IT subcontracting is a part of staff augmentation and outsourcing services where specialists are temporarily hired to work on specific tasks. Here, we’ll discuss how subcontracting in IT staff augmentation works and the benefits and challenges to consider when implementing the model.
IT staff augmentation has become a popular business model in recent years. From small businesses to multinational companies, many organizations are turning to outsourcing and staff augmentation to bridge the talent gap and hire experienced professionals quickly. According to statistics, the global IT staff augmentation market is expected to grow at a CAGR (compound annual growth rate) of 13.2% to reach $857.2 billion by 2031.
Simply put, staff augmentation is the process of expanding an internal team by hiring temporary experts from a third-party provider. For example, you require a diverse team of data scientists, data engineers, analysts, and software developers. Instead of conducting a full-scale recruitment program, you contact an IT staff augmentation company and share your requirements with them. The service provider will shortlist the candidates as per your specifications and conduct interviews to finalize a team.
The company will also take care of contract terms, onboarding, etc., for the new candidates to work on your project. Once the project is successfully completed, the team is dismantled. The external professionals are no longer associated with your business. They join another team for another client who requires their skills and knowledge.
IT staffing companies offer various models to help clients augment their teams. One such model is subcontracting in IT staff augmentation, where outside experts are temporarily brought in to handle specific IT tasks.
Let’s find out more about IT subcontracting and how it is beneficial to a business.
What is Subcontracting in IT Staff Augmentation?
Subcontracting is a part of the larger IT staff augmentation process. It is the process of recruiting external candidates with specific domain expertise to fulfill highly specific roles and responsibilities in an existing project. For example, company X wins the contract for a project and has to deliver it within a month. The company then gives a subcontract to another company Y or an individual to work on a part of the project or certain tasks based on their skill set.
Company X is responsible for delivering the project to the client. So, even though Company Y is a small part of the process, the main contractor (Company X) takes responsibility. So, Company X is the contractor, and Company Y is the subcontractor. Together, they finish the project as per the specifications.
IT subcontracting has become popular due to the increasing demand for experts from specialist domains. In this tech-based world, every business needs IT services in some form. Since maintaining an in-house IT team is expensive, the responsibilities are outsourced to other companies. These companies sometimes use the subcontracting model to ensure they fulfill the client’s demands successfully.
Typically, subcontracting in IT staff augmentation focuses on the following services:
- Software development (web, mobile, cloud-native, etc.)
- Data and system security
- AI and ML engineering
- LLM and GenAI development
- Data science and data analytics
- Business intelligence and transformation
- Data engineering (includes data warehousing)
- AI product development, etc.
There is a high demand for such services since many businesses are investing in digital technologies and using cloud solutions to manage their processes.
How do IT Staffing Firms Manage Subcontracted Resources?
The IT staff augmentation company finds subcontractors based on the project requirements, timeline, and budget. It can allocate resources to the subcontractor or ask the company to utilize its resources.
Identify the Need
Hiring IT subcontractors is a strategic decision. Every project may not need the services of another company or outside experts. So, the first step to managing subcontracted resources is to identify the need for their expertise. Compare the requirements with existing talent to identify the gap. This can be achieved through a quick audit. Then, the staffing company hires subcontractors (another company or freelancers) to fulfill these needs. The contracts are usually short-term or mid-term. The subcontractors may also work part-time since their roles are limited to certain tasks.
Select the Partner
The next step is to choose the right partner to sign the subcontract. This is vital since the software development staffing company is responsible for the project. If the subcontractor doesn’t deliver, it could mess up the entire project. Ideally, it is recommended to partner with another IT staff augmentation company or a managed service provider with the required domain expertise. This ensures that the subcontractor knows the stakes and delivers the required outcome as per the schedule. Consider factors like industry experience, portfolio, pricing, communication, and transparency when finalizing the partner.
