management capacity to manage the external team.	No control over the project, team, and development processes.
	Integrating new team members into your workflows can be time-consuming.	Integrating external resources may require significant effort.
	Risk of dependency on external providers for critical tasks and core expertise.	Dependence on the provider to drive project success and maintain product quality.
	Lack of provider’s ownership over the project outcomes.	Risk of misalignment in service quality if the managed service provider lacks expertise in your business vertical.
Billing	Salary based on hours invested by a full-time employee, plus vendor fees	Annual or monthly billing based on prior agreement.
Flexibility	High: Teams can be scaled quickly based on existing skill gaps.	Limited: Changes may incur additional payments or agreement renegotiation.
Responsibility	The client is responsible for project success, workflows, and daily management of external staff.	The managed service provider owns the project and delivers a product based on the agreed requirements.
Expertise	Targeted: Offers access to specific skills or expertise for the required time frame.	Comprehensive: Offers a wide range of expertise and ongoing support.
Cost structure	Flexible and cost-effective: Costs depend on the number of hires and their rates.	Fixed: Assumes a predictable fee based on agreements.
Scalability	Rapid: Easy to increase or dissolve teams as needed.	Slow: Scaling often depends on the provider’s capacity and incurs contract adjustments and extra payments.
Risk	Low risk: The client manages performance, deadlines, and quality risks.	Higher risk: The provider assumes responsibility for project management, without client involvement.
Onboarding	Required: External talent needs to be integrated into existing teams and workflows.	Not required: The external service provider onboards the team and sets up workflows.
Focus area	Task-specific, potentially short-term projects	End-to-end solutions
Time to start	Immediate: The team starts immediately after onboarding.	Delayed: Initial setup and alignment with the service provider may take time.
Management	High: In-house teams work with augmented staff, reporting to tech leaders on the client side.	Low: The provider handles daily tasks and makes all project-related decisions.
Customization	High: Fully customizable based on specific project needs and team dynamics.	Moderate: Limited to the terms outlined in the service agreement.
Project scope	Project requirements are defined and controlled by the client.	The scope is defined in the service agreement with limited flexibility for amendments.
Engagement	The project is executed by full-time employees.	Full-time or part-time engagement, depending on provider capabilities.
Best suited for	Temporary projects requiring specialized skills.	Complex needs that require ongoing management and support.
	Rapid scaling of teams during peak workload increase.	Long-term agreements for consistent service delivery.
	Delegating routine IT tasks to focus on strategic priorities.

Flexibility and scalability

One of the key differences between staff augmentation vs. managed services lies in the ability of approaches to adapt to the project’s immediate needs.

Staff augmentation is a more flexible approach than the managed services. It lets tech leaders bring in tech talent fast, enabling them to adjust to the changing project demands. Such flexibility is particularly beneficial for companies experiencing workload fluctuations or facing unique software development challenges that require specialized skills.

When it comes to a managed services model, it stands out as a complex approach where the service provider is accountable for end-to-end delivery and outcomes of the project. Given that the client and the provider agree on the scope of the project and requirements in advance, this arrangement doesn’t offer the same levels of scalability as staff augmentation.

Billing and cost structure

In staff augmentation, the client receives invoices based on the time worked by external professionals. This approach is beneficial for projects with distinct skill gaps, as you can integrate a few professionals specializing in the expertise you lack. As such, the price of staff augmentation will depend on the number of specialists you engage in your project.

In the context of managed services vs staff augmentation, the latter will be a more cost-effective approach as compared to hiring a third-party provider of managed services to handle the entire project.

Managed services assume operating on fixed payments for the end-to-end solution, no matter the team size. The benefit of this approach is the predictability of the budget that covers ongoing services over a pre-defined period.

Control and engagement on the client side

In the staff augmentation model, the client retains 100% control over the project and the team, whereas managed services involve outsourcing project control and dependence on the provider’s managerial capabilities.

In terms of engagement, staff augmentation providers ensure full-time employee engagement. A managed service provider, on the other hand, may involve full-time or part-time resources, depending on service-level agreements.

Risk and accountability

It’s generally accepted that staff augmentation services offer lower risk levels regarding performance, deadlines, and quality since the company manages the project directly. The client can set up the workflows, team members, deliverables, and timelines they see fit. Conversely, in managed services, the project’s success hinges on the provider who oversees the project.

