Staff Augmentation as a service versus Software Development as a Service – Which solution is best for your business?

While executing a project, knowing which path to choose is vital for growing your businesses. This article offers an insight into two popular IT outsourcing strategies: staff augmentation and software development as a service.

We discuss the unique benefits of each model, when to consider each one, and how to measure the performance of the service providers.

According to the ReportLinker’s analysis Global It Outsourcing Market 2020-2024, by the end of 2024 the value of the IT outsourcing will have grown by 98 billion dollars. As the IT outsourcing industry is getting bigger, the demand for flexible solutions is growing and new types of service are evolving. Understanding the nature of the different types of outsourcing models is the key to choosing the right one. Due to the dynamic development of new trends, the associated terminology is not codified or standardized, and even the services' names are often being mixed up and confusing.

In this article, we focus on two major trends in the IT outsourcing industry: IT staff augmentation and software development as a service. We take a quick but detailed look at both methods, analyzing the key aspects and differences. You can apply this knowledge when selecting a solution for your project at hand to minimize short- and long-term costs and achieve higher productivity and efficiency.

IT staff augmentation is a service that allows you to quickly fill the skill or capacity gap in your in-house team. In this model, you hire a person indirectly through a staff augmentation service provider. Augmentee’s location can be in-house, nearshore, or offshore. The arrangement between you and the vendor can be short and long term, part-time or full time, paid per hour or on a fixed-price basis.

Short-term cooperation is normally used for a specific project or to cover temporary needs emerging either due to increased workload or urgent demand for additional technological expertise. The long-term one is often a part of company strategy used to avoid costs associated with hiring directly or to reach for talent and expertise that are either far too expensive or not available locally. The main characteristic is that you pay the salary to the vendor and manage the employee as part of your in-house team.

This solution can offer several important advantages compared to hiring directly:

• Speed – with the right solution provider the time-to-hire is reduced to 1 to 6 weeks
  
  
• Cost savings – you avoid a costly hiring procedure; if you hire a remote addition to your team, the savings increase even further
  
  
• Simplicity – b2b agreement is administratively much simpler to manage
  
  
• Scalability – the speed, flexibility and optimal cost of this solution enables you to quickly add talent whenever they are needed, and for as long as they are needed.

IT staff augmentation model offers a few additional benefits compared to SDAS:

• Control – managing the people directly gives you a full knowledge on their work progress and performance
  
  
• Full alignment – by utilizing your onboarding procedures you can ensure that hired professionals know the company values and adhere to its culture and standards.

Software development as a service enables you to make use of a full and complete service, focused on the features you need to be developed. It includes several activities, like planning, designing, programming, testing, bug fixing, and more. It not only allows development but also the maintenance of a software or an application. The software development as a service provider can deliver his services on a short- or long-term basis, covering an entire project, or taking care just of some parts of it. Nowadays the pricing models are quite flexible: time-and-material, fixed-budget, per sprint, or a combination of those.

Outsourcing software engineering to third party companies can be a way to reduce price while lowering the workload. You can also use it to test some new solutions and technologies that you have no expertise in, without investing your time and money to build an internal capacity. The responsibility for the delivery of agreed software lies on the vendor side.

The advantages of using software development as a service instead of hiring software engineers in-house are like those of IT staff augmentation: SDaS is faster, cost-effective, it is simpler and offers higher scalability compared to hiring directly.

If we compare the IT Staff augmentation to SDaS, the latter offers additional benefits, connected to its specificity:

• Productivity boost – internal employees are not engaged in the process and can focus on other important tasks for your business
  
  
• Risk mitigation – responsibility to deliver functional software lies on the vendor side
  
  
• Innovation – using SDaS offers a possibility to try new technologies that your in-house team has no expertise in
  
  
• Access to expertise, support and internal capacity of the third-party company.

This model enables businesses of different dimensions and technological advancement to innovate and to effectively adapt to the market, to new environments or needs, without being limited to the skillset of their in-house teams.

To help you answer this question we prepared a comparison of some key aspects and typical use cases for both services.

If you do not have an IT department, or do not want to engage your in-house team, when you want to kick start the project without any further delay and be able to scale-up and down on demand, use software development as a service to outsource your project

If you want to keep 100% control over the project development and the cost, as well as a total flexibility, IT staff augmentation will be the right model.

Most times, cost is the core metric considered when staffing, but it inevitably leads to a cost/quality trade-off that can affect the organization’s end-product. Therefore, it is imperative to establish a set of metrics that defines success, or lack thereof.

In the IT Staff Augmentation model, the responsibility for the performance and productivity of the augmentees is on your side. So how to determine the success of the service delivery by your supplier? Those basic metrics that can serve as a template for measuring the effectiveness of your vendor:

• Supplier’s ability to provide augmentees in a timely manner
  
  
• Supplier’s ability to source augmentees who can perform their duties with minimum training
  
  
• The quality of work being done by the temporary personnel

Your company’s expectation plays a massive part in determining the performance of the supplier. To achieve maximum transparency and guarantee desired outcome you should sit down with the stakeholders in your company and determine what the expected outcome of the project is.

Translating those expectations into written standards will allow you to present them to your supplier to discuss and agree on the key aspects of your cooperation. When that is done, you will have dynamic parameters to extend your performance evaluation capabilities that will help you decide whether to continue with the current IT staff augmentation service provider or to look for a new company to work with.

When you outsource your project to the third-party company you should be interested in metrics that make sense to your company and explain the value you receive from the solution provider. Those KPIs will be different from those you use to measure your inhouse team performance, and different from those employed by the vendor for self-assessment.

Using our own experience, we have gathered a core set of indicators. You can use them as a benchmark in setting reasonable yet ambitious targets for the vendors you partner with.

• Number of completed stories by sprint
  
  
• Number of bugs found in the QA stage
  
  
• Number of bugs found in production stage
  
  
• Number of deferred bugs for next sprints.
  
  
• Lead time. This is the time it takes the vendor to fix a bug or fulfil a new requirement
  
  
• Code coverage. It is a technical quality measure that determines which sections of code have been executed through a test run, and which sections have not

Then, at the end of each sprint delivered by the vendor, the stakeholders in your organization need to decide if the product is releasable to production environment. If it is, the vendor can be said to be reliable.

In this article we discussed only two popular models of IT outsourcing: staff augmentation and software development as a service. For some projects it may be necessary to combine both approaches or use entirely different one, i.e. dedicated teams. We hope that the knowledge we share in this article can help you carry out a detailed cost-benefit analysis and chose the model which is right for you.

If you are still unsure about what approach to choose, or want to explore the outsourcing models that are not covered in this article, it's always worth to turn for advice to an experienced IT consulting company. And remember, any outsourcing model is only as good as the company that provides it for you. Taking time to evaluate the vendors is the next big step toward successful project execution.