Software Outsourcing or Staff Augmentation

The human element of our now digital world seems to be extinguishing. More and more, our lives and interactions are no longer human to human. There is often convenience, efficiency gain and scale offered as a result, but certain things are just better when there is a human interaction included.

Two generations ago, my family was in the restaurant business. Back then, dining out was reserved for special occasions and most restaurants were upscale. The dining experience was very personal. You were greeted and seated by a host that was in charge of the “front of the house”. You were served by a professional waiter that took interest in you and then enthusiastically explained the specials of the house. They would provide detailed insights to each dish and work closely with the customer to make sure their order was perfect. And, often the chef would even appear at the end of the meal to make sure you were satisfied and provide you with his gratitude. As a customer, you felt connected to the restaurant, its staff, and even the food. With few exceptions, this type of dining has long since passed. It is replaced today with an experience that is faster, far less intimate, and keeps the customer at a distance. And with online ordering in many restaurants, you can eat without any human interaction at all.

I view software development outsourcing, in the same way, I do the restaurant example above. Outsourcing development to firms in India, Philippines, Pakistan, and other common geographies has become as commonplace as quick casual dining. It is definitely cheaper, but saving money is not always a path to success. There are several byproducts of utilizing software outsourcing that can have a negative impact on a business. The most significant is that businesses that use software outsourcing have no connection to the developers that are actually writing code. In the software outsourcing model, the client does not typically interact with any developers. In fact, they may not even know how many developers are working on their specific project. The interaction is usually with a single Project Manager – one that may be (but is often not) fully dedicated to a single project.

How this plays out can have varying degrees of success. Let’s say that you have hired a firm in India to build you an app. India is of course widely known for its large number of software engineers. And, there is certainly a group of engineers in India that are world-class. Unfortunately, the chances of having those types of engineers building your app is unlikely. The vast majority of engineers around the globe are average. But, because of the model, you as the client are typically shielded to who is working on your project. It may be world-class engineers, but it may also be novice engineers. Another common issue is that of attrition. There is a “revolving door” at many of these outsourcing firms where engineers are job jumping. You may have 5 engineers working on your project initially, but a completely different 5 by the end of the project. Again – you are not privy to this. But, the biggest and most concerning issue to me (and the reason why I never liked utilizing outsourcing) is the lack of intimacy between the client and the engineers developing. Just as you are not connected to the developers, neither are they to you. There is no relationship and thus no real loyalty. Good developers are passionate about what they are doing. Good developers will challenge certain requests and offer feedback. Good developers have a connection to the work. In the software outsourcing model, they don’t.

Obviously, the perfect way to develop a product is to have your engineers onsite where you can interact with them face-to-face. Unfortunately, this is not something many businesses can do right now. Demand for software engineers has never been higher – making it incredibly hard to recruit local talent. And, if you can find and hire a local software engineer, you need to have big budgets to not only support them, but retain them. Costs for domestic software engineers in the U.S. has been rising 4-5X faster than that of inflation. It is very costly to have a domestic based software dev team.

Fortunately, there is a hybrid option between that of outsourcing and that of hiring locally. That option is referred to as “staff augmentation” and it is a model that has been adopted by companies both large and small. What staff augmentation allows a company to do is to select and engage a specific developer. The company can interview and qualify that specific person to make sure that they are a good fit for the role they are being engaged to fill. Once a match is made, the company has complete oversight on that specific resource (managing them as though they were hired as a full-time developer). The difference is that the resource is instead employed by the staff augmentation firm and often is based outside the United States. The company does not have to worry about housing that specific resource, providing them with benefits or dealing with other HR-related activities. They really are a contractor. But, the resource is chosen by the company, managed by the company, and is fully dedicated to that company.

Since these resources are often outside the U.S., companies utilizing staff augmentation are able to save considerable costs. In the case of Insurance Tech Talent, our clients save an average of 50% when compared to hiring that same type of developer in the United States. Companies using staff augmentation also have the flexibility to grow/shrink their teams at any time. If for instance, the app project I hinted to above is one that takes 1 year to complete, the company can easily disband its team upon completion.

The staff augmentation model is not exclusive to Insurance Tech Talent, but I am proud to share that we think we have perfected it. From our incredibly talented internal recruiters that source candidates to our enthusiastic HR / Office Manager staff that work tirelessly to keep morale high, Insurance Tech Talent brings a best-in-class solution to our clients. Our nearly 20-year history makes us a pioneer in the space and we are proud to share that many of our current customers have been with us since the beginning.

In the digital world, we live in, there is an increasing number of transactions happening where human interaction is no longer involved. We think software development should not be one of them.