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Outsourcing vs. Subcontracting vs. IT Staff Augmentation – The Ideal Choice?

External talent can enhance efficiency and reduce costs for a business. Three major models are used. Here, we’ll discuss the difference between outsourcing, subcontracting, and IT staff augmentation and determine the best model for a business. In today’s competitive markets, a business has to be equipped with the latest tools and technologies as well as talented employees to stay active and attract customers. Technology has become integral to every industry. For example, a healthcare center uses technology to streamline patient records, appointments, etc. A travel company invests in IT to create custom packages and itineraries, understand customer requirements, etc. A manufacturing enterprise uses digital tools to automate production, increase quality standards, and enhance the supply chain. However, not all businesses have the required expertise to achieve this. While some build an in-house IT team, others opt for simpler working models like outsourcing, IT staff augmentation, or subcontracting. Though all three are similar, they have certain differences that make it important to choose the right model for your requirements. Statistics show that the global IT outsourcing market will be valued at $807.91 billion in 2025 and grow at a CAGR (compound annual growth rate) of 8.6% to reach $1,219.31 billion by 2030. The demand for IT staff augmentation and subcontracting is also high. In this blog, we’ll read in detail about outsourcing vs. subcontracting vs. IT staff augmentation and which model is the best for your business. What is the Difference Between Outsourcing, Subcontracting, and Staff Augmentation? IT outsourcing, IT staff augmentation, and subcontracting are hiring models that allow an organization to use the resources of a service provider to complete specific tasks. These models are alternatives to recruiting candidates for the long term. Rather than spend time and money on hiring employees and training them in-house, businesses can take advantage of external talent and use their services to fulfill their project requirements. Though these models are used in various fields, here, we’ll limit our discussion to the IT industry. IT Outsourcing Outsourcing is the process of assigning specific tasks or projects to a third-party service provider. The company and its employees are not affiliated with your business in any way. After the contract is signed, they complete the tasks and deliver the expected results. It is a cost-cutting solution to reduce the number of employees you hire and the resources required to perform the activities. The outsourcing company uses its resources to work on your tasks, and you pay them a pre-determined amount as per the contract terms. IT Staff Augmentation Staff augmentation is a form of outsourcing where you temporarily hire external professionals to augment or expand your in-house teams. This is done to increase efficiency and empower your team with the right talent to complete the project. The outside personnel collaborate with your employees and use their expertise to fill the talent gap. It is also a cost-effective method to quickly strengthen your team by onboarding experienced professionals with the required skill set. This is done by hiring the services of a staff augmentation company. IT Subcontracting Subcontracting is when a business hires a third-party company to perform specialized tasks that cannot be handled internally. Unlike outsourcing, subcontracting is limited to temporary durations and shorter periods. A subcontract can be awarded to an individual (freelancer) or a company. Some IT staff augmentation companies also accept subcontracts to provide skill-based services to organizations. The association between both parties ends with the contract terms being fulfilled satisfactorily. The subcontracting model is chosen to find the best personnel for the job rather than as a cost-cutting move. What Are the Cost Implications of Each Model? IT Outsourcing Outsourcing is one of the famous tech hiring models in the global market. It is a cost-effective solution when you choose the right service provider. With outsourcing, you can reduce labor costs (no need to hire extra employees or pay them benefits) and overhead costs (no extra resources will be used). Instead, you pay the outsourcing company a fixed amount to complete the project on your behalf and hand it over. If you outsource your regular activities, then, the service provider will continue to deliver results for a lesser cost. However, choosing the wrong outsourcing partner can be cost-intensive due to delays, errors, miscommunication, and hidden costs. IT Staff Augmentation IT staff augmentation is also a cost-reduction model. However, the focus here is on balancing expenses with quality and knowledge. With staff augmentation, you can hire experts on a short-term basis. This reduces the cost of recruitment and the need to employ them even after you no longer need their expertise. That said, you have to pay salaries for the duration of hire. So, even if resource augmentation is not as cost-effective as outsourcing, it is still a reliable method to reduce expenses and overheads. Moreover, you have more control over the process and can replace the temporary employees with others or scale the team as required. IT Subcontracting IT subcontracting can result in cost reduction and cost increase, depending on your requirements. Though the subcontractor will use their resources for the project, you still have to pay them for the services. Since it is a bit similar to outsourcing but deals with specialized skills, businesses may have to spend more to hire experienced professionals. If there is high demand and less supply for a skill, the cost of subcontracting such talent will likely be higher. However, it is cheaper than what an organization will have to spend on recruiting the same talent. We can summarize that all three models are cost-effective but in varying proportions. So, how do control and flexibility differ between these approaches? Which staffing model provides more flexibility and allows you to monitor the progress throughout? Flexibility and control are major deciding factors when comparing outsourcing vs. augmentation. Typically, staff augmentation services are more flexible and give better control than IT outsourcing or subcontracting. That’s because you don’t entirely hand over the project to a service provider. Instead, you bring

