When it comes to building remote technology departments, there are three key models to consider: R&D vs. Outsourcing vs. Staff Augmentation. These options have proponents among software development firms and are common in many domains. 

A popular opinion is that these models apply to any kind of project. However, it’s only sometimes the case. Before you pick any of these approaches, it’s worth taking a look at the differences between them. 

While our article focuses on the differences between R&D vs. Outsourcing vs. Staff Augmentation, feel free to reach out to us to see which model suits your business best. As a company that launches remote teams of software engineers across Central & Eastern Europe and LATAM, we’ll gladly shed more light on these and other models of remote cooperation. Let’s begin with definitions. 

What is R&D? 

An R&D (Research and Development) Center is a branch of a tech company located abroad. The core goal of an R&D team is to generate innovative solutions. It may involve improving an existing product or developing a new solution. 

What is Outsourcing? 

Outsourcing is a model where a company hires a provider to delegate the software development process. During this cooperation, the provider sets up a team on their own, assigns a Project Manager, and is fully responsible for the delivery. The client has a limited influence on the SDLC.

READ ALSO: Outsourcing vs Outstaffing: Which one is Best for you?

What is Staff Augmentation?

Staff augmentation is a way to add team members on an on-demand basis. Not only does this approach let tech leaders find the needed skills but also helps them stay in full control over the remote team.

R&D vs. Outsourcing vs. Staff Augmentation: What is the difference?

In the R&D vs. Outsourcing vs. Staff Augmentation standoff, what are the key differences between these approaches? Let’s take a look at several parameters to find out. 

Team access

R&D: R&D units function abroad under the umbrella of the company brand. There are several possible setups. First, it can be a stand-alone engineering team under the vendor’s roof. The vendor covers HR, recruiting, retention, accounting, legal services, IT infrastructure, etc. Alternatively, you can create a stand-alone unit with a separate office, dedicated HR, accountant, and office managers. If you are looking to create a separate company, this option is best for you. 

Outsourcing: This approach lets you offload the work to the provider and wait for their team to achieve the pre-defined milestones. Typically, you neither have access to the software development team nor can oversee the SDLC. Instead, the project manager will be in touch with you to help you stay on top of the progress

Staff augmentation: With this arrangement, you’ll communicate with the team throughout the entire SDLC. You’ll track the team’s performance, progress, and day-to-day work. You’ll also build your own company culture as you see fit. And what is more important – you’ll stay in charge of the development process.

The difference: In the Staff Augmentation vs R&D vs Outsourcing paradigm, if you want to communicate and work with the team directly, it’s best to choose R&D or Staff Augmentation. Outsourcing will typically leave you out of team control. 

Team member selection

R&D: With an R&D center, a vendor will hire staff for your organization according to your vision, with the help of a dedicated recruiting team on their side. On behalf of your brand, they will ensure your R&D team is both skilled and fits your brand culture-wise.

Outsourcing: In this model, the step of team member selection is non-existent. It’s up to the provider to pull together a suitable team regarding skills and experience for your project, no matter whether it consists of shared or dedicated resources.

Staff augmentation: This arrangement obliges the provider to consult with the client during team creation. The provider handpicks and pre-approves team members according to your needs but the decision to hire is yours.

The difference: If you are choosing between Outsourcing vs. Augmentation vs. R&D, the choice typically boils down to whether you want to know who exactly works on your project. With Staff Augmentation or R&D, you’ll approve all team members yourself. 

Your project goals

R&D center: The goal with this model is more ambitious than with Outsourcing or Staff Augmentation. R&D units aim to increase your company’s value, create a long-term team,  generate and implement new ideas, build an innovative product, and introduce innovation that may disrupt the industry. 

Outsourcing: If you don’t have software development expertise, outsourcing is the way to go. The outsourced team can build a product from scratch or perform a part of development, for instance, a specific task like Quality Assurance or Cloud migration. 

Staff augmentation: The goal of this model is to resolve the scaling problem in your organization. The vendor of this model will help you access experts with the skills you need and integrate them into your team. 

The difference: When choosing between R&D vs. Outsourcing vs. Staff Augmentation, do you need to increase your company profitability, bring in the lacking software development expertise, or fill in the gaps in tech talent? Choose the model based on these goals. 

Timelines for your goals

R&D: R&D centers tend to include from 20 up to 100 people, and even more. Given its volume, building one can be a long-term game. Thus, R&D can be that high-level goal that you aim to achieve in the next 3-5 years or even longer. 

Outsourcing: It can be a long-term strategy as well, as you need a team to cover the entire SDLC, from ideation through design and development to deployment. 

Staff augmentation: Short time-to-hire is the hallmark of this model. This model lets you add the experts with the required skills within a matter of weeks – as opposed to months as with in-house staffing. It’s an effective way to add specialists for short to mid term. 

The difference: When comparing R&D vs Outsourcing vs Staff Augmentation, R&D takes more time than other approaches. If we were to compare Outsourcing vs. Staff Augmentation, the latter offers short time-to-hire. Finally, outsourcing teams can be set up fast in case of a bench, and up to 3-6 months depending on the size of the project and specifics. 

Structure 

R&D: It should be considered as a division of your company. Moreover, an R&D center may further include a director of R&D at the helm, several branches, for instance, an idea discovery department, a product development department, or an Intellectual Property department. In the tech sector, the common roles for an R&D unit are:

Supporting roles

  • Regional manager
  • HR/recruiters/people partner
  • IT infrastructure specialist
  • Office managers
  • Accounting managers

Product development roles

  • Software architect
  • Software developers
  • UX/UI designers
  • Quality Assurance experts

Outsourcing: The structure of this model is straightforward:  Client, Provider, Team, and Project Manager. This type of cooperation doesn’t leave room for the client’s involvement in the SDLC. The provider decides what kind of team structure is the best fit for the project. Instead, the client typically communicates with a project manager and isn’t concerned about what is under the hood of the development. 

