IT Staff Augmentation vs. In-House Recruitment: Costs, Processes, and Benefits

What Is In-House Recruitment, and How Does It Work?

When you hire in-house, your workers are completely your responsibility: you pay their salaries, onboard them, and give them everything they need to do their job.

In-house recruiting puts hard work before the reward. Here are the first four tasks that will be on your list:

1. 1. Crafting job descriptions: Define roles and responsibilities and highlight attractive company benefits.
2. 2. Advertising positions: Post job ads on platforms like LinkedIn and inform current employees of internal applications or referrals.
3. 3. Screening and interviewing: Review applications, conduct initial and technical interviews, and hold final discussions with stakeholders.
4. 4. Making hiring decisions and onboarding: Select candidates, complete formalities, and integrate new hires through orientation and training.

But in fact, hiring is just the beginning. The volatile tech labor market means losing professionals is common. Roughly 22% of millennials spent a year or less at their jobs in 2022, with even more of this gen considering leaving. The same goes for 83% of Gen Z workers, who are ready to job-hop as soon as the opportunity presents itself.

That leads us to the significant issue of employee replacement costs, which you need to be prepared for if in-house hiring is your method of choice. Replacement costs can be as high as 50%- 60% of an employee's annual salary, with overall costs ranging anywhere from 90%- 200% of their salary.

For example, if a senior developer earns $51,000 per year, it can cost an average of $25,500 - $30,600 just to replace that employee. This includes expenses such as recruitment, training, and the time taken to get the new hire up to full productivity.

Additionally, the overall losses to the company, which account for factors like lost productivity, the impact on team morale, and the time spent by managers and HR during the hiring process, can range from $45,900 - $102,000.

So, in-house recruitment also involves talent retention through proper onboarding, transparent communication, conflict mitigation, and anti-head-hunting strategies. This takes time and investment.

The first question is, why tackle this alone when an outstaffing partner can handle recruitment and retention for you?

The second? OK, so how does that work?

What Is Staff Augmentation, and How Does It Work?

Staff augmentation is a flexible outstaffing strategy for adding temporary talent to your team where you determine the term of commitment based on your business requirements.

So you can choose how long you need your talent for:

• Short-term: Good for meeting immediate project deadlines or handling skills gaps or peak workloads.
• Long-term: Augmentation can also run for several months to years on long-term projects or for ongoing support roles.
• Project-based: You hire professionals to complete a specific project. Their engagement ends once the project is successfully delivered.

You also get to choose where your augmented staff are based:

• Onshore: Staff are located in the same country as your company. This ensures cultural alignment, time zone compatibility, and often easier communication, but is more expensive.
• Nearshore: Staff are in nearby countries, usually within the same or a similar time zone. This provides a balance of cost savings and time zone differences, making collaboration smoother.
• Offshore: Staff are based further away, often in different time zones. This option is typically cheaper and offers access to a vast talent pool, though it may require more effort to manage due to time zones and cultural differences.

Now, let's see how the staff augmentation process typically works.

The Differences Between Staff Augmentation and In-House Hiring

The choice between staff augmentation and in-house hiring mostly depends on the nature of the project, your budget, your long-term goals, and the size of your skills gap. As a rule of thumb:

• Staff augmentation offers flexibility and immediate access to specialized talent, making it ideal for short-term and project-based needs.
• In-house hiringprovides stability and deeper integration with company culture, which is suitable for long-term and continuous projects.

Still, as things aren't always black and white, let's examine four things to consider when choosing between in-house hiring and staff augmentation.

Recruitment effort

When it comes to hiring top-tier specialists, staff augmentation offers a significant advantage: simplified recruiting. Since the vendor handles most of the recruitment tasks, you won't need to spend weeks or even months searching, vetting, interviewing, and onboarding potential candidates.

Instead, you provide a list of requirements, interview pre-screened candidates, and select the best fit for your team.

When clients partner with Giraffe Software, they gain access to a network of highly skilled specialists who can typically start within two weeks. Meanwhile, statistics confirm that finding in-house talent can take around 44 days to fill a position, slowing down your progress. Outstaffing is a reasonable approach that saves time and money, allowing startups to focus on growth rather than recruitment hurdles.

Cost

While in-house hiring is a better long-term solution, it requires a much higher upfront investment, especially in the US and Europe. For example, the median salary for US software engineers is $159 thousand/year, according to Glassdoor. If you're planning on in-house hiring in the States, you'll need to meet this cost.

Compare this to hiring in Germany, where the median salary is roughly $74 thousand/year, or the UK, where it drops to around $51 thousand/year. Still too high? Try Japan, with $48 thousand/year. Or lower? How about Ukraine , where it's only $36 thousand/year?

The point is that while US developers have a great reputation, other countries can offer you comparable services on a much smaller budget. Research places Ukraine, Romania, Mexico, and Moldova above the US for software engineering proficiency, and plenty of other countries also compare well. Staff augmentation lets you easily tap into this more affordable talent pool.

And salary is only part of the picture. New hires, especially in intern, junior, and middle roles, also require training and onboarding, which take more time and money. All of these costs can add up to as much as $28,000 per hire.

