With continued market disruptions in 2020 demonstrating the importance of flexible outsourcing strategies, the practice of staff augmentation has once again come into the limelight.
Under this staff augmentation model, outside personnel temporarily bolster your company’s response to specific business demands.
As of Q4 2020, staff augmentation is a USD 500 Bn industry and only growing in popularity.
The need for Staff Augmentation
In the US, around 60% of employers have job openings that remained unfilled for longer than 12 weeks. The main reason being a mismatch in the job descriptions and the talent capability.
At a global level, capability gaps are rising at an alarming pace. Capability gaps across all industries and occupational categories hover around 5-10% in the EU region. Here, over 45% of businesses report productivity loss and 26% revenue loss due to capability gaps.
In short, key market drivers propelling the staff augmentation demand include:
- Skills and Staffing shortage
- Emerging skills
- Labor demand
So, it is not surprising that enterprises have turned to augment their staff to mitigate the business losses.
Benefits of Staff Augmentation
Staff Augmentation offers significant cost savings and remains 59 percent of businesses’ top incentive to outsource their teams.
A few of the other benefits listed by top businesses according to a recent survey include:
- Enables focus on core business
- Solves capacity issues
- Enhances service quality
- Broadens access to intellectual capital
- Drives broader transformational change
It’s not just employers; employees, too, are actively considering joining this flexible job structure.
Unemployment among highly skilled workers is almost non-existent, making freelancing an appealing option for this demographic. Growing availability means employers can select contractors with the ideal proficiencies for the job, thus bringing the full force of their expertise to the company.
Companies can often hire consultants more quickly than full–time employees since the hiring process usually doesn’t involve HR or require extensive interviews. When there are limits on increasing headcount, separate budgets may still allow for consultants or temporary employees.
Staff augmentation enables companies to adapt quickly. By adding specialized talent, companies can expand their in-house team when project deadlines require a larger workforce. This flexibility allows companies to respond faster to changes in the market and exploit opportunities for growth.
Figure: The Staff Augmentation Process
Staff augmentation vendor landscape
IT industries largely depend on staff augmentation to keep up with the advancement and overcome skill gap challenges. It allows them to ramp up and down easily to meet changing demands without shouldering the cost and liabilities of additional full-time employees.
For example, in the BFS ecosystem, financial services companies are turning to flexible staffing options in the Covid-19 era as they need temporary accounting resources to address critical daily transaction balancing and align resources.
In the healthcare ecosystem, experts involved in creating technology solutions for hospitals are embracing the changing tides and opting for consultative work and contract opportunities, including staff augmentation work.
Workloads here include:
- Development of virtual care platforms
- Design & development of B2B tracking solutions
- Platforms for referral management and others
It’s not just startups who are looking towards outsourcing to boost their bench strength. Belarus-based staff augmentation provider Andersen Labs counts Samsung, Kaspersky, and Amazon among their clients.
Draup’s market analysis report notes that the main technologies being offloaded to augmented staff are React Native, Java, Redix, Redux. PRISM, Terraform, Ruby, and Angular JS, among others.
The report also notes that key players such Skelia, Inverita, and Synergo Group are targeting their outsourcing services towards companies in the IT, BGS, Telecom & Retail sectors.
However, the trends point towards more staff augmentation in other verticals such as real estate, travel & hospitality, construction, and health and wellness.
Vendors should closely track the advancements and industry signals in these areas to grab sales opportunities as and when they arise.
Focus areas for Service Providers
On analyzing several outsourcing initiatives by various companies, Draup has identified the following three areas to be of significant value across verticals:
- Application development
- Testing services
- Digital services
In BFS and wellness, especially, several opportunities are opening up for service providers to offer their solutions in application development & testing.
To get an idea of the type of ongoing activities, here are a few current use cases that are being undertaken with the use of staff augmentation vendors:
- Development of a cloud-based microservice solution and integration of data science, machine learning, and predictive analytics to automatically adjust irrigation for site-specific scheduling of every client
- Functional, regression, and integration testing of a Bank’s Unified credit portfolio/Unified corporate system
- Development of a Transport Inventory application that helps to create and maintain a complete record of the company’s stock and property and minimize possible errors
Without a doubt, COVID-19 has accelerated the demand for staff augmentation services. We have noticed that the outsourcing intensity has picked up pace globally as enterprises look to minimize costs and deliver professionally churned business solutions.
Sudden disruptions necessitate the need to break the traditional mold and tap into available labor sources quickly to fill any gap in business requirements.
This whitepaper is written with data gathered from Draup’s proprietary sales intelligence platform. Draup for Sales curates data from 4000+ sources and on over 280,000 companies about their outsourcing ecosystem to deliver staff augmentation/outsourcing vendors with actionable sales intelligence data.