Contractor vs. Agency vs. Staff Augmentation: 2021’s Best Form of Technical Recruitment
Contractor vs. Agency vs. Staff Augmentation: 2021’s Best Form of Technical Recruitment
Take a comprehensive look at how companies can overcome the challenges of traditional recruitment and find the talent they need.
April 08, 2021
Every year an increasing number of companies digitally transform their business, integrating the latest technologies into their existing business model to serve customers better. And while modernization is not only beneficial but vital to stay competitive, it also brings some new challenges to the table - including the challenge of finding technical talent.
Companies that adopt modern technologies also require the staff to manage those new systems as well. However, unlike the transformation itself, companies cannot hire a third-party to carry out the technical recruitment… or can they? In this article, we’ll take a comprehensive look at how companies can overcome the challenges of traditional recruitment and find the talent they need through three methods that are faster and more cost-effective as well as a technical recruitment model developed recently that takes the best of the other three methods while eliminating their limitations - called the dedicated teams model.
What is Technical Recruitment?
Technical recruitment can be thought of as an umbrella term that includes finding qualified individuals to fill the numerous positions that make up a modern IT workforce. The size and composition of each workforce are dependent on numerous factors and thus varies from company to company. That said, almost every company with an active IT staff includes developers, security analysts, administrators, and engineers. During one-off events such as cloud migration, digital transformations, and setting up big data analytics, additional talent is required as well in the form of cloud migration officers (CMOs), cloud consultants, data scientists, etc.
On its own, technical recruitment isn’t very different from traditional recruitment. An HR manager can still find and hire technical talent as they would any other employee. However, as we mentioned, there are numerous problems that are encountered mostly by non-tech companies and SMBs.
To avoid these problems and establish a competent IT team quickly and economically, different forms of technical recruitment have become popular. In this article, we will evaluate the following three popular options for technical recruitment:
- Independent Contractors
- Staff Augmentation
We’ll also take a look at a hybrid recruitment model built specifically for the challenges faced by legacy and modern businesses alike.
The Top Three Forms Technical Recruitment in 2021
As we said, technical recruitment in itself isn’t very different from traditional recruitment, it simply refers to the process of filling technical roles. However, due to the unique needs of companies and the highly varied roles required in a modern IT staff, different methods or forms of technical recruitment have emerged, each with its own set of advantages and disadvantages. The following three methods are the best forms of technical recruitment as of 2021. Let’s begin with the most common method.
Independent contracting is one of the most popular forms of employment for specialized roles, and it’s not just limited to tech roles either. Independent contractors can be found in just about every industry, from construction to aerospace engineering. The reason being, it allows employers to find individuals with a very specialized set of skills and hire them for the duration of a particular project, usually too short for most permanent/full-time employment.
It’s very important to note that independent contractors are not employees but rather a separate legal entity and are thus treated for different tax laws, benefits, and protections. This may complicate your bookkeeping but the cost benefits usually outweigh any additional costs in bookkeeping. Let’s take a deeper look at the pros and cons of independent contractors.
Pros of Independent Contractor
Highly specialized skill sets
Overall lower costs
Minimum training required (if any)
Independent contractors are more flexible in their terms of service (siimilar to employment contracts but not the same). For instance, a specialized individual may push for job security and a longer minimum employment period, the contracting model is made for short-term projects (usually under a year but can be longer).
It’s not easy to find experts and even harder to find niche skill sets which makes individual contractors a viable and attractive alternative. Contractors usually have years of expertise in a single field and they are much more available compared to similarly skilled full-time employees, not many of whom are unemployed.
You might find that individual contractors may have a higher hourly rate or a higher upfront cost compared to the initial salary of a full-time employee but the overall costs throughout the duration of the project will still very likely be lower than the long-term salary of a full-time employee.
Independent contractors are highly skilled in their field of work and are also experienced with working in new environments. The combination of these two factors means that independent contractors require minimum training (if any at all) and can get started on your project as quickly as possible.
Cons of Independent Contractor
Different working styles
One of the biggest challenges posed by hiring independent contractors is the additional bookkeeping and compliance requirements (applicable in certain industries). As we said, independent contractors are not employees and thus needed to be treated under a different set of accounting principles and other legalities. Additionally, you may need ways to measure time worked which can be done easily with a time-clock software or even a traditional time card.
It’s possible that the contractor you decide to work with may have a different working style that isn’t what the rest of your team is used to which can cause miscommunication and a little getting used to.
Although most independent contractors are fairly independent, they will still require additional management and regular supervision to ensure everything is done properly. This can be a big deal for employers who are looking to delegate responsibilities and not have to micromanage. This may become even more difficult as the number of contractors you have, increases.
This where agencies may be a better alternative to technical recruitment as they can take full responsibility for management and achieving the pre-determined goals.
