A Cost Benefit Analysis of Contractual Staff Augmentation

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According to Forbes, as companies around the world go global and marketplaces become more competitive, the need for software engineering has increased drastically. As a result, advanced technological solutions have become the key differentiating factor between winning and losing companies.

Businesses these days are actively looking for ways to manage bigger amounts of data to maximize ROIs. This is precisely why outsourced software development services have been the talk of the town lately.

One of the most crucial decisions that companies have to make regarding software development is hiring staff. And as costs rise, more and more medium and large scale companies are paying heed to contractual staff augmentation, as opposed to in-house hiring.

In this post, we will discuss contractual staff augmentation and what benefits it brings to companies.

*What is IT staff augmentation?*

Every company, irrespective of the size and scalability of its operations, has a certain area where it excels. Information technology may or may not always be a part of the company’s expertise. So if a company has a project at hand that needs to be worked on within a certain timeframe, they can choose to outsource it external technical staff.

The most crucial aspect of staff augmentation is that developer services are hired on a temporary basis for a predefined amount of time. The resources which are required to complete the project are provided by the staff augmentation vendor, and not the company itself.

In short, staff augmentation works as a viable alternative for companies which need IT support on a temporary basis and don’t want to incur the additional costs of having full-time employees.

But IT staff augmentation is not the same as IT project outsourcing. In the latter, companies outsource nearly all of their software development needs, while in the former, they outsource individual projects only.

If a company opts for IT staff augmentation, it doesn’t mean that they lack any software expertise. It merely suggests a dearth of a specialized skill set.

What is IT staff augmentation?

*Pros of IT staff augmentation*

Although the biggest advantage of IT staff augmentation is cost-effectiveness, there are many others. Such as:

1. A fresh perspective: The workforce of each company is conditioned to follow the rule book and stick to a shared set of values, methods, and strategies. Even if they try, there tends to be very little deviation from how the company has been going about things in the past. When you get external IT staff on board, they bring in a fresh perspective. This comes from years of working on numerous projects for clients who hail from a wide range of industries. The outsourced staff has internal capabilities and competencies that go far beyond what a single organization can possess.

Also, with someone who is not a permanent part of your organization, you can rule out the possibility of internal politics and conflicts affecting their work. They are, for all intents and purposes, immune to internal conflict.

2. Increased adaptability: Software developers in staff augmentation companies have considerable work experience under their belt. They take up projects of all sizes and varying complexities. Given their extensive experience, there will be no need for training and waiting for them to get accustomed to the work. All you need to do is assign them tasks and they’ll get to work.

3. Flexible timings: Permanent staff usually sticks to standard work timings—from early morning to evening. Now let’s say you’re running a company that needs around 40 hours of programming work this week and only 5 hours next week. The chances that you’d find a full-time employee who’d be willing to work according to this schedule are sparse. On the contrary, augmented staff will work as per your needs.
Other than that, you also won’t need to worry about downtime caused by looking for new, viable employees.

4. Increased responsiveness: This is a surprising one. Companies that aspire to increase the scale of their operations need to go through a lot of trial and error. There’s a risk of failure and lost investments in case a wrong decision is made. By getting augmented staff on board, you can shift the risk to outside the company. Instead of hiring a full-fledged permanent workforce, you can reduce the risk of failure by channeling funds toward smaller individual projects. This helps you test their acceptability in the market, be more responsive to challenges, and expand without the fear of succumbing to failure.

IT staff augmentation vs. permanent staffing

*IT staff augmentation vs. permanent staffing—what costs are saved?*

Below are some of the costs that companies save on as a result of getting augmented staff on board:

1. Infrastructure costs: These are, by far, the most prominent costs associated with software development. To begin with, you need office space, furniture, and a fast performing system. There are software licenses to be paid for and data servers to be bought. Other than that, IT infrastructure also comes with a lot of maintenance costs. You need to pay for and download system upgrades every now and then. You also need support staff which can help with downtime, updates, troubleshooting, and bugs.

When all of these costs pile up, your company might end up paying a lot more than it thought it would. This may even hamper the profitability index of said project. On the other hand, when you get augmented staff, the augmented staff vendor pays for all the infrastructure costs and related needs.

2. Cost of recruitment: Other than time, recruitment also takes up a lot of effort and money; so does training and development. Also, software development isn’t everyone’s cup of tea. You need to source external experienced professionals to train the employees. This doesn’t come cheap. Then there are additional costs such as employee benefits, payroll increments, and logistical expenses regarding recruitment drives.

Staff augmentation helps firms achieve operational excellence by letting them cut on all these costs. When a firm hires a staff augmentation vendor, they only need to worry about paying a one-time cost.

The key takeaway is that IT staff augmentation has not only made it possible for companies to streamline their business solutions at a minimum cost, but has also enabled them to handpick the skill set they want for their project. weKnow Inc. is a nearshore software outsourcing company based out of Costa Rica. For more details about our IT staff augmentation services, contact us online.