13 Staff Augmentation Service Models to Consider in 2025

Staff augmentation is useful, cost-effective, and a scalable solution for businesses to expand their teams whenever necessary. Here, we’ll discuss the different types of staff augmentation services and how these can help in tailoring the IT staffing strategy in a business. There’s a high demand for information technology (IT) services in various industries. Businesses from around the globe have been adopting new technologies to revamp their processes and compete in changing market conditions. Statistics show that the IT market size has grown from $8508.63 billion in 2023 to $9039 billion in 2024 at a CAGR (compound annual growth rate) of 6.2% and is expected to reach $12417.21 billion by 2028 at a CAGR of 8.3%. In such instances, the demand for IT professionals from various domains has also increased. Programmers, engineers, data analysts, data scientists, software developers, AI and ML experts, etc., are also being hired by non-IT businesses. However, not all enterprises follow the same hiring patterns. Instead of recruiting professionals permanently, many organizations are opting for outsourcing, managed services, or staff augmentation services. In this blog, we’ll talk about staff augmentation and the various types of staff augmentation services available in the market. What are Staff Augmentation Services? Simply put, staff augmentation is the process of temporarily using professionals from outside the establishment to work with your existing teams on a particular project. They augment your internal team capacity and capabilities to help you achieve your goals. IT companies offer staff augmentation services to help other IT and non-IT businesses access talent and technology through cost-effective means. Rather than spending money on full-scale recruitment for temporary jobs, you can sign a contract with a staff augmentation company to quickly hire as many experts as you want and pay them only for the project/ duration. What is an Example of Staff Augmentation? For example, a manufacturer wants to digitally transform the systems and set up IoT (Internet of Things) devices with factory equipment for data collection. The manufacturer can hire IT staff augmentation services to build a team of programmers and data analysts to handle the project. The selected external experts will collaborate with the enterprise managers to understand the requirements and deliver the results. The manufacturer will have to pay salaries only for the duration of the project (or choose a relevant plan to pay for the services). Most staff augmentation service providers can build teams in 48-72 hours and they start working on the project in around a week. This reduces the time to market and eliminates unwanted expenses for the manufacturer. Types of Staff Augmentation Services Staff augmentation services can be truly diverse and tailored to suit your business requirements at different times. This variety has made it a popular staffing method in the global market. Traditional Staff Augmentation Traditional staff augmentation involves hiring experts based on the problems faced by in-house teams. The experts usually work on-site and sign a contract to remain part of the team until the issue is sorted. It’s pretty much like a contract job, except the access to talent is limited to the region. Offshore Staff Augmentation Offshore staff augmentation is almost the opposite of the traditional model, as you can access experts from around the world to work on your project. The temporary employees belong to another country (which is usually across the ocean, hence the term offshore) and work from their locations remotely. Managing time zones and cultural differences can be a concern if you don’t partner with reputed service providers in offshore staffing. Onshore Staff Augmentation Onshore staff augmentation is similar to the traditional model except that the experts can belong to neighboring countries as well. You have access to a wider talent pool but not to the extent of the offshore model. For example, US companies can hire external employees from Canada, Mexico, or Latin American countries. Remote Staff Augmentation As the name suggests, the experts will work remotely and collaborate online to interact with your in-house employees. They can belong to the same region or live on the other end of the world. The services are offered remotely so that they don’t have to visit your office to get the job done. This method is cost-effective, though it needs a reliable internet network and wider bandwidth. Agile Staff Augmentation Agile staff augmentation involves building a team of experts from various domains to manage a project from beginning to end. For example, in analytics staff augmentation, the team will consist of a programmer, AI engineer, data analyst, data engineer, data scientist, business intelligence analyst, etc., to build, deploy, integrate, and maintain the data architecture. The teams are created based on your requirements. Resource Augmentation Resource augmentation combines staff augmentation and other resources. It is a model developed to help businesses bridge the resource gap in their organizations without spending too much money on building everything from scratch. The resources offered by the service provider include talent, technology, infrastructure, etc. While it is similar to outsourcing, resource augmentation provides more flexibility and can be for the short term. Temporary Staff Augmentation As the name suggests, temporary staff augmentation services are time-bound and used for short-term requirements and simple projects that can be completed quickly. It is a great model to address the immediate needs and concerns in an establishment. Sometimes, external experts are brought in during the last phase of a project to sort out the issues and release the product into the market. Project-based Staff Augmentation Project-based staff augmentation involves hiring experts for the entire project. Typically, team augmentation services are project-based since complex projects require more team members and diverse talent. You can easily scale the teams without incurring extra overhead costs or delaying the project to wait for new additions. The project-based model can be for the short-term, mid-term, or long-term. Long-term Staff Augmentation Long-term staff augmentation involves hiring external talent to work with your businesses for an extended period, which could be several months or a few years. Organizations prefer the long-term

