Managed Services vs Staff Augmentation: Which is better 2024?
JAN 31, 2024

Managed Services vs Staff Augmentation: Which is better 2024?

Facu Gandini
Braintly Co-Founder

Managed Services or Staff Augmentation in 2024? Both options have their pros and cons, and the decision to hire one or the other depends on various factors.

  • Managed services involve outsourcing specific tasks or functions to external experts who provide ongoing maintenance and support.
  • Staff augmentation involves hiring remote team members to work alongside your existing team, providing scalable resources and expertise.

In the fintech, construction, retail, and logistics industries, recommendations may vary based on the specific needs and challenges of each sector.

Braintly's Staff Augmentation offers a comprehensive solution to enhance team dynamics and boost efficiency. With a team of top-tier LATAM engineers, we provide cost-efficient resources, flexibility, and minimize turnovers.

Managed Services vs Staff Augmentation

What is Managed Services?

Managed services are a way for businesses to delegate specific operations to a third-party provider.

This arrangement usually involves a long-term contract where the managed service provider (MSP) takes responsibility for the functionality of the service, reducing the workload on the in-house team.

MSPs offer a wide range of services, from IT support to cybersecurity, cloud services, and network management. One key benefit is that it allows businesses to focus on their core operations while the MSP ensures that the outsourced service runs smoothly.

Additionally, managed services can help reduce costs associated with maintaining full-time staff for specialized tasks. By partnering with an MSP, businesses can gain access to expert knowledge and technology without the need for significant upfront investment in hiring and training.

What is Staff Augmentation

Staff augmentation is a flexible outsourcing strategy that enables companies to hire tech talent globally and manage augmented teams directly.

With staff augmentation, a business can rapidly scale up or down, adapting to project demands without the overhead associated with permanent hires.

This approach is popular for projects that require specialized skills for a limited period. It allows companies to extend their teams with skilled professionals who can integrate with the existing workforce and follow in-house practices and methodologies.

Staff augmentation provides the advantage of maintaining control over the development process and promoting a seamless collaboration between internal and external teams.

Moreover, it's a cost-effective solution for companies looking to fill skill gaps quickly and efficiently, without committing to long-term employment contracts.

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5 Differences between Managed Services and Staff Augmentation

The main distinction between managed services and staff augmentation stems from the extent of responsibility and control.

Managed services

  • Entail outsourcing a whole function or department, with the service provider taking on complete managerial control and accountability for the results of the work undertaken.
  • This model is generally hands-off for the client, providing a fully prepared solution that requires less regular supervision but also presents less direct control.

Staff augmentation:

  • Facilitates businesses to keep control over their projects by including individual professionals to work under their management.
  • The augmented staff enhances the existing team by contributing specialized skills as needed.
  • This model is hands-off in terms of management tasks such as payroll and HR, yet provides hands-on control in terms of project management and implementation.

The choice between managed services and staff augmentation relies on the company's requirements for control, resource management, and strategic orientation.

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Managed Services vs Staff Augmentation: Pros and Cons

Benefits of Managed Services

Choosing managed services offers several benefits for businesses, especially when it comes to specialized tasks such as IT and cybersecurity.

  • Ability to access expert knowledge and advanced technology without a hefty investment. Managed services providers (MSPs) bring a level of expertise that is often challenging and costly to develop in-house.
  • MSPs can offer 24/7 monitoring and support, ensuring that systems are always up and running, which can be crucial for operations that can't afford downtime.
  • Managed services can be more cost-effective than maintaining a full-time, specialized staff. They transform fixed IT costs into variable costs and allow you to budget effectively, paying only for what you use.

This model also helps in reducing the risks associated with compliance and security, as MSPs are typically well-versed in industry standards and regulations.

Disadvantages of Managed Services

While managed services offer many advantages, there are also some potential drawbacks to consider.

  • Potential loss of control over certain business operations. Outsourcing to an MSP implies entrusting them with significant decisions and management tasks. These may not always perfectly align with your company's practices or culture.
  • One possible issue revolves around developing a dependency on the service provider. This reliance could pose problems if the provider encounters downtime or in case of disputes regarding service quality.
  • Managed services often involve long-term contracts which may lack flexibility. This could make rapid adaptation to changes or pivoting strategies challenging without inviting additional costs.
  • External handling of business functions may raise concerns about data security and privacy. It thus necessitates rigorous checking of the MSP's security protocols to ensure your data is sufficiently protected.

