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The Real Difference Between Staff Augmentation, Outsourcing, and Direct-Hire Contracting

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The Real Difference Between Staff Augmentation, Outsourcing, and Direct-Hire Contracting

Staying nimble in today’s fast-paced digital world is a challenge. Between uber-competitive markets, the tug-of-war for top-tier talent and ever-changing deadlines for deliverables, it’s hard to keep up. As your company develops exciting new projects, you may need an extra hand to get the job done. When that happens, you’ll want to know your options, especially what hiring models may best fit your situation.

Today, we’ll go over the ins and outs of the most common models: staff augmentation, outsourcing and direct-hire contracting.

Content:

1. What is Staff Augmentation?

The staff augmentation model is a way to fill a temporary skills gap at your company by contracting a vendor that can supply your firm with the human capital it needs either for short-term or long-term projects. Let’s imagine that your company receives an interesting project from a top client, but you know you’ll have trouble making it happen. Perhaps the project requires a programming language that your staff doesn’t know well, or the deadline is a tight turn-around.

Whatever the reason, your in-house team can’t handle it all.  

That’s where staff augmentation comes into play. With it, you can hire one or more team members from outside the company to join your team. Often, these team members will have the core competencies and availability to help complete the project. Remember, the in-house team stays intact; it’s simply supplemented by extra team members to get the job done. This is great for retaining your company’s top talent and maintaining quality expectations without overwhelming your team with new business functions. 

There are plenty of pros to this model. Generally speaking, it allows for greater flexibility and dynamic adaptation to project needs. For instance, since staff augmentation fills gaps where needed, these workers will no longer be part of your team when the project ends. Staff augmentation is ideal for shifting project requirements, as you don’t have to needlessly hire in-house staff members. In this way, your company strengths are leveraged.

To learn more about the benefits and challenges of staff augmentation, check out our in-depth guide here.


Staff Augmentation Modalities: In-Country, Offshore, and Nearshore

Remember that staff augmentation has three different modalities. Depending on the geographic location of the workers, staff augmentation can be in-country, offshore or nearshore. All three have their benefits and drawbacks, which we’ll mention below.

Onshore Staff Augmentation

This means that outside team members are located within the same country as the in-house team. The main advantage of this system is that team members will share national regulations, language and culture. However, in-country staff augmentation is usually more expensive and can limit your talent pool.

Nearshore Staff Augmentation

Nearshore staff augmentation is when team members are located in a different country, but usually within the same general time zone. For the U.S. markets, nearshore workers often live in Latin America, which has similar time zone coverage. Nearshore staff augmentation helps limit issues with schedules, while also providing a larger talent pool with typically reduced labor costs than in-country. In addition, many nearshore workers will share language and cultural understandings. In the case of Latin America, English skills are strong and cultural knowledge of the U.S. is commonplace. A good example of nearshore staff augmentation is TECLA’s talent marketplace, which offers South American staffing services for U.S. markets.

Offshore Staff Augmentation

Offshore staff augmentation is a general term for any team member located in a different country than the in-house team. Generally, the terms offshore, overseas and foreign staff augmentation are used interchangeably. Offshore staff augmentation shares some benefits of nearshore staff augmentation, except for it may present issues with time zones and diverse cultural understandings.


2. Outsourcing

Another common working model is called outsourcing, or managed services. This model is distinct from staff augmentation in many ways. In general, outsourcing is a hand-off solution where companies contract another firm or team to take control of a project. Often, this means the outsourced team is completely responsible for the results and manages the project on their own.

Here are a few pros and cons to keep in mind about the outsourcing model:

  • Reduced Overhead Costs:
    Since you don’t have to worry about managing, and you often have a defined timeframe and budget, you’ll be able to save money. This is especially helpful if your core business line has nothing to do with the project you need. For example, perhaps you need a redesign of your website, but your company doesn’t have an IT or design department.
  • Focus on Core Business:
    With outsourcing, you can focus on what your company does best, and leave the rest to the outsourced firm or team. This way, you won’t be needlessly distracted by tasks that have little to do with your core business or waste time on the hiring process.
  • Risk of Reliability and Quality:
    You may feel a little nervous about handing over the responsibility of a project to another team. Since it’s not your in-house team, you may be hesitant about the outsourced team’s quality and reliability.
  • Reluctance About Sharing Sensitive Data:
    When you hand over the project reins to another team, you might not feel 100% comfortable with sharing all your data and intellectual property. However, this is an issue no matter the working model. Be sure to create tight, detailed contracts in order to prevent problems.


