Staff Augmentation vs Outsourcing: Which model to choose for your business?

You're handling 3 critical projects at once, but your in-house team feels overwhelmed and lacks the technical expertise to meet the project timelines. At the same time, you’re constantly juggling between cost, control, and speed cycle.

The challenge? Finding the trusted external vendor without losing control or breaking your budget.

You've two options: outsourcing and staff augmentation. While your competitors are rolling out digital products faster, you need to make the right choice quickly because the wrong one can inflate your budget and slow your growth.

To give you a quick answer, if your goal is to get more output, such as delivering complete projects without handing them control over the development process, then choose outsourcing.

But if you want your internal team to be in sync with the external vendor and achieve predictable progress with greater control over day-to-day execution, then staff augmentation should be your go-to choice.

In this guide, we'll break down the differences between staff augmentation and outsourcing so you can confidently choose the model that aligns with your business goals.

What is Staff Augmentation?

Staff augmentation involves businesses hiring temporary staff to fill specific expertise and skill gaps within the company. The outsourced development team (developers, testers, designers) becomes part of your existing team, expanding your capabilities.

For example, you're looking to add 2-3 skilled DevOps engineers to augment your team's capabilities and fulfil specific requirements.

This approach solves a common business challenge: Let's say you have a lot of projects on your plate, your existing team is already occupied, and you urgently need more people for one of them.

But doing full-time hiring means endless interviews, salaries, and long, month-long processes. That becomes expensive and time-consuming.

Best part? You can scale IT resources up or down as needed for your project, and your team still maintains oversight.

This model has proven effective across industries.

How Staff Augmentation Works?

• You pay per engineer, often monthly or hourly.
• You keep control over project management, quality, architecture, and deadlines.
• The external team follows your tools, workflows, and processes.
• It's ideal when you already have a strong internal tech team.

What is Outsourcing?

Under project outsourcing, a business partners with an external firm to complete projects for a certain period. Sometimes only specific aspects are outsourced, while other times the full product development cycle is handed off.

Though they may seem similar, outsourcing and staff augmentation are fundamentally different. With staff augmentation, your technology vendor fills skill gaps while you retain control over the development process.

But with outsourcing, you work with a dedicated development team that operates independently; they decide everything from planning through execution.

How Turnkey Project Outsourcing Works?

• You pay for a completed project, not individual people.
• The vendor uses their own team, tools, and processes.
• You focus on the results, not daily management.
• Best for businesses without internal tech expertise.

A Quick Comparison of how Staff Augmentation is different from Project Outsourcing

Here’s what makes staff Augmentation different from project outsourcing

Let’s explain these differences in detail -

1. Control and Ownership of Delivery

In case of Staff Augmentation, though your in-house team is hiring temporary workers, the technology partner will still follow your project processes. The client will have direct control over the development process and the augmented staff.

But when you outsource the design and development work to an outside technology vendor, who will build their team, manage the projects, and give results, your involvement is minimal. This can have significant consequences as you don’t have visibility into their daily workflows.

2. Flexibility and Scalability

Staff augmentation is a more flexible approach than project outsourcing, as you (the client) can scale or descale resources as per project requirements.

While the project-based outsourcing model follows a more rigid approach, with the project scope defined beforehand, especially for fixed- or milestone-based projects.

For example, for MVP or website design, staff augmentation outsourcing is not a feasible option for projects that require continuous changes.

3. Cost Structure

IT staff augmentation services are more cost-effective because costs are flexible and billed under a time-and-materials engagement model. It typically costs between $40-$100/hour and $100-$200/hour onshore.

So, this saves your recruitment expenses that would otherwise be spent on hiring permanent full-time resources, and there are no additional expenses for investing in office space or purchasing equipment.

But project outsourcing is a lower-tier approach, as you define the project scope and hand it off to a third party. It can cost as little as $20K or as much as $100K+.

But if there are sudden changes in project requirements or feature updates, it might increase project costs in the long run.

4. Client Control and Management

In staff augmentation, you’ll have better control over your business operations. It's like hiring software developers who will follow the organization's structure, report to your manager, and follow the company’s processes.

The augmented staff will not disrupt your internal workflows, as you’ve control over how you handle sprints, the review cycle, and communication.

