Staff Augmentation vs. Managed Services: An In-Depth Comparison

06 Jun 2024

Staff Augmentation and Managed Services are two popular collaboration models today. Choosing the right collaboration model to optimize operations and improve efficiency is very important. This article will help you better understand these two models, compare them, and provide guidance for choosing the most suitable model for your business.

What is Staff Augmentation?

Staff Augmentation is an outsourcing business model in which a business temporarily adds outside personnel to its existing team to meet specific work needs. This model allows businesses to increase resources without having to carry out long-term recruitment processes.

Information technology (IT) is the sector that accounts for the largest share of the Staff Augmentation market due to the high demand for technology skills and the rapid growth of this industry. 

According to a report by Global Industry Analysts, the Staff Augmentation market in the IT industry is expected to grow from 25 billion USD in 2020 to 40 billion USD in 2025.

Staff augmentation
Staff augmentation is a flexible hiring model

Benefits of Staff Augmentation

  • High Flexibility: Businesses can quickly add or reduce personnel based on the specific needs of the project or business phase.
  • Cost Savings: Minimize costs related to recruitment, training and long-term employee benefits.
  • Control of Human Resources: Enterprises maintain direct control over human resources and work processes, ensuring project quality and progress.
  • Highly specialized: Easily find and hire experts with specific skills for special projects.
  • Reduce risk: Limit risks associated with hiring and firing long-term employees.

When to Use Staff Augmentation

  • Short-Term Project: When a business needs to supplement staff for a specific project in a short time.
  • Lack of Professional Skills: When internally there are not enough necessary professional skills.
  • Quick Boost: When you need a quick boost in performance without wanting a long-term commitment.

What are Managed Services?

Managed Services is an outsourcing model in which a business entrusts one or more IT functions to an external service vendor. The supplier will be responsible for managing, operating and maintaining these services, ensuring they operate continuously and effectively.

The global Managed Services market has grown strongly. According to a report by Mordor Intelligence, managed security services account for about 40% of the entire Managed Services market and are expected to grow rapidly in the coming years.

Managed services
Managed services involve outsourcing entire business functions to a third-party provider

Benefits of Managed Services

  • Cost Optimization: Reduce costs of managing and maintaining IT systems, helping businesses budget more easily.
  • Professionalization: Using the services of experts with extensive experience and knowledge, ensuring high service quality.
  • Focus on Core Activities: Businesses can focus on core business activities instead of worrying about IT issues.
  • Enhance performance: Improve the performance and reliability of IT systems.

When to Use Managed Services

  • Long-Term Projects: When you need to manage and maintain IT systems for a long time.
  • Continuous Requirements: When IT systems need continuous monitoring and maintenance.
  • Lack of Internal Manpower: When a business does not have enough internal resources to manage complex IT functions.

Staff Augmentation vs. Managed Services: Key Differences

Control and Oversight

Staff Augmentation: The business maintains direct control over additional work and staffing. This allows for close management of progress and quality of work.

Managed Services: The service provider will be fully responsible for managing and monitoring the assigned services. Businesses have little to do with day-to-day details but must ensure suppliers comply with service agreements (SLAs).

Cost Structure

Staff Augmentation: Costs are usually calculated by the number of hours or working days of additional personnel. This is a financially flexible option when additional short-term resources are needed.

Managed Services: Costs are typically priced according to service packages, including fixed monthly or annual fees. This model makes it easier for businesses to budget and control costs.

Adaptability and capacity for expansion

Staff Augmentation: Flexible and easy to adjust the number of personnel according to project needs.

Managed Services: Optimized for continuous expansion and upgrades. Managed service providers are often able to adapt well to changes and new requirements from businesses.

Service Level Agreements (SLAs)

Staff Augmentation: The agreement usually focuses on providing personnel with the right skills and meeting project schedules.

Managed Services: SLAs are more detailed, including performance standards, response times, and overall service levels that the provider must ensure.

Nature of Work

Staff Augmentation: Work is typically short-term, project-based, and responsive to specific needs. Tasks are often about solving immediate problems or completing a specific piece of work.

Managed Services: Work is long-term in nature, focusing on continuous improvement and sustainable management. The service provider not only solves the problem but also ensures the system operates efficiently and continuously.

How to Choose Between Staff Augmentation and Managed Services?

Assessing Your Business Needs

First, you need to clearly identify the current needs of your business. This is an important step to ensure you choose the model that best suits your current situation and long-term business goals.

  • Short-Term Project: If your business needs staff for a short-term project, IT Staff Augmentation may be the optimal choice. This model allows you to quickly add needed manpower without a long-term commitment.
  • Specific Skills: When your business lacks specific technical skills, Staff Augmentation helps you quickly fill this gap by hiring external experts with the necessary skills.
  • Long-Term Management and Maintenance of IT Systems: If your goal is to maintain and continuously improve your IT system, Managed Services will bring greater efficiency. The service provider will be responsible for managing, operating and ensuring the system operates stably.

Considerations of a strategic nature

When deciding between Staff Augmentation and Managed Services, consideration of strategic factors is indispensable.

  • Long-Term Goal: If your business's goal is to continuously improve and maintain a stable IT system, Managed Services will be a better choice, helping you ensure that the system is always monitored and improved. by the time.
  • Corporate Culture: If your business has a culture that is flexible and adapts quickly to changes, Staff Augmentation may be a better fit. On the contrary, if the business tends to focus on stability and continuous improvement, Managed Services will be a reasonable choice.
  • Industry Trends: In industries that require high security such as healthcare, Managed Services are often preferred due to their ability to ensure compliance with strict regulations. In contrast, information technology industries have more flexibility in using Staff Augmentation to quickly respond to software development needs.
  • Budget: Staff Augmentation often has flexible costs, based on hours or working days, while Managed Services often have fixed monthly or yearly costs. 
Choose Between Staff Augmentation and Managed Services
Staff Augmentation vs Managed Services, which is better for your business needs?

Industry-Specific Applications

Each industry has its unique characteristics, so customizing services to suit the specific industry is necessary.

  • Healthcare Industry: In the healthcare industry, Managed Services are often preferred for their ability to provide seamless service and ensure compliance with strict standards of data security and patient privacy.
  • Finance Industry: Similarly, the finance industry also requires high levels of security and compliance. Managed Services can help businesses in this industry manage and maintain IT systems safely and effectively.
  • Information Technology Industry: The information technology industry is highly flexible and requires continuous development. Staff Augmentation is ideal for quickly adding experts to software development or other short-term projects.
  • Retail Industry: The retail industry can require flexibility and the ability to respond quickly to market changes. Staff Augmentation can help businesses quickly adjust resources to meet seasonal needs.

In short, the final decision between staff augmentation and managed services depends on each organization's specific needs, including project complexity and budget.

FAQs about Staff Augmentation and Managed Services

How do managed services work?

Managed Services is where an external provider manages and maintains a business's IT functions, ensuring the system operates continuously and effectively.

When should a business consider staff augmentation?

When you need to quickly supplement human resources for short-term projects or when you need specific professional skills that are not available internally, businesses should use Staff Augmentation.

What are the cost implications of managed services vs staff augmentation?

Managed Services costs are typically fixed monthly or annual fees, making it easy to budget. Meanwhile, Staff Augmentation costs are calculated by the number of hours or days worked by additional personnel, providing financial flexibility for short-term projects.

"MOR Software becomes great not only because of the achievements and scale we have reached, but the best thing we have is our colleagues, the employees who have built a solid foundation for this company along with me."

Vu Van Tu

CEO

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