The limited job market can stifle your project’s progress. With that in mind, many companies seek partnerships with nearshore and offshore companies that let them bring in the technological expertise they may lack on-site. In this journey, companies rely on a variety of business-to-business models that facilitate cooperation with external IT services providers, IT team augmentation and managed services being the two most common ones.
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. As there’s no one-size-fits-all approach, we’ve written this article not only to help you differentiate between IT team augmentation vs managed services models but also to guide you in choosing a better model for your company.
To begin, let’s get into the nuts and bolts of both models.
In a broad sense, these are approaches to expanding a company’s software development capabilities with software developers. Both of them imply involving expertise from across borders, and exist to regulate your relationship with the provider of the services, be it IT augmentation services or managed services. Going with any of these approaches will contribute to the transparency of cooperation and define different aspects of it, such as team control, billing, duration, responsibilities, and so on. All of these will be written down in a legally binding contract signed by both parties.
Now let’s move on to the nitty-gritty of each model.
What is IT team augmentation? It’s a strategy that enables you to add IT specialists from other countries to 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? Similar to IT augmentation services, managed services also let you involve IT specialists located in another region. However, your approach with this model will be hands-off, which implies excluding you from the processes of hiring software developers and managing the team. Unlike IT team augmentation where the client is actively involved in every aspect of software development daily, this model is more about getting a ready solution that will be produced by a provider’s team. That’s why payment for managed services is typically fixed-price and based on deliverables, and not solely on employee’s rates as opposed to the cost being linked to the employee’s salary and rate as it is with team augmentation services.
The key difference between managed services and team augmentation services lies in the holder of expertise. When going with IT team augmentation, the client should have internal tech expertise and the capability to run a team of developers. In the managed services model the client always depends on the provider’s tech expertise.
To sum up and put the two models into perspective, let’s do a head-to-head comparison:
| Aspect | IT Team Augmentation | Managed Services |
| Process | The client is in full control over the development process | The provider manages the process from start to finish |
| Access to the team | The client communicates with and manages the team members | The client communicates via an assigned project manager or account manager |
| Hiring | The client approves or vetos candidates provided by the vendor | The provider selects team members without consulting with the client |
| Billing | Based on the salary of a developer plus a provider’s fee | A fixed payment based on the provided solution |
| Cost structure | The provider handles tax, team administration, overhead, employee bonuses, etc | The approach is based on providing a complete solution |
| Flexibility | High, ability to change without additional costs | Low, increasing workload comes with additional payment |
| Responsibility for results | The customer retains control over the outcome of the project | The provider is responsible for fulfilling the client’s expectations |
| Managerial effort | Strategy is required for integrating remote teams | Reduced managerial effort, reliance on the provider’s expertise |
Cost: When choosing team augmentation services, you’ll only pay for the hours your employees worked on the project with an assumed full-time load in regards to hours worked. It’s a good way to trim the unneeded costs such as tax, administration, employee bonuses, etc, which will be taken care of by the provider. This benefit can also be applied to managed services.
Approach: Team augmentation services imply a hands-on approach that lets you control every aspect of software development and eventually its outcome. In managed services, the client loses control over the project in this model, as software development is handled by the vendor.
Flexibility: With team augmentation services, you can get access to the needed resources fast and backfill the vacancies that appear down the road quickly, without impeding the process of development. In managed services, where everything is set in stone, the client typically has to sign another agreement if they want to increase the workload.
Results: With IT augmentation services the outcome of the project depends on your choice of team members and setting up their work, whereas in the managed services model the client isn’t able to control who will work on the project. The only choice that affects the outcome of cooperation here is that of the vendor. Thus, in a managed services model, the outcome is tied to the expertise of the provider.
Effort: Some training may be required as new software developers are integrated into your processes, learn the inner workings of your product and company. You may need to carve out a separate strategy to allow your distributed employees and internal units to work together in the IT team augmentation model. On the other hand, with managed services, the effort on your part is minimized, given that you will rely fully on the expertise of the provider.