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Advantages of Staff Augmentation

Staff augmentation carries several advantages for businesses looking to enhance their teams with specialized talent.

  • Quick Scaling: Staff augmentation gives the ability to rapidly increase efforts on particular projects without the obligations associated with hiring full-time employees. This aspect is invaluable in sectors where project volumes vary.
  • Enhanced Control: Staff augmentation provides more command over work procedures in contrast to managed services. Corporations can directly oversee augmented personnel, assuring that the tasks align with the company's standards and targets. This often leads to superior quality results due to comprehensive supervision and the integration of team members into the existing corporate culture and methodologies.
  • Cost Efficiency: This model offers significant financial benefits. Companies using staff augmentation save on expenses tied to recruiting permanent workers, such as employee benefits, training, and workplace facilities.
  • Access to Global Talent: Staff augmentation allows organizations to tap into a worldwide talent pool. This access enables a diverse range of abilities and viewpoints that can stimulate innovation and provide a competitive edge.

Recommended Reading: How to prepare your team for a staff augmentation

Downsides of Staff Augmentation

Despite its advantages, staff augmentation also presents several downsides.

  • The integration of external team members into existing teams can be challenging. There is a risk of communication issues and cultural misalignment, which can impact team cohesiveness and productivity.
  • Management overhead. Unlike managed services, where the service provider manages the team, staff augmentation requires your business to manage the augmented staff directly. This adds to the workload of managers who must oversee the additional team members and may lead to stretched resources if not planned adequately.
  • While staff augmentation offers cost savings in some areas, it may also result in hidden costs. These can include time and resources spent on training and onboarding new staff or potential disruptions to workflows during the adjustment period.
  • Can sometimes lead to a lack of long-term commitment from augmented staff, which may affect project continuity and knowledge retention.

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Staff Augmentation vs Managed Services: Which is choose?

Factors to Consider When Choosing between Staff Augmentation and Managed Services

  1. Assess the level of control you require. If you prefer direct oversight of team members and projects, staff augmentation may be the better choice.
  2. Consider the specific skills and expertise needed for your project. If you need specialized knowledge for a short-term project, staff augmentation can provide that expertise quickly. However, for ongoing support and maintenance, managed services might be more appropriate.
  3. Evaluate your current team's workload and capacity. If your in-house team is already stretched thin, managed services can offload some of that burden. Conversely, if you have the bandwidth to manage additional team members, augmentation can expand your team's capabilities.

Also, take into account the cost implications of each option.

  • Managed services may offer more predictable costs
  • Staff augmentation can vary depending on the length and scope of the project.

Lastly, consider the importance of scalability and flexibility for your business operations, as these can significantly influence your decision.

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When to Choose Managed Services

Managed services are often the ideal choice in scenarios where continuous, expert management of a function is needed. For instance, if your business requires round-the-clock IT support or cybersecurity monitoring, an MSP can provide these services reliably and efficiently. This is especially pertinent for businesses that lack the internal resources or expertise to manage these complex systems.

Additionally, managed services are suitable when you want to ensure compliance with industry regulations without having to invest heavily in specialized staff or training. Businesses facing high compliance burdens can benefit from MSPs who are up-to-date with current standards and can mitigate risks effectively.

For SMBs looking to focus on core business objectives without the distraction of managing non-core but critical functions, managed services can streamline operations. This option is also fitting for businesses undergoing digital transformation where the technical complexity of the transition is best handled by dedicated experts.

When to choose Staff Augmentation

Staff augmentation is a strategic choice for businesses facing short-term projects or temporary skill gaps.

For example, if your company is developing a new product and needs additional developers with specific skill sets for the project's duration, staff augmentation allows you to supplement your team efficiently.

This approach is also advantageous for companies that need to scale up their workforce quickly to meet a sudden increase in demand or to push through critical project milestones.

It is especially useful when you need to maintain control over project management and want to ensure that external team members work closely with your internal processes and culture.

