Managed Development vs. IT Staff Augmentation, How Do They Differ?

Shushmitha Thambiraj

August 4, 2022

Business

5 mins

You need to increase your organization's IT capabilities. You don't want to increase your internal team. But, you're not sure which path suits you best... There are two options you can consider when increasing your team through outsourcing. Which works best for you depends on a number of factors including your current team composition and the complexity of the project. Based on the requirement, and deciding factors, you can choose to go with a managed development approach or a staff augmentation model. But how do these differ, and how do you decide which one to follow?

Outsourcing of IT is not a recent development, but the changes due to the COVID pandemic and the increase of work from home staff has certainly made its mark on the industry at large. Research has shown that people have switched to a nearly fully remote working model without any impact on their productivity, and in fact in certain industries productivity has seen a fair increase due to employees having the flexibility to work from a preferred setting. The benefits of this are not lost on organizations and management teams, additionally to the increase in productivity, they are making further savings through cutting down on operational costs. The remote working model opens up further opportunities for organizations by removing geographical boundaries and increasing the talent pool that was previously available.

As previously mentioned, there are two main outsourcing strategies to consider: managed development, and staff augmentation.

Managed development

In managed development you hire an entire IT team. This team of professionals will be responsible for your product from its inception to delivery, in many cases extending their services to include maintenance and release of new versions through the lifetime of the product. The team will comprise of the typical roles required for an IT project including:

  • Project manager
  • Business analyst
  • Software engineer
  • UX designer
  • Quality assurance engineer

The team composition and size can vary depending on the size and demands of your requirement.

Your main responsibility will be to assist this team with business requirements. From that point on, the team will work with you to understand the business requirement and scope, create a project plan and budget, and develop your product.

The project manager will guide the team and maintain open communication with you to ensure that you are kept up to date on happenings within the team, and development tasks, while ensuring that the team meets its deadlines and delivers on expected milestones. Your responsibilities are reduced as is the time you need to spend to manage the team, freeing up your time to work on other activities within your organization.

A managed development team can work on either a fixed bid, or a time and materials model, and it will be up to you to negotiate the best deal for you.

IT staff augmentation

Staff augmentation works well when you already have an internal team and are lacking just the numbers, or a set of particular skills to complete a project. Staff augmentation can be further separated to short term or long term. Short term staff augmentation can happen during a certain busy period in the year when you do annual maintenance of your products, or have a sudden requirement to build a product quickly. Long term augmentation works to enhance your existing team, filling a skill-gap, or simply to reduce operation costs. In both models the staff will be paid by their parent company, and you will have contracts with the parent company, not the employees themselves.

How do these models stack against each other?

Recruiting

Management development

There is no particular recruiting process that you need to be a part of. You pay your outsource partner to develop the product, they are responsible for the recruitment of a team capable of delivery. In some cases you may be able to request to be a part of the recruitment process, or at least interview and choose team members from a talent pool.

Staff augmentation

Your partner will provide you with CVs of candidates based on your requirements. You will be responsible for interviewing and selecting suitable candidates.

Onboarding

Managed development

The onboarding process will be carried out by your partner. You may play a role in an onboarding meeting to introduce the client.

Staff augmentation

You and your team will need to plan the onboarding process and ensure that the new team member is made to feel as comfortable as an internal employee.

Responsibility and ownership

Managed development

The responsibility of delivery falls squarely on the shoulders of your partner and the project manager of the team. Your responsibilities are mostly limited to communicating business requirements, being present at meetings to answer any questions, and generally maintaining communication.

Staff augmentation

The responsibility and ownership of delivery rests with you and your team. You will be able to manage the project like any other internal project.

Cost

Managed development

In a managed development model you pay for the scope of work. It can be either a fixed bid, or a time and materials model.

Staff augmentation

Normally you pay a monthly or daily amount as agreed on with your partner. They manage the salary and other costs of the employee.

But, which model works best for me?

Managed development and staff augmentation are both great models to outsource IT development. Depending on your requirements, you can decide which works best for you. For example if you are a start up, or building a new product from scratch, or highly specialized in a business vertical and operate with a skeleton IT team, a managed development model will suit you best.

Alternatively, if you already have an inhouse team, you just need to fill some skill gaps, or just need a few more people during busy periods, staff augmentation might be the best fit for you.

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Asitha Kobbekaduwa

Lead UX Consultant

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