Sign the Contract
Once the subcontractor has been found and the terms have been set, it’s time to finalize the agreement. Sign a contract listing the T&C and other details. The IT staffing company is the prime contractor and the other company offering specialist tech staffing solutions is the subcontractor. Typically, the prime contractor wins a bid for a large project and delegates portions of it to one or more subcontractors based on their expertise. The deliverables, timelines, payments, etc., are clearly mentioned in the agreement contract.
Project Management
The IT staffing company appoints a project manager to supervise the entire project and interact with the subcontractors. The subcontractors use the communication tools/ channels provided by the prime contractor to collaborate on the project. The extent of interactions between subcontractors and other professionals will be determined by the project manager based on the requirements. This is done to limit confusion and facilitate seamless communication. It also helps in preventing data leaks by limiting access to sensitive information.
Performance Management
Since the prime contractor/ IT staff augmentation company is responsible for the project, it monitors the tasks and developments to measure the performance of subcontractors. If a subcontractor is unable to deliver, the contract terms might be revisited. The subcontractor may have to replace the candidates with others to ensure the project is not disrupted or delayed. There will be feedback and evaluation, regular reports about progress, check-in meetings, etc., to ensure quality and adherence.
How Does Subcontracting Differ From Direct Staff Augmentation?
Direct IT staff augmentation is where the business hires employees from a staff augmentation company to expand its internal teams or delegate a project. Subcontracting is where the said IT staff augmentation company can hire another service provider to handle a portion of the project and deliver the results. A subcontractor doesn’t have to work on a full project or take up multiple responsibilities. However, an IT resource augmentation company is responsible for the entire project.
It’s a bit like the difference between outsourcing and staff augmentation. They come under the same umbrella term of outsourcing.
Outsourcing Vs. Augmentation
Outsourcing is the process of handing over an entire project to a service provider to save costs, accelerate results, and make use of their expertise to increase efficiency and quality. Staff augmentation is the process of hiring candidates temporarily to work with your existing teams and complete the project as per the specifications. While augmented teams tend to use business resources, outsourcing is where the service provider uses its own resources. There are more differences in terms of control, management, scalability, budgeting, etc.
Outsourcing, staff augmentation, and subcontracting are similar yet different. These are popular working models for businesses to access expert IT services without increasing costs. The right model depends on the business and project requirements.
What are the Benefits of Subcontracting for IT Projects?
Subcontracting in IT staff augmentation is beneficial to a business in various ways. From reducing the workload on in-house employees to providing access to expert talent at short notice, here’s how subcontracting helps organizations effectively manage their IT projects.
Save Time and Resources
When you win a project, you have to start working on it as soon as possible to deliver the end product as per the terms. If you spend a major portion of your time in a full-scale recruitment process, you end up wasting many hours and other valuable resources. Instead, you can rely on an IT staff augmentation company to find the right talent to work on the project or give a portion of it as a subcontract to an IT talent acquisition company to fulfill the tasks. It frees up your internal resources and allows quick onboarding.
Gain Access to Specialists
No business has all specialists working for them. You hire new employees as and when necessary. However, it can be difficult to find specialists at short notice. Also, what if you want to hire them temporarily and not in the long-term? A better alternative is to give a subcontract of those tasks to experts. That way, you gain access to their talent and work with them, but without spending money on recruitment and training. Moreover, there’s a gap in demand and supply of experienced professionals in certain specialist fields like AI. Subcontracting is beneficial in such instances too.
Retain Control Over the Project
With Subcontracting in IT staff augmentation, you still retain control over the project. That’s because you delegate only specific activities to external professionals. They communicate with the project manager to send regular reports and ensure everything is aligned with the requirements. You can suggest changes if the process is not giving the expected results. Depending on the time and budget limitations, you can choose how the work gets done.
Scalability and Flexibility
When you give a subcontract of the IT project to a resource augmentation company, you have the freedom to scale the team whenever required. For example, you may initially hire only two experts to work on specific tasks. Then, you might need more professionals to complete the job. So, you contact the company and ask them to expand the team. Moreover, you can also ask for changes or additional tweaks to enhance the final product. The companies are equipped to deal with such requests and tend to accommodate them. Additionally, the subcontracted team is dissolved when the project ends. There’s no need to retain it.