Additionally, don't forget the costs associated with office space, equipment, and benefit packages required for full-time in-house employees. These overhead expenses can be substantial but vanish when you partner with an outstaffing company as they take on these responsibilities.

Finally, to stay competitive and attract more high-quality hires, you must offer competitive salaries and benefits packages, including health insurance, retirement plans, and other perks.

All in all, staff augmentation takes the cake for cost efficiency.

Interested in learning how we help clients save up to 50% in IT salary costs? Contact our experts, and we'll demonstrate our calculations.

Flexibility and scalability

Another factor to consider is flexibility and scalability. Spoiler alert: staff augmentation also decimates in-house hiring.

Let's say you need two Gatsby engineers ASAP. It takes around 35 days to hire a software engineer, and a Gatsby expert will likely take a bit longer. Plus, you'll need a few weeks of onboarding. Realistically, you're looking at 2 to 3 months without the required expertise.

Alternatively, you can contact someone like Giraffe Software (that's us!) and get your developers working in as little as two weeks.

Now, consider what happens when your Gatsby project gets axed. Realistically, you no longer need your in-house developers. Do you fire them? Maybe, but then you have to clear the legal hurdles and pay for severance.

And what if we add the real world into the mix? There have been massive layoff sprees worldwide in 2024 alone, with some organizations cutting up to 20,000 people. Firing doesn't just feel bad: it also makes for terrible PR.

With staff augmentation, you have none of these problems. Your team member leaves at the end of the contract with no hassle and no additional costs.

Control and integration

It's wrong to say that team augmentation is all sunshine and rainbows. Many clients come to us with a real fear of losing visibility and control over their augmented teams, and that's understandable.

With a good in-house hire, you get someone who will integrate into your company, absorb its culture, understand all your daily processes, and develop their knowledge alongside you.

With staff augmentation, everything can feel farther away, so you might wonder:

• How do I overcome the language and cultural barrier?
• How do I know my employees are committed and productive?
• How do I foster a sense of connection and teamwork between augmented and in-house employees?

In fact, while managing augmented staff takes effort, effective communication and management strategies can address the most common concerns.

Access to global talent

Of course, you want to hire the best specialists for your project. The unfortunate truth is that building an in-house team limits your talent pool. While opening up to remote or hybrid working lets you hire further afield, finding the perfect match for your team still takes time and effort.

In contrast, outstaffing providers maintain extensive databases of vetted developers and often have broad partnership networks. At Giraffe Software, we boast a pool of over 30,000 talents, all thoroughly vetted and field-tested. This accelerates your access to global talent, enabling you to find your ideal candidate more efficiently.

Does Staff Augmentation Really Work?

In a word, yes. Many companies use staff augmentation to achieve business success for less, ranging from small bootstrapped startups to mastodons like Pinterest, Porsche, and Google. At Giraffe Software, we've spent over seven years helping it happen.

REM Waste

Take, for example, REM Waste, a UK-based waste management company. In just four months, our eight engineers rolled out an MVP for their CRM platform, saving the company 38% in costs compared to local hiring.

Aconi GmbH

Or look at German-based Aconi GmbH, who saved 29% of their hiring budget thanks to our expert developers. Six Giraffe team members helped create a custom ERP system and transform it into a SaaS product that Aconi now sells to others.

Looxis

Another example is Looxis, also based in Germany, who also saved 29% of their budget with help from Giraffe. Our small team of four members helped this gift shop launch into the digital space as a full-featured eCommerce store.

Once we complete our projects, many of our clients continue to use our services for maintenance and updates until they feel comfortable transitioning to a more permanent in-house team.

IT Staff Augmentation vs. In-House: What Should You Choose?

As with most things in life, the answer is “it depends.” If you're looking for a quick solution, staff augmentation is probably the way to go. But if you want more long-term benefits, then despite its drawbacks, in-house could be the right choice.

Here's a table summarizing the pros and cons of each approach.

Many companies combine the two approaches for the best results: they hire a solid in-house team and then enhance it with augmented staff when required. This is sensible if your project is affected by seasonality or high peaks and lows: for high season, you can hire staff augments and then let them go for low season.

If we've convinced you to take the staff augmentation route, we'd love to be part of your success. Giraffe Software has a pre-vetted pool of developers from all over the world that can start in as little as two weeks and save up to 50% of your development budget.

Are you looking for a team extension right now?

contact us today

Summary

The choice between staff augmentation and in-house hiring depends on project dynamics, budget considerations, and long-term goals. While staff augmentation offers flexibility and rapid access to specialized expertise, in-house recruitment provides stability and deep integration with company culture.

However, the current situation calls for immediate solutions, which outstaffing provides. Limited resources, a tight market, and urgent deadlines make talent acquisition a major stumbling block.

Many companies adopt a hybrid approach, blending in-house teams with augmented staff to navigate project fluctuations effectively.

Giraffe Software stands ready to support businesses with a vetted pool of developers, ensuring swift deployment and substantial cost savings of up to 50%. If you're exploring team extension options, reach out to Giraffe Software today, we're eager to share our practical expertise and best practices.