Many tech agencies offer a wide range of services, one of which is outsourcing. Although outsourcing isn’t traditional recruitment because it involves hiring an agency and not individual workers of an agency, it’s still a viable and very popular form of technical recruitment because it eliminates the company’s need to find multiple individuals themselves. Instead, it’s up to the agency to form the team that will carry out your project once the business requirements and goals have been clarified.
Pros of Agency
Minimum managerial overhead
Capable of larger and diverse projects
Hiring an agency is undoubtedly faster than hiring a team of experts yourself. Agencies maintain a talent pool with a wide range of skills that can be deployed to new projects on very short notice. The only time-consuming process is the initial discovery sessions and finalizing the contract but both of these activities are important to ensure goals are properly met.
Instead of managing individual developers, engineers, designers, etc, the manager only needs to be in touch with the agency contact who will brief and update them on the progress made. This significantly reduces managerial overhead and virtually eliminates the need for 24/7 supervision.
Due to the larger and diverse talent pool, agencies are capable of taking on different types of large-scale projects. In contrast, even the most capable independent contractors are limited in what they can achieve. Hiring an agency is also an excellent choice for large-scale, one-off projects such as digital transformations and platform migrations.
Cons of Agency
Reduced internal capacity
Premium for convenience
Most companies that go the agency route will likely be doing it at the cost of an internal team - after all, it makes little financial sense to have both, unless you have a lot of work. Either way, this means that you have a reduced internal capacity which means having a reliable agency is extremely important.
The overall costs for hiring an agency will be higher compared to a group of independent contractors because you are paying a premium for the convenience of external management and recruitment. The time saved and headache avoided is usually worth this premium, especially if you’d much rather focus on core activities.
The two forms of technical recruitment we’ve discussed so far are both closer to outsourcing than to traditional employment, because the former is usually faster and more economical. However, in recent years, companies have started adopting a third form of technical recruitment which is much closer to traditional employment in structure and fills their technical talent needs - staff augmentation.
Staff augmentation refers to an employment arrangement where a third-party service provider, usually a talent agency or Managed Services Provider (MSP) helps you form and employ a team from their internal talent pool. This sounds similar to outsourcing but the major difference here is that the augmented staff works in tandem with your internal teams and you manage the new employees as your existing ones.
Pros of Staff Augmentation
No additional/separate management
Fills the gap in smaller internal teams
Staff augmentation teams are like your own employees and thus there is greater flexibility in the projects/tasks they can be given. This also helps reduce turnaround times since less time is wasted in communication.
Employers will manage staff augmentation employees the same way they would any other employee. No need for separate meetings or discussions.
Staff augmentation is much more economical than hiring full-time employees while achieving the same results, making it a more cost-efficient method.
Staff augmentation is particularly a great option for companies that are slowly building their internal IT staff but need full-time employees specializing in certain fields for periods less than 1 year. Staff augmentation gives them enough time to scout and train their own teams without compromising business operations.
Cons of Staff Augmentation
Staff augmentation is a great option for short-term projects (under 1 year) but long-term costs are comparable to full-time employment and can even be more than traditional employment depending on the project.
Staff augmentation teams work as internal employees but they do not possess historical knowledge of the company or have access to any confidential information (they can after signing an NDA) which can limit the scope of their work in certain scenarios.
The Modern Hybrid: Dedicated Teams Model
Each of the three forms of technical recruitment we discussed had multiple drawbacks and limitations, some of them even being dealbreakers for, otherwise, perfect forms of recruitment. At D3V, we set out to create a hybrid recruitment model that would keep all of the benefits of external technical recruitment such as low costs, flexibility, and autonomous working styles with limited supervision required.
After a lot of testing, we came up with the Dedicated Teams model. This modern form of technical recruitment enables companies to hire flexible technical teams capable for spearheading entire technical projects such as cloud migrations and app development as well as work in tandem with a company’s internal team during peak season or when a company is just building out its technical staff.
Learn more: How We Work
Getting Started with Technical Recruitment
Technical recruitment is a common challenge for non-tech companies that have either adopted new technologies or have recently undergone a digital transformation. In both of these cases, because the company did not have the technical talent to begin with, there is an immediate need for technical staff to take over administrative and development tasks from the cloud migration/digital transformation teams. This challenge is further compounded by the limited technical knowledge in the HR departments of most small-medium-businesses. As a result, technical recruitment can be a slow and inefficient process.
The methods we have discussed above can help you completely avoid these challenges. However, in case you’re finding one too many trade-offs in the three forms we’ve discussed, you should take a deeper look at the dedicated teams model. If you’d like to learn how this can model can be implemented into your business, book a free consultation with one of our cloud-certified experts today.