Remember: Outsourcing Can Also Be In-Country, Nearshore or Offshore

Let's not forget that the same modalities apply to outsourcing. Sometimes outsourcing happens in the same country as the in-house team. Alternatively, you might opt for a nearshore company for greater talent and lower costs or an offshore team for a specific skill set. Overall, nearshore and offshore services tend to be more cost-effective than in-country services, though you may need to handle challenges with time zones and cultural differences.


3. Direct-Hire Contracting

In addition to staff augmentation and outsourcing, there’s another model called direct-hire contracting. Many specialized agencies (psst, like TECLA) will offer a direct-hire service so that you can recruit a special contractor directly into your company. This is similar to staff augmentation, except that it focuses on just one worker for a long-term relationship at a company. It’s a one-off recruitment model that can help fill a company’s long-term needs.

When thinking about direct-hires, it’s important to understand the difference between a consultant and a contractor. Make sure you understand these distinct roles for direct-hires:

  • Consultant: A consultant provides expert advice and guides a company on the best way forward. This person is typically highly specialized and knows how to assist you in making decisions or guiding you through processes. You might hire a consultant when you’re not sure how to implement a product, or what the best practices may be.
  • Contractor: A contractor is a general term to talk about a worker who performs the job. You can contract this worker when your needs are already defined and you simply need high-quality work to get done.

In either case, you can use direct-hire contracting to recruit top talent for a one-off need your company may have. It’s a good option if you have a precisely defined role in mind and just want help recruiting full time employee. 

Whatever your needs may be, you know your company best. You can decide whether staff augmentation, outsourcing or direct-hire contracting may be right for you. In addition, you should consider whether the in-country, nearshore or offshore modality will best fit your company. Keep in mind these considerations so you can successfully augment your teams and finish those key projects on time.

FAQs

What is the meaning of staff augmentation?
Staff augmentation is a solution for companies looking to hire top talent without the hassle of contracts, legal, payments, and HR services. TECLA offers nearshore staff augmentation, connecting companies with 40,000+ software developers from Latin America, all fluent in English and in your same time zone. With our approach to staff augmentation, you are guaranteed to receive completely integrated team members, allowing you to maximize a full software development team swiftly. All you need to do is choose which candidates to interview from our hand-picked community.
What are the benefits of staff augmentation?
Staff augmentation is a great solution for companies looking to have flexible scalability. Because of this greater flexibility, many businesses choose staff augmentation over other available outsourcing models. It is not only a scalable service, but it’s also known for being a cost-efficient alternative, making it perfect for businesses that might need to expand their teams with a limited budget. Additionally, staff augmentation shields your business from legal responsibility for adhering to regional tax and labor regulations that may be challenging for an outsider to comprehend.
Is staff augmentation good?
Yes. In places like LatAm, where companies may not know how to source elite talent, maintain compliance with labor and tax rules, and handle onboarding without knowledge of the local language and culture, staff augmentation is an ideal alternative to hiring. By choosing this option, you won’t be taking care of time-consuming crucial practicalities but rather focusing on what matters most to your team.
Why do you need staff augmentation?
Companies that are looking to scale their teams in tight markets, budgets, and projects and that also need fast-response hiring without compromising quality will significantly benefit from staff augmentation. It is a highly scalable service; therefore, it may be scaled up for longer-term requirements or used for project-based objectives.
Gino Ferrand

By 

Gino Ferrand

Gino is an expert in global recruitment having spent the last 10 years leading TECLA and helping world-class tech companies in the U.S. hire top talent in Latin America.

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