Last year, I spoke with several founders and managers interested in scaling up their software development resources. While they were pretty sure they don’t want to expand their own team, they had to struggle to pick the type of cooperation with outside employees, that suits them best. Options most frequently appearing on the table are hiring software house or body leasing/staff augmentation agency. In this article, I would like to show differences, pros and cons and less obvious arguments of both alternatives by answering a few important questions.
To make it clear, I’d like to define the major difference between body leasing, recruitment services and relationship with a software house. Companies offering body leasing lend their in-house specialists (software developers, testers, etc) to other companies, charging them for a day rate. Recruitment agencies (very popular in Great Britain), perform employment processes on behalf of their clients, charging them with a success fee for every effective hire. Software development companies (software houses) gather the requirements and compose in-house teams, dedicating them to the clients. In this relationship, there are several models of pricing, including time & material contracts as well as fixed pricing.
What is success?
In the staff augmentation industry, success is achieved when the desired position has been filled. Depending on the pricing model, a client will be invoiced with a daily rate, alternatively, after a few months of successful hire.
Mature software house (SH) has a slightly different perspective. As a reference-based business, custom software development companies display a strongly project-oriented mindset. To conduct a successful project, they must have a great awareness of the project goals and ability to dedicate the most relevant tools and professionals.
One of the greatest benefits in this setup is flexibility, as each project has different needs in terms of manpower. In opposite to the staff augmentation company, a software house has the ability to dedicate and support a full stack engineering team with part-time support from other professionals such as User Experience designers, Quality Assurance specialists, scrum masters, and others. Their time involvement can be adjusted during the project, depending on the needs.
What do you pay for?
Body leasing providers and software houses invoice their clients for the working hours spent on the project. In opposite, employment agencies charge for every successful hire. The main difference between staff augmentation and custom software development companies is flexibility.
Many SH accept fixed or part-fixed pricing, especially when it comes to some smaller projects. They also offer full stack team hire services, where some of the members can be involved part-time if their full-time involvement is not a necessity. In opposite to the staff augmentation company, a mature software house allows their client to develop an entire product with an adjustable team composition. Half-time UX designer can be involved in another project, while, let's say, Python engineer and React Native developer are dedicated exclusively.
Below please find a sample forecast of a monthly time involvement prepared for one of our clients, based on the historical data:
|A FULL- STACK TEAM (4 developers, 2 QA, 1 UX, 1 PM)||
TIME SUMMARY (in hours)
|Time sum for x2 senior developers||240|
|Time sum for 2x regular developers||240|
|Time sum for x1 senior QA||80|
|Time sum for x1 regular QA||80|
|TOTAL WORKING HOURS (AVERAGE)||800|
|TOTAL WORKING HOURS (MAXIMUM)||1000|
What to expect from cooperation?
To perform a successful software development project, engineers and designers must understand the environment and conditions faced by the final user of the product or service, as well as the stakeholders, willing to invest his time and money. In opposite to staff augmentation companies, for the SH hiring and dedicating the right people to the tasks is just the beginning of the process. Highly efficient software development is a learning process, combining business acumen, design competencies and purely engineering skills.
Therefore, mature custom development companies emphasize hardly User Experience processes, such as workshops, design sprints, audits. The goal is to gain possibly high understanding of the product and ensure that each team member involved in the process has a holistic vision of the expected outcome. In result, software engineers have a higher motivation (because they understand the purpose of their work) and think more about the general result, rather than commits and pull requests.
For a software house, successful contribution results in higher willingness to refer a good recognition at services like Clutch.co. There is a strong motivation for the company to become a valuable partner. Organization unable to meet the expectations continuously is expected to vanish as the market is becoming more competitive.
Who provides the right communication?
Software development companies dedicate their team members to work on sophisticated and innovative products and services. Modern tools like Slack, Jira, video conference programs help IT teams from all around the world to maintain highly efficient communication, despite distances.
In the body leasing model, the specific team engineers are dedicated to working on the client’s premises, or at the provider's office. The second option is becoming more common, not only due to preferences of the staffing agency but also because of the lack of office space and long distances of the client's offices. In these circumstances, maintaining a well-going communication is mainly transferred to the client, which is enforced to dedicate experienced project management.
In another scenario, a software development company dedicates a scrum master/project manager to maintain communication. In agile methodologies, every team member is an active participant of the processes and high involvement of each team member has become a standard. The on-site manager can significantly increase the performance of the team, schedule internal meetings, and take care of the paperwork related to the project, ensuring that the engineers can focus on their daily-based tasks.
Looking for a right partner in software development
Body leasing or staff augmentation is becoming more popular among startups and technological SMB's, unable to cover their needs with in-house recruitment. However, in many cases, the relationship is far from balanced, as the small the freshly-backed initiatives are not taken seriously by big body leasing firms, which prefer to work with organizations of relevant size.
A mutual relationship can be fruitful in the situation when both parties consider each other as partners. Hence, I’d suggest startups and SMB's (and even companies of 50+ employees) to seek technological partnerships with someone for whom this relationship will become important.