Staff Augmentation via labour hire or a Managed IT Service Provider – which is better?

When budget constraints, immediacy of need, or any other reason renders recruitment for full-time IT staff roles impractical, you can instead choose to augment your staff from either a staffing solutions agency or a managed service provider (MSP). Both can help bridge the skills gap in your company and quickly provide the additional human capital it needs to complete projects or achieve specific productivity or performance goals.

The features and benefits of each approach are markedly different, and so are their costs to your business.  Depending on the type, urgency and scale of support you need, one will fit better than the other.  Making the wrong decision can cost you excess time and money, so we’ve put all the features and benefits of each into this article to help you make the best choice.

Managed IT Services vs. Staff Augmentation: Which is better for your business?

To make things simpler, think of staff augmentation as a “micro-type” solution and of managed services as “macro-type.” Each type has a different way of fixing your HR challenges, a different set of benefits, and a different price tag.

Being a micro-type solution, staff augmentation works best in delivering highly targeted and in-focus benefits (such as the completion of small, time-bound projects; or a quick remedy for seasonal staffing needs to support peak business activities like the spike in retail sales during the Christmas holidays).

On the other hand, managed IT services work best in delivering big picture, holistic benefits (such as long term reliability, sustained regulatory compliance, and consistent service quality). Any staffing support an MSP might provide (on top of other services the client already enjoys) is linked to those big-picture outcomes.

What is staff augmentation?

Staff augmentation refers to the use of external personnel to supplement in-house staff, typically for meeting seasonal, temporary, or urgent business needs. An increasing number of companies turn to staff augmentation as a talent outsourcing strategy for matching a team’s headcount and/or skillsets with those required for completing a project or achieving a business objective – without hiring any full-time employees. 

Staff augmentation almost always starts with temporary, contractual, project-based, or seasonal need. It allows your company to harness specialist skills on demand (as projects arise, corporate milestones loom, or peak seasons approach) and to easily decommission those specialists when they are not needed, thereby reducing unnecessary operating costs. 

In a staff augmentation arrangement, the staffing solutions vendor would bring in the incremental staff you hire for a set period, at a typically pre-agreed rate (per person or per hour worked). These supplemental staff generally work under the management of your in-house team and can either work remotely or on-site, depending on your requirements.  They will require an orientation and swiftly-delivered on-the-job training to be of most benefit.  

What are Managed IT Services?  

Managed IT services refers to a range of outsourced resources (such as server networks, cloud applications, and IT personnel) that are provided and managed by a third party called a Managed Service Provider (MSP). Managed services agreements typically extend from one year to three or five years and focus on delivering business outcomes at pre-agreed service levels and quality standards. 

MSP’s are capable of supplying staff to augment or temporarily replace your in-house team, but that’s just one of the ways in which they address your underlying need for IT support.  Typically, an MSP will provision a share of their entire team’s resources to handle the demand from your company, replacing or adding to your internal IT team’s skill set. This reinforced team will function as your IT department.

When a specific project or short-term need is identified, the MSP will typically provide and manage those resources, guiding the team until project completion.  The resources will come from within the MSP’s own ranks and already be familiar with your environment and some of your team members.  The MSP is accountable for managing the staff, processes and the tools that will be used to deliver on your business goal(s).

When the project is completed, or the absences covered, both types of provider will pull back their staff and you will return to business as usual.

What are the differences between Staff Augmentation and Managed IT Services?  

Staff augmentation and managed IT services can both replicate the services of a full-time in-house employee/team for a limited or extended period. To varying degrees, both enable an organisation to focus on its core business while avoiding the hassle, lost time, and costs of acquiring in-house talent. 

Managed IT services, however, differ from staff augmentation in the nature, scope, and period of their support. While HR solutions account for the bread-and-butter/domain expertise of staffing vendors and talent providers, MSPs tend to approach HR challenges through a comprehensive and strategic lens. Simply put, talent outsourcing constitutes the main service of a staffing solutions provider while it forms just one of many on-demand services on the MSP’s menu. In addition, MSPs commit to delivering business outcomes (e.g., sustained productivity level over a period of time) while staffing agencies focus on providing business inputs (e.g., a help desk augmentation).

When is the best time to use staff augmentation as an HR solution?

Staff augmentation is best used when you need to:

1. Outsource talent but only for the short term.
2. Tackle simple projects like desktop deployments, auditing, stocktakes and so on.
3. Acquire incremental staff while retaining full control and management of a project, initiative, or process. 
4. Complete a project faster than your in-house team can do on its own.
5. Reinforce your in-house team for tackling multiple projects simultaneously.
6. Meet multiple deadlines but your teams are understaffed.
7. Deal with a huge backlog of non-core tasks.
8. Temporarily acquire specialist skills (such as data science) to add value to a specific project or initiative.
9. Screen potential candidates for long-term employment.