Dependence on internal processes: IT team augmentation is dependent on the internal processes of your company. When you add people into convoluted workflows, it can impede their productivity, so you need to get your processes straight before you add people. At the same time, in managed services, the outcome depends on the vendor’s ability to organize the processes and workflows of the team working on your project.
Managerial effort: With IT augmentation services, integrating new people requires well-established management techniques that allow you to ensure all your tech units work as one. When it comes to managed services, management falls on the shoulders of the provider, freeing you up from this laborious duty.
So which model is better? Well, there’s no universal answer. That’s why before going with any of these approaches, you should learn your company’s needs and capabilities. Here’s what you can take into account as your first step:
Do you have internal expertise? If you already have a team, you can consider adding people, IT team augmentation can help you add developers who will step into the breaches and bring the expertise you may lack to the table. Managed services can be useful when you don’t have a team or expertise to build a software solution.
How involved do you want to be? The answer to this question may affect your choice of an approach. Going with IT team augmentation means being in the driver’s seat for all project decisions, communicating with each developer directly, and having them report to you. Managed services suggest delegating all decisions to a vendor and waiting for the solution to be made, which may be a good approach when you don’t have relevant in-house expertise.
Are you comfortable not knowing who is working on your project? A sight-unseen approach suggested by managed services may not be the most comfortable one for you. When you can’t hire developers yourself, you should invest time and effort to choose a company with an impeccable reputation. That’s not to say that team augmentation service providers shouldn’t be chosen carefully. We just want to emphasize that hiring developers directly is more comfortable for many organizations, especially if it’s their core business focus.
We at nCube specialize in building technology teams for companies worldwide. At the start of any partnership, we encourage the client to learn their needs to see if our model of IT team augmentation suits them in the best way possible. We consider everything – from the client’s goals and vision to their management capabilities. Read more about our approach to staff augmentation here.
If everything falls into place, we search the market, handpick and prescreen developers that fit the client’s vision of a perfect candidate. Then, we let the client interview candidates and decide if they want to work with them. We don’t require any upfront payments before the client is absolutely sure they’ve found the needed developers.
Contact us and let us see if our way of IT team augmentation is suitable for you and your project. We are also flexible enough to offer you an individual solution.
As a means of sourcing skilled software developers, IT team augmentation has become an essential element of many businesses’ strategies. At its best, this approach can be an efficient way to expand your internal staff and add the talent you lack on-site, but only if you partner with a reliable company. This post will hopefully help you separate the wheat from the chaff when selecting a purveyor of IT augmentation services. Without further ado, let us walk you through the steps you can take to select the best one.
While the vendor of team augmentation services usually does the lion’s share of work when it comes to building a team, it’s the client who should quarterback the software development process. Thus, it’s essential to develop a Project Scope, a document that outlines the workload for the members of your squad(s) and reflects the direction of your project.
Project Scope is in fact the backbone behind the concept of IT team augmentation, as it gives you an idea of the skillsets you need to add to your team. Besides that, the document includes such key elements as deliverables and their timelines, budget, and metrics for success. On the side of a vendor, Project Scope will come in handy when it comes to understanding what roles you need to fulfill and developers’ rates. So, it makes sense to have Project Scope in place before you start looking for potential IT team augmentation partners.
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The residing country of your provider of IT augmentation services may affect everything, from software developers’ rates to talent availability. Here are several criteria you can take into account at this step:
Rates. If you are located in North America or Western Europe, you may want to look for firms providing team augmentation services in nearshore or offshore regions. This is a great way to trim costs for software development, as it gives you an opportunity to choose countries where the rates are lower than you may have locally. For example, you can consider Eastern Europe as a source of skilled software developers. The rates of developers in this region vary from $50-$60 per full-time employee, including IT augmentation service fees.
