Project Outsourcing or Staff Augmentation — Which one is better for your business?

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There has been a paradigm shift in the way organizations perceive human capital investment. Every
enterprise, through advanced business processes and technology advancements, strives hard to gain
that extra yard which will enhance their operational efficiencies and eventually result in a favourable
bottom line. With globalization and IT advancements, there are projects galore and the execution of
these projects within a stipulated timeframe, budget and to client’s specification is critical to the survival
of business in a competitive world of consumerism. There are primarily two delivery models- staff
augmentation and outsourcing which form the basis of the new human capital investment models to
plug the void created by lack of existing skilled resources.

A critical IT project demand skilled resources to meet the deliverable window within the stipulated SLA’s
but very often seen that the business equation and requirement change in the agile delivery model
resulting in the change of project dynamics and the need for new skill sets. With staff augmentation, the
business has the liberty to scale up or down the existing workforce depending upon the needs of a
specific project. There is a minimal business risk in doing so as the risk is transferred to the
augmentation firm. It shoulders the cost and liabilities of an augmented workforce. The augmented
workforce provides specialized expertise and integrated into the internal process to meet the aggressive
project timelines. And just like any other delivery model staff augmentation has few drawbacks. It still
requires imparting training to the new staff to align the resources with the company’s processes and
tools. Additional resources mean more management overhead as more supervisors required to
effectively manage them.

Project outsourcing, on the other hand, allows companies to transfer the onus of the entire project to
external expertise so that they can continue to focus on their core operations. In a managed services
model, management, operations, and process delivery handed over to an external service provider who
is responsible for adopting maintain and improving best practices. The other factor which makes
outsourcing an attractive long-term strategy is the reduction in management overhead, cost of training
and the complexity of employee vs contractors issue. Through project outsourcing, the fixed cost
(employee) is shifted to variable cost(project) which is proportional to the current level of activity in a
project. While this model has benefits, it comes with its own share of disadvantages. Lack of control,
finding the right outsourcer and internal resistance are some of them. The efficacy of this model is
dependent on the size of the project; a small size project might not be as cost-effective under this
model.

There is no right or wrong model. Each business to their own, with each of these project sourcing
models influencing a business strategic staffing and consulting strategy in their own ways. Some
companies might even use a hybrid model which has the best of both the deliverable models, but
eventually, it boils down to project requirements, intricacies of the project and the aggressive project
timelines which have to be met.

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