Outsourcing projects to a third-party vendor means you lose daily oversight and control of the project, and if there are any changes along the way, things can become a little complicated.

Here’s what outsourcing looks like

5. Onboarding time

Staff augmentation reduces onboarding time for tech professionals, allowing them to start working on the project quickly. A little time can be invested to help them understand your processes and systems.

However, the onboarding time required to set up a dedicated development team is longer, as they need to understand project scoping, define deliverables, and the contract.

Benefits of Staff Augmentation

Here are a few advantages of choosing a staff augmentation model for your business -

1. More control  

With the physical presence of hired specialists on-premises, businesses have direct oversight over the working of a specialist and the progress of the project. Furthermore, companies have the liberty of involving the augmented staff in multiple projects, according to the business requirements.   

2. Scaling flexibility   

Through the staff augmentation model, businesses enjoy the flexibility of scaling up or scaling down their staff/teams. In case a project expands or contracts over time, or timelines change, a business doesn’t need to worry about hiring or firing additional employees. You simply pick the most suitable outsourced people for your project and scale according to business needs.   

3. Reduced hiring costs and retention efforts

Since IT staff augmentation providers handle administrative duties, a business does not need to worry about recruiting, hiring, retaining, or incurring the costs of a full-time employee.

This eliminates the lengthy recruitment process while giving you the flexibility to scale the team as per your project requirements.

The staff augmentation model works on a pay-as-you-go basis—you're paying for what you need when you need it. This proves to be more cost-effective than the project outsourcing model, as training costs and benefit costs drop to $0 since there's no hiring of permanent staff.

4. Expertise  

And this is also true: with rising skill shortages of IT professionals, hiring itself has become a headache for many organizations, so staff augmentation can be a blessing, as you can handpick the best industry talent for your business.

5. Better internal integration  

The staff augmentation model enables the smooth integration of external hires into an internal team for a project, as opposed to working with a third-party vendor team. In the latter case, there might arise some compatibility issues rooted in cultural and technological differences between the parties.   

Drawbacks of Staff Augmentation 

Here are a few limitations of Staff Augmentation -

1. Infrastructure and resource arrangements  

Sometimes under the staff augmentation model, the company needs to make necessary infrastructure and managerial changes/additions. Businesses need to hire or reallocate project managers to manage the temporary hires and even provide additional office space according to the size of the augmented staff.   

2. Initial training on company workflows  

Although you get the most skilled and proficient hires, some resources still need to be devoted to training, as well as educating them about your company culture, operations, and work ethics. This might sometimes slow productivity down, in the initial period, until the outsourced staff gets a hang of your internal business workflows and protocols.  

3. Complete responsibility and risk  

Through staff augmentation service, businesses just get the required resources for a third-vendor company. Therefore, the complete development process, quality control, and hitting the deadlines, are to be looked after by businesses opting for augmented staff services.  

4. Communication barriers

Once you’ve brought in resources for your project, there's a high chance of communication barriers, time zone and cultural differences.

But it also depends on whether the staff augmentation company you choose to work with fosters a culture of regular team meetings, have clear communication channels, and ensures that your in-house and augmented teams are in close sync with each other.

5. Compliances and Legal Complexities

The downside of working with a staff augmentation partner is that there is a risk of data breaches that expose the client’s data, information, and trade secrets.

A study from IBM states that the global average cost of a data breach range around $4.4 million.

Note: If you’re augmenting a software team, you need to ensure that your on-demand tech talent follows the security architecture practices and ensures that the client’s data is end-to-end encrypted.  

Benefits of Project Outsourcing 

Here are a few benefits of Project Outsourcing -

1. Effective project management   

In the project outsourcing model, the entire project is managed by experienced, proficient industry outsourcing service providers. Furthermore, the training required for an outsourcing company to effectively complete your project would most likely be little or none at all.   

CIO magazine research stated that ‘CIOs find data science and analytics positions most challenging IT jobs to fill’.  

The outsourced project is carried out more effectively as outsourcing companies may leverage their internal economies of scale within their key competencies for a project, giving optimal results.   