When is the best time to use staff from a managed IT service provider?

Managed IT services are best used when you need to:

1. Trust in the confidentiality of your augmented team (you will already have signed a confidentiality agreement that binds their employees)
2. Acquire access to a rich pool of technical experts and specialists without directly hiring them. 
3. Build a team for large, internal, and long-term projects; and relinquish control and management of such a team to a more capable entity.
4. Ensure that the new, temporary team members already know you and your business. 

PROs & CONs of Managed IT Services and Staff Augmentation

Like all other business solutions, staff augmentation and managed services both have Pros & Cons. Understanding and balancing these factors will help you identify the right HR solution for your company.

Pro’s

Main benefits of staff augmentation:

1. Easy, quick, and flexible access to skills and expertise your company urgently needs.

• Reduces recruitment time.
• Relatively seamless team integration.
• Excellent solution for rank-and-file staffing needs.

2. Provides most of the benefits of an on-site dedicated service/staff. 
   • Adaptable, plug-and-play solution for peak (seasonal) business periods at an affordable cost.
   • Can be leveraged to form a walk-up IT service (or an on-site support channel). This service can be a game-changer, especially in cases where downtime costs hundreds of dollars per hour.
3. Cost-effective in the short term. 
   • Yields significant savings in HR expenses.
   • No need to draw up and finance superannuation plans, leave credits (sick/ bereavement/ holiday/ slept-in-too-late-and-just-can’t-be-bothered), and other mandatory employee benefits.
4. Frees HR from the hassles of recruiting, screening, and onboarding.
5. Supplemental staff are directly accountable for deliveries and deadlines.
6. Gives your company greater control and closer management of the relevant processes and staff.

Main benefits of managed IT services as a staffing solution:

1. Cost-effective in the long term. 
2. IT Security gets a major upgrade. 
   • Solid protection against mass impact events (such as destructive viruses), especially when compared to small in-house IT teams which can easily be overwhelmed by powerful malware.    
   • Most MSPs provide data storage, disaster recovery, and compliance services.
3. IT issues get fixed quickly. MSPs typically assume responsibility for your entire network and provide 24/7 monitoring and tech support.
4. Ready access to considerable resources.
   • You can readily make use of MSP resources such as hardware, software, networks, solutions, specialist skills, domain expertise, and strategic consulting. 
   • An existing relationship with an MSP should accelerate setup time and rationalise costs for virtually any project, including supplemental staff for peak seasons or ad-hoc tasks. 
5. Guaranteed outcomes.
   • As stipulated in the Service Level Agreement (SLA), MSPs undertake a formal commitment to their clients and are directly accountable for deliveries and deadlines. 
   • MSP personnel also have a sense of ownership when it comes to any client project because they are guided by Key Performance Metrics (KPIs) in support of the SLA. MSP personnel are expected to give their best when deployed in any capacity (including as support or incremental staff for the client). 
6. Lighter responsibility for IT, more focused involvement in core business.
   • MSPs assume full responsibility for and direct management of the processes, systems, personnel, and other resources they provide.
   • No need to manage your own ticketing system.  An MSP like Computer One can augment your on-site team while still relieving you of the burden of managing help tickets.
   • Frees HR from the hassles of recruiting, screening, onboarding, and training.
   • Frees your in-house team from the need to supervise seasonal or ad-hoc processes, projects, and staff. You can focus instead on improving your core business. 
7. Knowledge base growth.
   • Besides their obsession over process and metrics, MSPs are avid curators of knowledge bases. When you work with one, expect their teams to record virtually everything relevant to a project or a technical problem — from the different layers of a network operations centre to the specific steps in troubleshooting an end-user issue.
   • By extracting and classifying new lessons learned, MSPs enrich the shared knowledge of organisations they partner with, equipping current and future stakeholders with insights that help them become better at what they do. In contrast, augmented staff absorb new knowledge but typically have no formal obligation nor incentive to share such knowledge with the larger team. When their stint as temporary staff ends, they take potentially helpful knowledge with them as they exit the door.
8. Proactive advice and strategic insight for sustained profitability.
   • By nature, MSPs play the long game. They serve as committed partners who prove their value by enabling measurable client successes in virtually all aspects of their business.
   • Expect to discover opportunities for business improvements and well-designed plans on how to maximize those opportunities. 

