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In today’s dynamic business landscape, companies constantly seek innovative strategies to streamline operations and achieve optimal efficiency in project execution.
Among the myriad approaches available, one model stands out for its ability to leverage external expertise while maintaining internal control. This article delves into the hybrid model that combines business process outsourcing (BPO) and staff augmentation.
Keep reading to learn more about the hybrid model’s impact on project management, particularly in information technology (IT).
Difference between project outsourcing and staff augmentation
In 2023, the worldwide market for BPO reached $280.64 billion. Meanwhile, staff augmentation investments could reach approximately $82 billion by 2025. These figures show that outsourcing and staff augmentation are essential and lucrative business processes.
The choice between project outsourcing, staff augmentation, and hybrid models depends on factors such as project complexity, resource availability, budget constraints, and the level of control desired by the company. Each model has its own set of advantages and challenges.
Project outsourcing
First, what is BPO? In this model, a third-party remote vendor manages an entire or significant portion of a project and is responsible for executing it within the agreed-upon scope, timeline, and budget.
This targeted approach to staffing allows companies to focus solely on securing the services of specialized professionals to fulfill project requirements while concentrating on their core operations. Other reasons for choosing this model include the following:
- Organizations want to free up the in-house team to concentrate on more productive endeavors.
- Working with BPO organizations becomes necessary to expedite routine or time-intensive business operations.
- Entrusting non-core functions to a third-party vendor through outsourcing helps distribute responsibilities and associated risks.
- Outsourcing services enable access to skills that might not be available locally, thereby meeting specific project needs.
For example, one commonly outsourced task is IT. Outsourcing this function offers the following advantages and drawbacks for companies:
| Pros | Cons |
|---|---|
| An IT outsourcing company minimizes the time spent scouting, interviewing, hiring, and training internal team members. | The company has less control over the project execution and quality. |
| Outsourcing to a provider with lower production costs results in decreased overall expenses and improved return on investment (ROI). | Dealing with an overseas IT outsourcing company usually involves significant time zone differences, potentially impeding communication and progress. |
| IT outsourcing provides access to a diverse global talent pool. | Language barriers can pose challenges for outsourcing teams located outside the home country. |
| IT outsourcing services help companies expand into new domains and acquire new clients. | Adjusting to cultural disparities and divergent work habits often requires a considerable amount of time for many companies. |
Staff Augmentation
Staff augmentation involves temporarily engaging external personnel to boost the workforce. Instead of hiring permanent or full-time employees, the company engages talent from staffing agencies, consulting firms, or freelancing platforms to fill specific skill gaps or meet short-term demands.
In staff augmentation, the external personnel work directly under the company’s supervision and management, integrating seamlessly with the internal team members.
Various factors can prompt businesses to augment their staff, especially for IT support. The following scenarios are among the most common:
- Fluctuating customer demand, heightened production requirements, or increased cybersecurity threats necessitate increased staffing levels.
- Temporary acquisition of specialized skill sets, such as expertise in brand design or advanced technologies, is vital.
- Strategic shifts toward a more agile approach or projects needing quick delivery require additional resources with specialized skills.
- It serves as a temporary solution while hiring a permanent team to help meet long-term organizational needs.
Here are the benefits and disadvantages of leveraging staff augmentation:
| Pros | Cons |
|---|---|
| Companies can avoid hiring permanent employees and instead engage staff on a short-term project-by-project basis.The strategy is not ideal for continuous skill requirements or extended project durations. | |
| Personnel sourced from staff augmentation services typically demonstrate proficiency and can readily integrate into existing roles. | Reliance on external organizations for staff augmentation can impede sustainability strategies. |
| It offers an excellent opportunity to assess potential future employees’ capabilities through a trial period. | It is inappropriate for projects necessitating deep institutional or contextual understanding. |
| Adjusting staffing levels according to requirements or demands allows for flexibility in resource management. |
Hybrid model: Combing BPO and staff augmentation
The hybrid approach combines BPO and staff augmentation. In this model, third-party vendors handle certain parts of the project while the company retains core functions and augments its staff for specific tasks or roles.
Modern companies face rapidly changing business environments, especially in IT. With evolving business needs and project requirements, a blend of staff augmentation and project outsourcing services becomes imperative for many IT firms.
Various factors influence the need for a hybrid approach. For instance, a project nearing completion might require specialized knowledge brought in through IT staff augmentation.
On the other hand, another phase of IT software development might benefit from having an outsourced development team handle distinct aspects of the project. This hybrid outsourcing model can significantly support internal departments while ensuring timely project delivery.
A hybrid BPO and staff augmentation approach offers flexibility in allocating resources. Companies can leverage external expertise for specialized tasks while retaining control over critical project components. In the process, this model mitigates some of the risks associated with full outsourcing.
Learn more about the approach’s advantages and limitations below:
| Pros | Cons |
|---|---|
| The monthly team cost is predictable and consistent. | Complexity in managing multiple vendors and internal teams requires effective coordination and communication. |
| The IT company gains access to a diverse pool of specialized and scarce global talent, allowing selection tailored to specific projects. | Potential integration challenges between in-house and external teams can occur, particularly regarding workflow and collaboration. |
| Companies can maintain or reduce overhead costs from expanding office space in the case of offshore outsourcing. | The approach requires careful planning and coordination for a seamless execution and alignment with project objectives. |
| Outsourcing to a third party sets up the team and speeds up project work. | |
| It allows the company to be more cost-effective by optimizing resource allocation based on project requirements. |
Pricing considerations in the hybrid model
In the hybrid model, IT staff augmentation typically involves temporarily bringing in extra resources to collaborate with the existing in-house team. The expense is commonly calculated based on the hired resources’ hourly or daily rates.
The cost of project outsourcing is usually based on the scope of work, deliverables, and the vendor’s pricing structure. Some service providers charge a fixed fee for the entire project, while others use milestone-based or time-and-materials pricing.
Rates for project outsourcing can vary significantly depending on the complexity and scale of the project and the vendor’s reputation and location.
When considering how much to spend for a hybrid model, focus on the costs associated with staff augmentation, such as hourly rates for additional resources, and those linked to project outsourcing, such as vendor fees. Additionally, thoroughly assess the requirements and anticipated project outcomes to determine the most cost-efficient approach.
The bottom line
Project outsourcing, staff augmentation, and hybrid models are all strategies companies use to fulfill their staffing needs and complete projects efficiently. Each model has advantages and disadvantages. The choice depends on various factors such as project complexity, budget, timeline, and the level of control the company desires.
The hybrid method of combining BPO and staff augmentation involves integrating elements of both strategies to optimize project execution. It leverages the strengths of both models to help companies maximize external support and internal control.
Let’s connect and discuss the possibility of adopting a hybrid model for your IT project.