2. Reduced costs  

As per the project outsourcing model, the responsibility of putting together, training, and handling a remote team falls on the vendor. Furthermore, delivery of the final product and meeting the quality standards, are also looked after by the vendor. Therefore, there is no additional management overhead for additional employees with project outsourcing.   

In fact, in a survey by Statistics Brain Institute, 44% of American companies that participated said reducing expenses was the key reason for choosing the project outsourcing model. 

3. Fewer turnaround times   

Under project outsourcing, the velocity of teams collectively is comparatively higher, and therefore, project turnaround time is relatively less. While deadlines are often more flexible and negotiable with in-house/internal teams, an outsourcing company’s success is decided by its timely deliveries.  

4. Focus on core business functions  

When a business outsources the product development cycle, they have a window to focus on more crucial, core aspects of the business. Project managers have the room to free up time for in-house employees by outsourcing some development tasks.  

By distributing the workload of in-house teams, the utilization of onsite employees becomes more flexible. This way they can be redeployed to work on high-priority projects or projects that are focused on or around the company’s area of expertise.  

5. Scalability  

If a project grows over time or if additional resources are required, it’s easy to scale using the project outsourcing model.   

6. Risk sharing  

Usually, under the project outsourcing model, any project delays, failures, or liabilities that may arise are the project outsourcer company’s risk.  

Cons of Project Outsourcing 

Here are few limitations of Project Outsourcing -

1. Less project controls  

Since the control of the project lies with the outsourced party, businesses lose direct managerial control over the project. Outsourcing IT projects means leaving the project goals execution, workflows, and delivery deadlines, all up to the outsourcing company. In case of communication gaps, this would turn the whole project and experience around.   

2. More difficult to integrate with internal systems  

It can be more difficult to integrate outsourced projects with internal systems. This is because it requires the business to align with the outsourced IT team.  

Because you give up direct oversight with this model, you may run into some quality issues with the final product, which can harm productivity, as well as general team morale as employees, managers, and outsourcing vendors try to figure out who is responsible for these issues. Coding errors that fall short of your firm’s rigorous development standards, undisclosed technical debt, or other technical problems originating from an outsourced development team can be time-consuming and difficult to resolve.  

3. Difficulty in finding the right partner and kicking off the project 

Companies often experience a hard time looking for the right and most suitable outsourcing companies. It is important to invest time in finding the same and be in constant touch or engaged all along the development process to get optimal results.    

Furthermore, all aspects and components of the outsourced project need to be finalized during the planning stage, and legalities and documentation must be done and dusted, all before the project kicks off. 

Which One Should I Choose for my Business: Staff Augmentation or Outsourcing?

Though we’ve covered the advantages and disadvantages of Staff augmentation and Project-based outsourcing, here’s the quick cheat sheet for you to help you pick the right outsourcing model for your project needs -

To not select the wrong outsourcing model, we’ve covered a quick decision matrix to help you make the right choice -

When to choose staff augmentation?

• Need to scale your team quickly without long-term hiring commitments. For example, if your project requires expertise in machine learning, you can bring in a data scientist who can provide the skills you need.
• Want to have direct control over the project progress and workflows.
• Keep the project details confidential, as you don’t want the third-party vendor to know those sensitive project details.
• Skip outsourcing if the project scope changes based on the user’s behaviour.
• Ease of collaboration between in-house and augmented staff.

When to Choose Outsourcing?

• You want to focus on core business activities while delegating specific functions to an outside third-party vendor
• Do the faster product launches and keep up with customer demands
• If your goal is to save project cost in the long run, then a fixed pricing model would work in the long term

How can BigOhTech help me fulfill my Business's Staffing Needs?

Yes, we know that choosing between staff augmentation and outsourcing has never been easy. Of course, there’s never a one-size-fits-all approach because there are a lot of factors that affect which approach is feasible, such as -

• Whether you want defined results, such as ship this feature or develop this platform
• You want to manage the day sprint execution
• You want higher control over the roadmap

No matter whether you’re looking to hire software developers for a project or a full-stack development team, we've got you covered.

FAQs:

Q1. What is included and excluded in each business model (Staff Augmentation vs Outsourcing)?

Here’s what comes and doesn’t come under the scope of staff augmentation -