Times are tough for many businesses, with COVID-19 putting companies around the world under financial stress.
Businesses with a large workload and a limited in-house team should consider staffing options beyond hiring and onboarding new employees, which is often costly.
Staff augmentation and outsourcing are two popular solutions for businesses looking to increase workforce capacity without stretching the company budget.
Here, we explore the differences between staff augmentation and outsourcing, while providing the benefits and drawbacks of each.
What Is Staff Augmentation
Staff augmentation shares some similarities with outsourcing but is different in a few key ways.
Staff augmentation is the practice of temporarily hiring external personnel for specific projects to maximize output.
Businesses use staff augmentation to address temporary staffing needs with experienced, outside contractors or consultants.
Staff augmentation encompasses a wide range of business scenarios. Toptal, a freelance staffing and management platform, gives a few examples of how businesses use staff augmentation:
- Address a temporary increase in daily workload (e.g. increasing an e-commerce company’s workforce to fulfill holiday shopping demands)
- Provide temporary staffing before building a permanent team (e.g. hiring an interim freelance graphic designer while a full design team is assembled)
- Meet company needs for temporary, specialized skills (e.g. a consultant hired to help onboard the team to a new CRM)
- Gain a competitive edge with flexible labor
Freelancers and temporary staffing agencies support most businesses’ staff augmentation efforts.
Companies usually procure augmented staff from third-party firms and websites, which often have their own rules and regulations.
Businesses looking for a temporary boost to their staff, under the right circumstances, can find staff augmentation an effective alternative to hiring and onboarding new full-time employees.
What Is Outsourcing
Outsourcing is also a business process by which companies hire external workers to achieve a business objective.
Outsourcing, however, implies that the business seeking external services hires workers or teams from a foreign country to staff a particular business project indefinitely, or until the project is complete.
Companies can outsource certain practices or operations temporarily, but most often companies outsource teams to perform a specific task permanently rather than take on in-house staff to complete the project.
Take customer service, for example. Many companies outsource their entire customer service operations to countries overseas to cut costs and provide extended hours for their customer service chatbots, phone lines, or emails.
Unlike staff augmentation, outsourcing is most commonly used when businesses wish to take advantage of reduced labor costs.
According to Investopedia, businesses also leverage outsourcing to direct in-house staff’s focus on critical aspects of business operations, leaving less critical tasks to an external team. What aspects are most “critical” is at the discretion of every business.
Outsourcing has many benefits for businesses around the world, with new markets for outsourcing emerging every year. Businesses should choose carefully between outsourcing and staff augmentation when staffing their teams.
When Companies Should Choose Staff Augmentation
Staff augmentation is an easy choice for businesses in certain circumstances. The temporary staff of freelancers can help businesses reach critical milestones without having to invest in salary and benefits for a new full-time employee.
Temporarily staffing freelancers, contractors, or consultants to a project can help companies:
- Save money
- Reduce output time
- Create a trial period for potential new hires
These benefits, however, require the augmented staff to be highly skilled, specialized, and competent.
Staff augmentation might not be the best fit for a company if the temporary, augmented staff lack the technical expertise, or the project in question requires a significant amount of context or institutional knowledge.
Similarly, staff augmentation is temporary by definition. Projects that require augmented staff to participate for two or more years may require outsourced expertise instead.
Businesses with larger staffing budgets are better candidates for staff augmentation as a transition between a temporary hire to a full-time hire.
Ultimately, staff augmentation is an effective solution for businesses facing short-term staffing pressures. Any long-term staffing needs, however, should be addressed through hiring or outsourcing operations.
When Businesses Should Choose Outsourcing
Outsourcing helps businesses reduce labor costs and streamline operations by staffing teams from overseas against core business functions.
Businesses should opt to outsource a project or segment of their work if they:
- Wish to reduce costs of labor
- Require additional staffing beyond temporary increases in work
- Want to delegate mundane or repetitive tasks
It takes many departments to run a business effectively. Companies need sales teams, human resources departments, accountants, customer service representatives, and more to ensure a successful enterprise.
With so many requirements for a successful business, outsourcing can alleviate pressure on business leaders by delegating low-priority tasks for a lower cost.
A company that needs an accountant but only has a 15-person team of salespeople might choose to outsource accounting and bookkeeping to an accounting firm overseas.
Outsourcing is also a helpful solution for businesses looking for highly skilled and specialized workers they cannot find in their home countries.
Western software companies, for example, often outsource programming and development to countries with more skilled developers and programmers while keeping sales and management teams onshore.
Outsourcing is an alternative to staff augmentation providing numerous benefits for businesses around the world.
Outsourcing and Staff Augmentation Help Businesses Meet Goals
Outsourcing and staff augmentation both staff businesses with external workers to help companies meet goals and milestones.
Deciding between outsourcing and staff augmentation, however, depends on the company’s specific needs and financial limitations.
Outsourcing is an affordable, long-term solution for businesses. Companies can outsource tasks or projects to reduce costs and free up time and resources to focus on key business priorities.
Argentina is an emerging market for all types of outsourcing with many benefits. Learn more about outsourcing to Latin America.