Con’s

Disadvantages of staff augmentation:

1. Company assumes responsibilities and risks.
   • Without a formal guarantee from the staffing provider nor the temporary hire, your company is solely accountable for project failure.
   • Your in-house team owns the process and is responsible for managing incremental staff.
   • Tight HR involvement is necessary, which entails allocation of valuable resources for onboarding, training, and other HR concerns.
   • Company absorbs all security risks associated with hiring temporary staff.
   • Excessive reliance on staff augmentation carries the risk of establishing a company culture that trivialises careful and strategic resource planning.
2. Less focus on core business.
   • Because the company owns the process and manages the team, its attention (which is already divided among multiple aspects of the business) gets another source of distraction.
3. Not optimised as a long-term solution.
   • Can become very costly to sustain as an overhead expense when incremental staff start to fill in quasi-permanent roles.
   • Staff augmentation often entail higher labour costs. This is because staffing providers charge customers substantial added costs on top of basic worker wage to cover their own overhead (for talent search and screening) plus their profit margin. While dealing with individual contractors addresses this disadvantage, doing so burdens your HR team with the responsibility of searching for, shortlisting, and screening the best candidates themselves.
4. Cost-effective only for small-scale projects or time-bound initiatives.
5. Brain Drain/Knowledge Capital Flight.
   • Augmented staff accumulate knowledge, skills, and capabilities on which your business (and others) depends. Contractors, however, are not typically obligated to document or share said intellectual assets — which eventually, would just tag along with their lucky owners towards the next gig.
6. Lack of commitment to business success.
   • Staffing providers sell skills and work hours, not outcomes. Very few — if any – talent sourcing agencies guarantee service level commitments.
   • Similarly, augmented staff have relatively low motivation and incentive to “own” the process and walk the extra mile, viewing the engagement as just a minor fling.  

Disadvantages of managed IT services as a staffing solution:

1. Higher costs.  

• Partnership with an MSP costs higher than getting a one-time service from a staffing solutions provider because by default, you get a lot more goodies from an MSP than just access to their talent pool.
• Upfront payment is significantly higher, with agreement terms typically extending to at least one year.
• MSP pricing can be complicated, with different players adopting diverse pricing models and multiple package options.

1. Difficulty in switching MSPs/Bound to long-term contract.

• Managed IT services are designed for the long haul. In the meantime, any number of negative issues (including mismatched expectations and doubtful sustainability of the MSP’s own business) can undermine the partnership. When this occurs, orchestrating a painless, less costly exit can be a challenge.

1. Zero to minimal boots on the ground.

• By default, automated and virtual solutions are the go-to methods of many MSPs to reduce their need to deploy human teams on site. Some MSPs like Computer One, however, reinforce their regional and local presence with actual boots on the ground who are ready to support customers in their physical offices.

4. Less control of augmented team.
   • This can either be a plus or a minus depending on how integral to your core business the functions of the augmented staff are. If the function is similar to just a utility service such as internet connectivity or web service maintenance, then relinquishing control and management of the team to a more capable entity is a huge plus.
   • Otherwise, authorizing the MSP to control and manage your core functions can be risky on many fronts. First, you might end up sharing valuable assets such as trade secrets, patent details, unique business models, and other success-critical information. Second, you would always want complete control over and the ability to micromanage the things that matter most to your business. Consulting and strategic advice are one thing, decisive action another. For top-level decisions, too many chefs can spoil the broth. Having your own signature team who understands the business, creates the product, wears the brand, and commits to your success is a lot better than outsourcing the very soul of your organisation.

Conclusion

In the business world, disruptions are the norm — not the exception. The only question is, how well-prepared your company is at weathering a storm.

Throughout history, technology (such as farming, automobiles, and computers) often drives the disruption. In recent years, however, three disruptive phenomena – the pandemic, the Great Resignation, and the worsening talent gap – converged into a massive people-shaped challenge.

Because business success remains reliant on human skills, smart companies need a cost-effective strategy for balancing their in-house employees, contractual hires, and outsourced teams. Rising wages for permanent workers and the improving capabilities of external staffing sources build a very strong case for both staff augmentation and managed IT services. While using different approaches and wearing different price tags, both methods can readily solve the skills gap in your organisation.

But if you’re still uncomfortable in making a decisive choice, you can still have the best of both worlds. A few flexible MSPs such as Computer One offer Hybrid Augmentation to adapt their resources with complex customer needs. Hybrid augmentation is a viable substitute for full-time in-house staff that are deployed for small projects, ad-hoc tasks, or seasonal roles.

The final word…

Work with your MSP ahead of time to learn how hybrid augmentation can deliver the benefits and cost savings of two trusted staffing alternatives, while guaranteeing the business outcomes you expect. By sharing your capabilities, goals, and priorities, you equip the MSP with the right data points to configure a hybrid augmentation plan designed to meet your expectations.