IT agencies nowadays are facing heavy corrections in their market value. Especially the recent recession suggests trends in the US, UK, and other first-world countries have made things critical for IT firms. IT giants have dedicated and huge human resources, but the smaller firms are melancholy. This article will help you to get insights into the problems faced by IT companies with lesser manpower and how outsourcing options from software development companies can solve these problems. Let’s take a dummy example to make the points easily understandable.
D-Soft is a newly started software development firm. It has 5 major clients from Europe to which they provide software services. At the same time, they are exploring their capabilities to design a new CRM product that could serve as a blue ocean for them.
D-Soft gets hefty payments from European clients for the services it provides. It uses these funds to pay its employees in India and some portion of the same funds goes for the research and development of the CRM product. (And obviously, the rest are their profits
Suppose its revenues from European clients decline by 20% due to geopolitical or other reasons.
• Can D-Soft directly reduce the commensurate salaries of its employees?
○ Quite possible, but there is a risk of attrition
• Can they afford to keep non billable employees in their service section?
○ Really hard. Because D-Soft is a newly established firm, it will find it difficult to burn cash from their hard-earned profits
○ On the other hand, they may need that workforce for their product R&D team. In that case, also, they cannot hire skilled people quickly due to reduced revenue.
These questions are leading towards the most important inability for D-Soft, flexible workforce
Since D-Soft is a budding firm, it cannot handle idle/non-billable employees. Also, it cannot quickly hire employees if needed. In short, their workforce is directly dependent on revenues and funding.
D-Soft can get rid of this hassle by using outsourcing techniques suitable for their software development services and product R&D.
Here are the possible types of outsourcing that can be helpful for D-Soft:
1. Staff augmentation
2. Managed team model
3. Project-based model
Let’s take a closer look at each.
Staff Augmentation Model
• A company expands its in-house staff by outsourcing IT specialists (usually, a few specialists at once) temporarily
• These employees are paid on an hourly basis considering 8 hours a day and 5 days a week.
In our case, we have a decrease in revenue by 20%. In such cases, we can easily reduce or increase the workforce. Also, if we need a team with special expertise for the CRM product section, then this model can be helpful, because we will not be following the traditional hiring process—searching, interviewing, onboarding—and losing time. Simply an outsourcing company can be contacted which will provide additional employees for the work on an hourly basis.
That’s how the staff augmentation model works. Outsourced specialists will become a part of D-Soft but on a contract basis. They will work with the internal D-Soft team and cooperate with D-Soft employees. While D-Soft remains in charge of the management and development practices which will enable it to attain full control and responsibility of the project (be it CRM product or Software services)
Benefits of Staff Augmentation
- Easily accessible talented human resource
- Flexibility in the expansion of the team
- Cost-cutting and lower hiring efforts
When to choose Staff Augmentation? / Prerequisites of Staff Augmentation model
• If you choose Model Staff Augmentation services you already have an in-house team. You cannot “extend” a team that does not exist. So the first requirement is to have your own development team and need experts to (temporarily) extend it.
• You have a technical leader at your side. Working with an extended team means management is on your side.
• We need a technical lead or CTO with sufficient experience and expertise.
• We need expertise that we don’t have in-house. The Extended Staffing Model is for companies that require specific expertise (Android development, DevOps, automated QA, etc.).
• We need to expand our team urgently. Internal recruitment takes time. Especially if you’re looking for someone with a particular skill set, for example a Flutter developer.
• With the Staff Augmentation model, you can find that person much faster. Simply contact a company of your choice, read developer resumes, and interview. This is much quicker than recruitment, which can take months to find the right specialist locally.
But staff augmentation can backfire in some cases. So it is better to be aware of its potential disadvantages before you implement it in your organization. Such disadvantages are visible especially when the project has a too long duration and a go-to model is implemented.
Disadvantages of software augmentation
1. Oversight and management: Team size changes abruptly. So, it is difficult to manage the team
2. Onboarding external talent: Staff augmentation takes lesser time than conventional hiring, but it does not take zero time. One should always keep this in mind without taking the ease of hiring for granted.
3. No institutional knowledge: Some projects require non-technical domain knowledge as well. For example, a banking client would prefer developers with at least the basics of banking terminologies. In such cases, you need to train the external team additionally 4. Higher long-term labor costs: If you are paying the eternal employees on an hourly basis, then you have to keep their wages compatible. And since they will be a kind of freelancer, there will be higher attrition than conventional employees. If the project duration is too long, then you will have to make more revisions in their payment, which will ultimately increase the skilled labor cost and the profits will be directly compromised.