Talent availability. In addition to reducing software development costs, the goal of IT team augmentation is to give you access to a variety of skillsets. Eastern Europe, for example, boasts countries with hundreds of thousands of engineers who have years of experience being part of IT team augmentation firms, which means they already have solid communication skills and the needed expertise. For example, Ukraine, one of the pillar countries of IT team augmentation in Eastern Europe, boasts over 250K engineers (as of January 2022), which guarantees you a variety of choices when it comes to skillsets.
READ ALSO: Offshore Product Development: Eastern Europe, Latin America or Asia?
Expertise. Not only does IT team augmentation gives you access to a vast pool of tech talent. It also lets you add genuinely skilled talent. Many developers in nearshore/offshore regions have harbored solid experience, collaborating with companies and startups from different industries, which lets them further become valuable assets within team augmentation services. For instance, Eastern European developers play strong when it comes to Fintech, Healthcare, and EdTech expertise, given that a huge amount of companies stem from this region. For example, Ukraine alone is home to 100+ Healthcare startups. Engineers working there can potentially augment your company as well.
The hardest part is probably to shortlist potential providers of team augmentation services, as there are thousands of companies offering this service out there. For your convenience, below are some basic signs that may help you identify solid firms:
These are the key testaments of a reliable vendor of IT augmentation services you can use to narrow down your list. However, it’s best to contact the firm you’re interested in to gain a better understanding of their capabilities.
READ ALSO: How Should You Hire Remote Developers in 2022?
At this step, you need to verify your pre-selected purveyors of team augmentation services. Go over your chosen companies’ portfolios and make a head-to-head comparison. Look at the list of their past and ongoing clients. What companies are in their portfolio in terms of size and industry? Do they have experience in your domain? Answers to these questions will help you filter out firms without relevant experience. Then, you can pay attention to the kind of IT team augmentation model they provide. Most likely, they will offer you one of the following solutions:
Many companies that provide team augmentation services work with both models, so you can choose any you are happy with.
Reach out and speak with your shortlisted IT team augmentation firms to ensure they are a good fit for you. At this point, it’s essential to pay attention to the quality of communication and identify potential risks. Mind that your business needs should always come first, so if the vendor tries to sway you into a decision that’s not in your best interest, you may be better off parting ways with them from the get-go. Ideally, your communication should be coordinated by a personal account manager on the side of the provider. This person will be crucial if you decide to move forward with the IT team augmentation company, as they will be the bridge between you and your remote unit in the future.
Let’s say you’ve chosen the vendor and are ready to get the ball rolling on your IT team augmentation venture. To build a strong team, you and your vendor should work side by side. As a client, you should have a say in all crucial processes when it comes to choosing software developers. With that in mind, you should interview all candidates personally and decide whether or not to hire them.
In this regard, you may come across the following IT team augmentation protocol:
If your chosen vendor follows all of these steps, then chances are high that IT team augmentation will be beneficial for you, as an approach like this lets you choose team members personally and takes into account your needs.
READ ALSO: Your Guide to IT Team Augmentation vs. Managed Services Comparison
So, you have hired a provider of team augmentation services and are now all set to integrate developers into your local team. Before your new hires roll up their sleeves, it’s best to make sure that your cooperation is secure. The vendor will typically offer you to sign a Service Level Agreement, Non-Disclosure Agreement, and contracts with newly minted employees. It could be a good idea to run the papers by your local legal department or consultants to ensure everything is in order.
Relying on our 14+ years of experience in IT team augmentation, we are convinced that this business is all about finding talent who will act as parity to your internal staff. Such talent should be carefully handpicked together with the client in a customized team creation process based on their Project Scope, business goals, and vision.
Above all, a provider of IT augmentation services should go the extra mile to cater to your needs. Furthermore, it’s crucial for them to have access to a vast pool of skilled technology talent. the vendor should also cover all bases when it comes to the security and quality of engineers who will augment your squad. We at nCube rely on the pool of Eastern European tech talent to source skilled developers. Our partners such as Life360, doTerra, AstraZeneca, Greenpeace, and many more are a great testament to our reliability and professionalism when it comes to team augmentation services.
Contact us to discuss IT team augmentation opportunities with us.