Staff Augmentation: The structure of this approach is akin to that of outsourcing but with one significant difference: Staff augmentation puts the client in the spotlight of the SDLC. The client leads the remote software development process, and augmented engineers are fully integrated into the client’s company processes – from recruitment to team management.  The provider helps access tech talent as well as recruit, integrate, and retain team members. 

The difference: When it comes to R&D vs Outsourcing, the structure of R&D is more comprehensive, consisting of various departments overseen by a director of R&D. Outsourcing has a straightforward structure involving the client, provider, team, and project manager. When comparing Outsourcing vs Augmentation, the latter shares a structure similar to outsourcing but implies higher levels of client involvement. 

READ ALSO: Launching an R&D Center: An Expert Addresses Key Questions

Intellectual Property (IP) Protection

R&D: Launching an R&D is a good practice to keep IP within the company. With an R&D team, the client has direct oversight of security measures and procedures. 

Outsourcing: In this model, IP protection takes a significant place in the contractual agreements. Most providers prioritize security as their main selling point, but working with external staff always requires special legal frameworks and protocols to mitigate risks. Also, the codebase is stored on the vendor’s server until production ends and is paid in full.

Staff augmentation: Generally, the IP generated by the remote team members stays on the client’s side. Just like with outsourcing, data encryption, access control, NDAs, compliance with industry standards, IP ownership, and other measures are necessary to keep threats at bay.

The difference: In the R&D vs Outsourcing battle, R&D has the upper hand when it comes to IP protection. R&D is typically a secure environment as the client maintains direct oversight of security measures and procedures. If we look at Outsourcing vs. Staff Augmentation, the latter ensures that the IP stays within your organization. With outsourcing, IP ownership is defined in the agreement. 

Cost control

R&D: Given that R&D is like an offshoot of the client’s organization, the client’s board of directors decides on the budgeting and expenditure of their R&D efforts. It’s also worth mentioning that upfront investments and ongoing operational costs go hand in hand with launching an R&D. You can significantly reduce the cost of R&D in case of an under-the-roof scenario where the team will be located in the vendor’s office. In this case, the vendor will also cover all the necessary related team services.

Outsourcing: When comparing R&D vs. Outsourcing in terms of cost control, the latter is a more flexible approach. The client has the freedom to negotiate the price based on the type of services. Outsourcing is an ideal approach for smaller projects with fixed scope, as the price for the works can be agreed on beforehand. 

Staff augmentation: With this approach, you can pay for the time an FTE has invested into your project per month, plus a vendor’s fee. This structure is best for long-term cooperation or projects where the scope isn’t set in stone and requirements can change. 

The difference: In R&D, the client maintains control over budgeting. When it comes to R&D vs. Outsourcing, both approaches require upfront investments. However, with Outsourcing the price is typically fixed. In the Outsourcing vs. Staff Augmentation paradigm, the price for augmentation is defined by the time an FTE invests in the project each month, along with a vendor’s fee. 

Wrapping up

The choice between R&D vs. Outsourcing vs. Staff Augmentation boils often down to your goals, team dynamics, your involvement as a client, cost, and IP protection. We’ve wrapped it up in the table below:

CriteriaR&DOutsourcingStaff Augmentation
Team accessDirect Limited Direct
Team
format-ion
Through a local managerUses a provider’s teamThrough a vendor, the client approves
Project goalsInnovation, idea generationAccess to software development expertiseResolving team scaling problems
Time Long-term Depends on the project sizeFast time-to-hire
Struct-ure A comprehensive division of your companyProvider+Client +Project ManagerIntegrated into the client’s team
IPSecure, direct client oversightDefined by a contractIP stays with the client
Cost controlDefined by the clientFixed, Project-basedFTE monthly salary+vendor fee
R&D vs Outsourcing vs Staff Augmentation

READ ALSO: Remote Teams: Why Should You Build One in 2024?

Whether you’re looking for an R&D, Outsourcing, or Staff Augmentation partner, it’s best to pick one who will help you achieve success, no matter the model you select. As a company that builds remote teams for global companies, we can offer:

  • We are present in such offshore/nearshore zones like Central and Eastern Europe and Latin America so you tailor your experience with the team based on the time zone of your choice.
  • We have a proven track record in the realm of software development to walk you through the procedures of your chosen model. We’ve built skilled teams for Greenpeace, Encore, CrossEngage, Life360, and AstraZeneca, to name a few. 
  • We offer an established recruiting process with a personalized candidate assessment conducted by senior–level engineers, English testing, and soft skills check.
  • We are flexible enough to provide you with various engagement models and are ready to align with your specific technology needs – from R&D and Outsourcing to Staff Augmentation. 
  • We take care of all the hassle connected to HR management, accounting, vacation and sick leave management, etc. You can fully focus on your project and team performance.
  • We have the adaptability to rapidly scale your team within 2-6 weeks so you can optimize your resources faster and achieve your business goals efficiently.
  • We have experience across multiple domains. We’ve helped over 120 companies in e-Commerce, Fintech, Healthcare, Marketing, Telecom, to name a few. 
  • We have a network of 125,000+ technologists with expertise not only in generic technologies but also specializing in AI/ML, Big Data, Data Science, IoT, and more.

Let’s connect.

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