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Team augmentation is an excellent solution for business process outsourcing (BPO) companies seeking an additional workforce without opting for conventional hiring methods. The service can offer resources tailored to their project needs for a set duration.
However, BPO vendors must understand the financial intricacies of staff augmentation to manage costs effectively.
This article discusses staff augmentation and its costs in detail. It also analyzes the average cost of staff augmentation projects, the factors and pricing models that affect the final charge, and budgeting strategies.
Staff augmentation project cost analysis
On average, working with a staff augmentation firm costs around $25 to $40 per hour. Other providers may charge higher or lower depending on the services provided, the expertise required, and the project scope.
The augmentation price also varies significantly depending on the client’s industry. Travel and accommodation costs might also be considered for augmented team members required to work on-site during specific project phases.
Additionally, the cost of employing technology professionals through team augmentation services fluctuates based on their seniority and level of expertise. Here is a breakdown of hourly rates based on the skill level of the professional:
- Junior developer. Engaging a junior developer through staff augmentation costs $30 to $40 per hour. A junior developer generally possesses approximately one to three years of experience in a specific tech stack.
- Regular developer. Hiring a regular or mid-level developer costs approximately $40 to $60 per hour. This developer typically has three to five years of experience in a specific programming language.
- Senior developer/tech leader. Engaging a senior developer or tech leader comes with a fee ranging from $60 to $90 per hour. A professional at this level usually has over five years of coding experience and can assist with task management and technical consulting.
However, if your information technology (IT) staff augmentation collaboration aims to cut costs, consider working with talent in different locations. Here is the average cost per hour of global professionals, according to data collected by Clutch:
| Location | Average Cost per Hour |
|---|---|
| U.S.A | $25–$49 |
| Canada | $100–$149 |
| UK | $50–$99 |
| Australia | $100–$149 |
| Ukraine | $25–$49 |
| Poland | $25–$49 |
| Spain | $25–$49 |
| Philippines | <$25 |
| India | $25–$49 |
| Mexico | $25–$49 |
Pricing models for staff augmentation services
BPO organizations considering staff augmentation must conduct a cost analysis and learn the different pricing structures. This initial step is crucial in getting a clearer understanding of expected expenditure.
IT staff augmentation companies commonly offer various pricing models, often dependent on the project scope. The following are some of the prevalent pricing models offered by these companies:
- Hourly fee. Many IT staff augmentation firms utilize hourly rates, where project costs rise proportionally with the time augmented professionals dedicate to your project. However, setting limits on the hours allocated to your project is often possible, allowing you to control total costs.
- Monthly retainer. A monthly retainer for IT staff augmentation services is a logical option for long-term projects. Under this model, you pay a set rate for unlimited services.
- Fixed price. A fixed pricing model involves companies paying a flat rate for services. This model is applicable only when the project scope is well-defined, with predetermined start and end dates. While offering minimal flexibility, it simplifies budget adherence.
- Continued term. Continued-term models, like monthly retainers, are appropriate for long-term projects. This staff augmentation pricing model can involve monthly or hourly rates. However, it differs by providing a dedicated team of IT professionals specifically assigned to your project.
Budgeting for IT staff augmentation services to align costs with goals
Reports show that 56% of companies expressed worry about the scarcity of tech talent, increasing the need for staff augmentation. The charges imposed by a staff augmentation company on one BPO firm may vary significantly from those applied to another firm with comparable needs. As such, firms must exercise diligence and proactive management to mitigate the risk of overspending and ensure that they only pay for the necessary resources and skill levels.
What can BPO companies do to align staff augmentation costs with business objectives? How can they optimize the budget for IT staff augmentation services?
Here are the best practices to consider when selecting a staff augmentation partner and conducting cost analysis to keep augmented staff expenditures in check:
- Benchmark analysis. Conducting an analysis of resource rates through price benchmarking enables the assessment of competitiveness for specific roles, skills, experience levels, and geographic locations. Utilizing data-driven insights, the sourcing team can negotiate competitive rates and save money on hiring temporary workers.
- Role standardization. Accurate benchmarking involves standardizing roles based on responsibilities, skillsets, and experience levels. This step applies to time and material rate cards and various organizational projects.
- Skill matching. Skill-to-requirement alignment is vital, considering certain specialties command a premium in the market (e.g., data scientists or cloud architects), while others have lower rates due to resource abundance. Ensure selected team members possess core skills matching project requirements to prevent overpayment.
- Baseline rates. Establishing baseline rates for different experience levels helps standardize resource costs. Defining baseline rates across all roles ensures hiring resources with appropriate project experience levels. Regularly reviewing experience-level requirements is essential to adapting to evolving project needs.
- Team location. Geography plays a significant role in billing rate variations. Companies should assess the feasibility of remote work to optimize costs based on geographic considerations.
- Market insight. Given the dynamic nature of the market, resource supply and costs can change rapidly. Timely insights into fair pricing for required services are crucial. Additionally, strategic pre-planning and insight-driven negotiations with vendors ensure fair pricing and help avoid unexpected costs.
- Total cost of ownership (TCO). Consider the total cost of ownership, including direct financial costs, and the potential impact on productivity, efficiency, and overall project success.
- Return on investment (ROI) analysis. Assess the ROI by comparing the expected benefits of the IT staff augmentation against the costs incurred. This analysis helps in evaluating the cost-effectiveness of the approach.
- Review and adjustments. Periodically review and adjust the budget based on the projects’ progress and changes in business priorities. This step ensures ongoing alignment with business goals.
Although the expenses associated with engaging an IT staff augmentation company may appear steep initially, they are typically spread out over time. These projects often involve long-term partnerships, with payments occurring at regular intervals, rendering them more financially feasible for most businesses.
When budgeting for an augmented IT team, it is advisable to concentrate on the monthly expenditure you are willing to allocate. By setting monthly spending limits aligned with your fees, you will be compelled to prioritize areas requiring the most support and increase the likelihood of finding an IT staffing partner that aligns with your needs.
The bottom line
A staff augmentation cost analysis is essential for BPO companies to navigate the complexities of the outsourcing business, manage costs effectively, and ensure the success and sustainability of their operations.
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