Many startups have an idea and the ability to make a cool service/product but do not have enough experienced people to develop other non-core areas. Hundreds of startups burn out every month because they haven’t set up marketing automation, made a user-friendly website, haven’t created an app, or set up feedback. This article discusses why it is a great solution to scale your startup with the help of IT staff augmentation.
Scaling startup: Outsource vs. IT staff augmentation
How can startups effectively implement non-core tasks? One way they often choose is outsourcing, from back office tasks and customer support to creative works like logo design and marketing collaterals. They simply outsource the task to a company for which it is relevant. This ensures that the task at least gets done. And it will require fewer expenses than in the case of its solution by the startup (no need to hire programmers and managers, pay HR and then think where to dismiss unnecessary employees). But this solution has a few disadvantages:
- Startup become dependent on other company
- Startup does not train its people, which means that in the future, it may have problems scaling up
- Startup is not responsible for the quality of its product
- Startup cannot be 100% sure about the security of user data
- Startup cannot perform quick fixes
IT staff augmentation allows startups to eliminate all these disadvantages and perfectly suits them. IT staff augmentation means leasing or renting personnel. With it, you can get experienced employees to your team ready, allowing the startup to develop from within. It is even considered a beneficial growth hacking technique.
If you have unlimited resources and time, you can (and should!) hire experienced employees so that the rest of the team can equal their level. But finding and attracting such specialists is very difficult, and the process, even with an offer of above-market salaries, can take months. During this time, you risk losing the competitive advantage you had.
So until you find all the people you need to develop your project, IT staff augmentation is the best solution with an eye on the future.
After the pandemic began, the IT staff augmentation market finally opened up. Customers became more flexible about their employment. That’s how startups hire whole ready-made development teams, which are engaged in implementing the project from the MVP stage to post-release support.
The rapid development of the industry is easy to explain. Many startups just prefer to do the project themselves, keeping full control over it instead of giving it to a third-party studio, hoping for the best.
IT staff augmentation practice
Here is how IT staff augmentation works:
- The IT staff augmentation provider selects employees according to the client’s requirements. It takes into account the position, qualifications, salary, and terms.
- The client company receives detailed information about suitable specialists: their previous jobs, resumes, and hourly rate. Interested candidates are interviewed by the startup.
- The two parties decide on a convenient reporting format, the specialist’s salary, the anticipated amount of work, and the process of setting tasks and verifying results. IT staff augmentation companies usually work on a prepayment basis.
- Once the specialists have been selected, an addendum is prepared to the contract with the IT staff augmentation provider. Then the customer is billed. This is the first step in the entire process that requires payment.
- Leased specialists are hired as staff and become full employees of the company. An NDA may even be signed with them. But the employees have an employment contract with the IT staff augmentation provider.
- At the same time, the client does not conclude a separate contract with the hired employees and is not bound by any agreements with them. He can refuse their services at any convenient time or ask to replace one specialist for free with another.
The managers of the client company manage the work of a specialist. They have full control. They are free to change employees and the specifics of the tasks they are working on. There is no need to renegotiate contracts or sign new contracts. That is why IT staff augmentation is considered more flexible than outsourcing. It is greatly suited for startups where the specifics of work change regularly.
Advantages of IT staff augmentation
The advantages of the staff augmentation model are significant:
- The long and costly search for suitable employees can be avoided entirely.
- Costs of keeping personnel records, accounting, and migration records are reduced. This is especially important for small firms that do not want to support large HR and accounting departments. Also, the cost of office supplies, software, and consumables is reduced.
- The customer is not legally responsible for leasing employees through an IT staff augmentation provider. He is not responsible for the superannuation fund and does not give social guarantees. He does not have to pay benefits if fired or an insured event occurs. All risks and additional costs are passed on to the IT staff augmentation provider.
- Any possible claims to the employer (including those of judicial nature) are resolved by the IT staff augmentation provider. This is also a significant advantage for small startups.
- The startup does not have to worry about delays in project implementation in the case of illness or any other situation with the employee. If necessary, he will be replaced free of charge.
For an employee, such a labor organization scheme has positive aspects. One of them is the possibility of gaining work experience in large companies or startups. Experienced specialists often find it more attractive to work for an IT staff augmentation provider than for one particular company. This way, they can try their hand at various projects.
Why do startups need IT Staff Augmentation?
Regarding growth rate, IT staff augmentation has become several times more successful than outsourcing. Here is why:
- Low cost. IT staff augmentation is often cheaper than outsourcing, especially under the guidance of experienced managers. You do not spend a single extra penny.
- Quick MVP (minimum viable product) creation. With IT staff augmentation, startups can release MVP and see how it reacts. And then, unlike outsourcing, you get to keep the key specialists who made it happen.
- It is possible to quickly get critical specialists. IT staff augmentation providers have them, and they value them very much: this is the basis of their business.
- Promptness. Every day counts in a startup. It is urgent to find experienced specialists, and there are almost none on the free market, and they are not eager to join a startup company. IT staff augmentation becomes the fastest and most available option: searching for developers takes not more than two weeks.
- Insurance against unforeseen circumstances. Staff turnover is a big problem for the IT industry, especially startups. With IT staff augmentation, you get insurance (if something doesn’t work out with a staff member, they will hire a new one for free).
- Flexibility in staff management. The number of workforces always corresponds to the actual volume of work. Employees do not idle if they are not busy. At the same time, the possibility of rapid expansion is also preserved: you only need to order more developers when a project comes up for them.
- Reduced administrative and financial burden on the startup while maintaining the direct management of employees. This is especially important for startups with small IT products, which have little experience so far, and who do not want to organize several departments in the company from scratch, hire managers for them and get into a routine.
Suppose eCommerce website development is a non-core business for you, and you want to transfer this part of the work to professionals. In that case, it is worth remembering that outsourcing is not the only way out. IT staff augmentation brings much more benefits to different-sized companies than you think.
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