Thus, in the context of accountability in staff augmentation and managed services, the first approach places responsibility for project success and team management on the business. In managed services, the service provider holds accountability for driving the project’s success.

Security  

Given that external hires are typically tightly integrated into the client’s IT infrastructure, they may have access to sensitive data. If you’re more comfortable managing the security of staff and systems according to your specific needs, partnering with staff augmentation services is the best solution.  

In contrast, managed service providers will take on the responsibility for securing systems and data, based on their internal security policies and protocols.  

Focus area and expertise  

Staff augmentation gives you quick access to skilled resources to address skill gaps or strengthen your in-house units with specific expertise, for instance, Cloud, Data, IoT, among others. You can integrate team members, set up processes, and work with external talent for as long as you need it. 

Managed services incline towards long-term cooperation for software development and other IT operations. This approach focuses on providing consistent, high-quality services across various IT functions – rather than tight collaboration between companies pertaining to augmentation.  

Both staff augmentation and managed services provide access to specialized skills or expertise for a specific timeframe. However, managed services tend to deliver broader expertise, offering businesses ongoing support and comprehensive end-to-end solutions. 

About nCube’s approach

In-depth internal screening

Unlike managed services, where resources are often shared between companies, we’re committed to building a fitting team based on your specific project requirements. Our multi-step screening process includes evaluating technical competence, business acumen, communication skills, cultural fit, and English proficiency. We specifically target the top 1% of tech talent so you can work with professionals who fit seamlessly into your tech needs as well as company culture.

Large pools of tech talent

If you’ve been trying and failing to find local tech experts with specialized expertise, staff augmentation is the best solution to access broader talent pools. With nCube, you can integrate experts close to your HQ, without worrying about time zone gaps. For instance, North American businesses can benefit from LATAM countries as a powerhouse for skilled software engineers.

If you stem from the EU, staff augmentation in Eastern Europe stands out as a hub of technologists with an inclination to innovation. We at nCube have an office presence across these regions and a pipeline of 125,000 skilled IT professionals, ready to join your project.

Focus on retention

Our talent retention strategy kicks off just after the team launch. Our goal is to provide you with a stable team for as long as your project requires. We always strive for a 100% retention rate by offering a comfortable work environment, competitive salaries, and attractive bonus packages to keep your team members committed and motivated.

Fast team creation

At nCube, we start building your team right after our initial call. We take 24-48 hours to dive into your project requirements, analyze CVs, and set up interviews with fitting candidates. On average, it takes us 2-6 weeks to launch a tech team.

Domain expertise

Our team will help you find and integrate talent in any programming language as well as niche expertise like AI/ML, Data, Cloud, and most importantly, experience in your business niche. For instance, we’ve recently helped a company source a team of senior-level AI Python engineers with a Biotechnology background.

Full integration

Dedicated to the staff augmentation model, we’ll take care of team formation, overhead, and talent retention, whereas you’ll have full control over the project and staff. The team members will work under your leadership, tightly integrating into your company operations.

Contact us today, share your project requirements, and let’s start augmenting your team with the talent you need!

FAQ

Frequently asked questions about augmentation and managed services

What is staff augmentation?

This model involves addressing skill gaps in your organization by integrating software developers or other talent based in other locations, for instance, Latin America or Eastern Europe. Staff augmentation ensures cultural alignment, high control over the project, improved communication, and cost efficiency.

What are managed services?

Managed services is a type of outsourcing where the client delegates entire project functions to an external provider for long-term support, management, and oversight.

Which model is more cost-effective?

In terms of cost, staff augmentation vs. managed services offer different approaches. Staff augmentation is typically more cost-effective for short-term needs due to its ability to ramp up and down according to the company’s needs. Managed services engagement is more beneficial for long-term, ongoing needs, as they include a comprehensive approach to project support.

What is the difference between staff augmentation and managed services?

Staff augmentation lets companies integrate external talent to complement in-house teams and work under client management. It gives you as the client 100% control over the team, progress, daily tasks, and more. Managed services, in contrast, assume outsourcing entire projects to a provider who is responsible for delivering end-to-end solutions.

What factors should be considered when deciding between staff augmentation and managed services? 

Several factors come into play when deciding between managed services vs staff augmentation, including project scope and duration, control and oversight, scalability and flexibility, cost structure, security, and risk management.