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 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.
What are team augmentation services and managed services?
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 on a daily basis, 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 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 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:
IT team augmentation: The client manages an entire development process.
Managed services: The client only provides project specifications, the rest is managed by the provider.
IT team augmentation: Direct access to each team member.
Managed services: No direct access, communication goes through an account manager or project manager.
IT team augmentation: The client gets to interview and hand pick team members (after the provider’s internal screening).
Managed services: The team is built by the provider.
IT team augmentation: Typically, a cost-plus model, Salary plus fee.
Managed services: A fixed or hourly payment model based on the provided solution.
IT team augmentation: The client retains control over the development process.
Managed services: Software development is handled by the provider.
In this part, we’ll play a kind of comparison game to distinguish the benefits and potential shortcomings of both approaches.
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 services 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.
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.