Outsourcing AI Requirement To AI Companies Is a New Emergent Trend: An Analysis Justifying It

Are you thinking of outsourcing AI requirement, when you are not sure of the value it can add to your business, during its initial phase of R&D. Whether it is the e-Commerce retail giants Amazon, eBay or an emerging startup, they all have one thing in common, the acceptance to technological advancements and the willingness to adopt it in their process automation. In their visions, AI’s role has been crucial. On a larger scale, Amazon has been automating its godown and warehouses with RPAs or (Robotic Process Automation) by signing a deal with Kiva Systems, a Massachusetts based startup that has been working on making AI robots and software. The report from PwC, a professional service network specify that nearly 45% of the current work is automated in many organizations. Such an approach leads to an annual $2 trillion in savings. Even the emerging startups have started to integrate chatbots in their process management for simplifying the customer engagement process. All these businesses have focussed on outsourcing their AI needs to other companies having the domain expertise in AI. Therefore, it is evident that such a trend has been persistent and will sustain for long in the near future. Let’s look at why this trend is becoming mainstream and why it is beneficial for companies to outsource their AI requirements to other domain experts. Benefits Companies Receive When They Outsource Their AI Access to Top Level Resources or also known as Connoisseurs in AI Companies/corporations work at different wavelengths, and domain expertise differs for all. For example, a company in the retail, supply chain, or logistics might not be an expert in technology. But they do need smart technological solutions that can automate tasks, eliminate the need for workers for menial jobs, and ways that can cut down the operational budget. Though they have full knowledge of their process and domain, having experts to sit in-house for programming, development, and deployment will cost them fortunes. When these companies outsource to AI-oriented companies with expertise in Robotic Process Automation, Business Intelligence, Data Mining, and Visualization, it helps them save additional expenditure from setting up a new tech process and face mental hassles to manage the same. As a result, top companies, whether SMEs, startups, or even MNCs prefer to outsource their AI needs to domain experts in the market. On-Time Delivery of Services & Products On-time delivery is a pressing challenge when you have an in-house team to manage the development, testing and delivery process. For example, a retail giant like Amazon or eBay is more interested in improvising their delivery system, product quality and price optimization rather than spending time manufacturing robots or managing data of consumers on their own. At such instance, they need the support of data management and manufacturing companies on the AI domain to help create feasible solutions for them. Having an expert AI company can assure them of on-time delivery without compromising on the quality. The result would be satisfied and happy customers for the companies hiring AI service provider for their niche based requirement. Setting Up Smooth Business Process Smooth business process using AI solution works best when you have the customized solution provider in the market working on solving your challenges. Most AI driven applications need prevailing market analytics and trends to be incorporated for better performance. Companies who decide to build and manage their AI applications on their own if they excel in different sectors won’t meet the desired results when compared to AI oriented solution providers. Those companies whose main product is AI solutions are continuously monitoring trends and upgrades. They partner with numerous AI based companies, volunteer in AI workshops and programs to further enrich their knowledge base. Thus, ending up as best for companies who want to integrate AI solutions in their scheme of work. These AI based startups, or established companies understand the process of their clients and customize the product to best fit into their requirements. For example, Apple’s Siri, or NetFlix customized content shown to users are best use cases to show how AI can simplify the user experience and set-up a smooth process as per the changing needs of the business. But for banks, pharmaceutical or logistics sectors to develop their own solutions like Apple’s Siri or Netflix’s customized AI data analytics would be a tough job to achieve. Even if they do invest into it, the time investment required to keep things in order might disrupt their natural business process. Hence, they find it much more feasible and cost effective to outsource it to an AI company and develop the solutions on their behalf. Save Expenses In A Big Way For sustainability, businesses have to understand the challenges, market dynamics and adapt to the changes every now and then. Such an approach requires a lot of time investment and spending time to create AI based solutions to simplify their process will be an added liability for resource and time. When companies in other sectors outsource their AI based requirements to a technology company excelling in AI, they save the time and cost. As a result, most companies are willing to outsource their requirements to a tech company rather than managing on their own. Conclusion Outsourcing to AI companies help build customized solution and they bring a lot of advantages for businesses who want to resolve their challenges in the most cost effective manner. When you analyze and find out that even top giants like Amazon and Apple are willing to outsource their specific process to AI companies, it wouldn’t be wrong to conclude that outsourcing looks much more feasible option for most companies these days. We at DataToBiz help our partners in their initial phases of R&D involving Artificial technologies. Contact for further details