Additionally, staff augmentation can be the right choice when a business is looking to test the waters before committing to a full-time hire. It offers a practical way to evaluate an individual's fit with the team and their contribution to the company before making a long-term investment.

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Industry-Specific Recommendations Between Managed Services and Staff Augmentation

Fintech: Managed Services or Staff Augmentation?

In the fintech industry, the decision between managed services and staff augmentation hinges on several factors, including

  • Regulatory demands
  • Innovation speed
  • Scalability needs.

Managed services might be the preferred choice for fintech companies that require robust security and compliance management. With the financial industry facing stringent regulatory requirements, an MSP can ensure that systems are compliant and secure against cyber threats.

On the other hand, fintech startups or those in a rapid growth phase might benefit more from staff augmentation. This method allows for swift scaling of development teams to innovate and bring products to market quickly without the burden of long-term hiring commitments.

Staff augmentation provides the flexibility to add niche expertise to the team on an as-needed basis, which can be crucial in a field that evolves as swiftly as fintech.

Ultimately, choosing the right strategy will depend on the fintech firm's current objectives, growth trajectory, and the critical nature of maintaining control over financial technologies and data.

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Construction Industry: Which Direction to Take?

For the construction industry, where projects are often time-bound and location-specific, staff augmentation can provide the adaptability required to meet shifting demands.

  • Augmenting staff allows construction companies to bring in specialized skills for the duration of a project without the long-term overhead of full-time hires. This is particularly beneficial for projects that may require niche expertise, such as sustainable building practices or advanced engineering.
  • Managed services may be advantageous for ongoing needs that fall outside the core competencies of a construction firm, such as IT infrastructure or fleet management. An MSP can take over these functions, allowing the firm to focus on its primary business objectives—building and construction.

Decision-makers should weigh the project-based nature of construction work against the continuous need for operational support when choosing between staff augmentation and managed services.

Retail's Best Pick: Managed Services or Staff Augmentation?

In the retail industry, which is customer-focused and experiences seasonal fluctuations, both managed services and staff augmentation can be highly beneficial.

  • Managed services can ensure that IT systems, crucial for point-of-sale operations and inventory management, are always functioning optimally. An MSP can provide continuous support, security, and system updates, which is vital for maintaining customer trust and satisfaction.
  • Staff augmentation can support peak seasons, like holidays or sales, where additional staff can quickly be brought on to handle increased demand without a long-term commitment. Augmented staff can assist with customer service, inventory management, or even special technology rollouts to enhance the shopping experience.

Retailers should consider their operational needs, customer service goals, and the importance of scalability in high-volume periods when deciding.

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Logistics: What Works Best?

In logistics, the decision between managed services and staff augmentation often comes down to the scale of operations and the nature of logistical challenges.

  • Managed services can be particularly useful for maintaining and managing complex logistics software systems and networks that require constant uptime and specialized knowledge. Outsourcing these aspects to an MSP can lead to improved efficiency and reduced downtime, which is critical in an industry where timing is everything.
  • For logistics companies that experience variable demand or need to ramp up for seasonal peaks, staff augmentation provides the necessary workforce flexibility. It enables rapid scaling of operations without the long-term costs associated with permanent staffing. Augmented staff can be brought in to manage temporary warehouses, coordinate large shipments, or handle increased customer service inquiries during peak times.

Logistics companies must assess their operational consistency and demand variability to determine the best approach, ensuring they can respond effectively to the dynamic nature of the supply chain.

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Conclusion: Staff Augmentation vs Managed Services: Which is better in 2024?

Deciding between managed services and staff augmentation is a strategic choice that can significantly impact your team's efficiency and your company's bottom line.

  • Managed services offer the benefit of expert management of business functions, allowing SMBs to focus on their core competencies.
  • Staff augmentation, on the other hand, provides flexibility and control, enabling businesses to address immediate needs and scale their workforce as necessary.

The right choice depends on a variety of factors, including:

  • Need for specialized skills
  • Desire for control over projects
  • Cost considerations
  • Level of flexibility required.

By carefully assessing these factors, businesses can make an informed decision that aligns with their strategic objectives and industry demands.

Ultimately, whether opting for managed services or staff augmentation, the goal is to enhance team dynamics, boost efficiency, and position your company for success in the competitive SMB market.