Focus on Core Functionalities
Every business has its core functionalities that take up more resources and need greater attention. After all, that’s how you expand your business. By subcontracting the additional tasks and other parts of the project to external teams, you can limit your focus to what’s important for the business. Your employees will not be stressed or distracted by other activities. They can continue to be productive in their fields of expertise. Furthermore, you get to hire an expert for every valuable task. Instead of asking the same team to do everything, you can have individuals/ teams for each activity.
Reduce Risks and Uncertainties
Typically, IT staff augmentation companies are used to working on diverse projects and requirements. You choose someone who has proven their skills and abilities and knows their job. This reduces the risk of errors. Moreover, when you hire someone as an internal employee, there’s a risk of the candidate leaving the job before the project ends. Or, they may not be good at the job, which means you have to hire someone else, resulting in delays. Luckily, replacing an external team member is easier. You can also complete the projects as per the timeline.
Fewer Legal Complications
With subcontracting, the agreement terms are pretty clear. You pay the IT staffing company for the services provided. The experts are not on your payroll. There’s no need to pay them other incentives or provide employee benefits as this responsibility lies with the contractor. This results in fewer legal complications or lawsuits from employees demanding insurance and other benefits. However, make sure to sign the contract after a legal consultation with your lawyers.
What Risks Should Companies Consider Before Subcontracting IT Roles?
While staff augmentation services for subcontracting have several benefits, the model is not without a few risks or challenges. With some planning and patience, you can overcome the risks and enhance the benefits.
Not Doing Enough Research
Proper awareness and understanding are necessary when choosing a business model. Firstly, know how subcontracting in IT staff augmentation works. Then, check out the list of service providers in your industry. Shortlist more than a few companies and go through their websites, etc. Check the project portfolios and testimonials. Talk to them to ensure you understand each other. Do not hurry at this stage.
Misaligned Working Approach
Every business has a different working style. The service provider’s approach may not align with yours. This can lead to conflicts or low-quality outcomes. Find an IT staffing company that follows a flexible approach and adopts the working style preferred by the client. It will be easier to work with such companies.
Data Security Concerns
Does the service provider sign an NDA and implement robust measures to ensure data security? Get answers to such questions before you finalize the company. Find a subcontractor with SOC and ISO certifications as this signifies that they know how to protect client’s data from unauthorized access. Don’t ignore concerns about data and system security.
Lack of Communication
Does the subcontractor respond to your queries? How easy or difficult is it to interact with them? How do they respond to personalization requests? Communication is a must when you hire a subcontractor for a project. Make sure you partner with a reliable and transparent service provider. Also, discuss hidden costs and other aspects in advance.
Conclusion
Subcontracting in IT staff augmentation is a viable, efficient, and effective solution to enhance overall quality and performance without incurring heavy expenses. Organizations from various industries can strengthen their IT infrastructure and gain a competitive edge by partnering with reliable service providers. Find an IT staff augmentation company that provides subcontracting services for cost-effective prices and believes in transparent communication. Schedule a meeting with our experts to know more.
More in IT Staff Augmentation Services Providers
IT staff augmentation is highly beneficial for SMBs, MSMEs, and large enterprises from various industries to empower their existing teams and bridge the talent gap quickly. Since an organization can augment teams in the short term and long term, the model is flexible and scalable enough to accelerate projects and increase efficiency.
Check the following links to learn more about IT staff augmentation.
- 8 Leading Subcontracting Staffing Model Companies You Should Know
- 13 Staff Augmentation Service Models to Consider in 2025
- Hire Data Scientists or Developers – Right Choice For Scaling Enterprises?
- 11 Best Staff Augmentation Services Firms for B2C Growth
Fact checked by –
Akansha Rani ~ Content Creator & Copy Writer
