How much does IT staff augmentation cost? Many factors influence the price of the IT staff augmentation service. Therefore, it makes no sense to name a specific cost. Instead, we will consider the main pricing factors. So, this article will discuss how to price staff augmentation.
Overview: What is the Staff Augmentation Pricing Model and How It Works
Outstaffing is a variant of hiring personnel. It helps a business save time finding employees and eliminates certain expenses related to their maintenance, such as social security benefits and insurance. This is because the employees are not part of the company's staff.
When a company needs employees, it turns to an outstaffing agency and rents personnel for a strictly defined period. Since the outstaffing partner is the official employer, it pays the rented personnel salaries, keeps all personnel records, and transfers money to the tax authorities and social funds. The lessee company is exempt from all these troubles.
IT staff augmentation works according to the following principles:
- A company that needs employees searches for an outstaffing agency like MaybeWorks and sends an application for recruitment.
- The agency provides specialists. They are either selected or allocated from their own staff.
- The parties conclude a contract. The document specifies the main points, such as the number of employees who will work in the company, each employee's qualifications, the working conditions of the specialists, the terms of validity of the document, any reasons for its early termination, the procedure for payment for agency services, etc.
- Outstaffer prepares documents for each employee.
- The personnel starts working. The tenant company is responsible for providing them with the necessary equipment and overalls.
This is how the IT staff augmentation model works in short.
Outsourcing and IT staff augmentation - what is the difference?
Outstaffing is often confused with outsourcing. Meanwhile, these are two different concepts for managing remote development teams.
By choosing to outsource, the company simply transfers part of the work and business tasks to other performers. IT staff augmentation implies the same employees as the rest of the staff—they come to work every day in the same way and fully participate in the company's life. It's just that they are on the staff of another organization—the outstaffer agency.
Benefits of the IT Staff Augmentation Model?
As you can see from the image, IT staff augmentation offers numerous benefits. We at MaybeWorks want to highlight 3 of the most important in our opinion.
Cost Efficiency
Staff augmentation helps in significantly reducing overhead costs. Businesses only pay for the specific skills and time required instead of bearing the expenses associated with hiring full-time employees, such as benefits, office space, and equipment. This methodology allows companies to scale their teams according to project demands, ensuring financial resources are used efficiently and only where necessary.
Flexibility
One key benefit of staff augmentation is maintaining a flexible workforce. Companies can quickly adjust their team size to meet project requirements without the delays that come with traditional hiring processes. This flexibility means businesses can respond swiftly to changing needs, new projects, or sudden increases in workload, ensuring they remain agile and competitive.
Unique IT Talents
Staff augmentation grants access to a vast pool of specialized IT professionals who bring unique skills and expertise that might be scarce locally. This access allows companies to enhance their projects with cutting-edge technologies and methodologies. Additionally, these professionals often bring diverse experience from working on various projects across different industries, providing novel viewpoints and innovative solutions to complex problems.
We recommend you read our article discussing IT staff augmentation provider vs freelancers.
Factors That Influence IT Staff Augmentation Costs
Several parameters influence the cost of the IT augmentation service. Below, we will consider the 8 most important of them.
Skillset Requirements
Since there are no strict recommendations on who should be removed from the staff and who should remain in it, both ordinary employees and specialists are transferred to external maintenance. Naturally, employees with different qualifications receive different pay. For example, a Java developer or MERN programmer has lower salaries than a DevOps engineer or a product manager.
The contractor needs to build up a payroll every month. He does this using the money received from the client. It turns out that the higher the level of qualification of the staff, the more money is spent on its maintenance. However, do not forget that when employees are enrolled in the company, such costs do not decrease because employees still have to pay wages.
Project Duration
The length of a project is another important factor. Short-term projects often have higher hourly costs because they require rapid onboarding and immediate productivity. Long-term engagements, while potentially cheaper per hour, accumulate more substantial costs over time.
Additionally, longer projects may require periodic training or upskilling, adding to the total expense.
We recommend you read our article discussing IT staff augmentation vs outsourcing.
Location of Resources
Not only domestic personnel but also foreign personnel can be transferred to external management. In the second case, it is even more relevant for the company. Enrolling non-residents in the staff is a task whose solution involves many bureaucratic difficulties. We are discussing collecting documents and certificates, issuing visas and patents, etc.
It is clear that it is easier to get Germans to work in Germany than citizens from other countries. Therefore, the contractor incurs different costs when maintaining domestic or foreign personnel. Such fees are covered at the expense of the client. Accordingly, the more non-residents you plan to put on the payroll, the more money you will have to pay for it.
Demand and Supply Dynamics
The market demand for specific IT skills can cause prices to fluctuate. Offshore staff augmentation rates can spike during peak demand periods, like major tech rollouts or when new technologies emerge. Conversely, when the market is saturated with talent, costs might drop.
Quality Assurance and Testing
Ensuring the quality of work through rigorous testing and quality assurance processes is essential but adds to the cost. Investing in these areas is critical to avoid potential expenses from bugs, security breaches, or system failures. High-quality output may require dedicated QA specialists and advanced testing tools, further impacting the budget.
Administrative Expenses
Depending on their specialization, employees may need overalls, inventory, and so on for their work. The purchase of such resources also incurs costs. Since the personnel's formal employer is the contractor, he provides them with tools. However, the cost of purchasing materials and supplies is initially accounted for in the total estimate.
So, the customer can remove personnel from the staff and fully transfer the responsibilities for its maintenance to the IT staff partner—from document execution to service support. It should be understood that the IT staff partner will be happy to provide additional services. But this will necessarily increase the cost of outstaffing.
Software and Tools
Providing the necessary software and tools for augmented staff can be a significant expense. This includes development environments, collaboration tools, security software, and other specialized tools required for the project. The licenses, subscriptions, and maintenance of these tools should be factored into the overall cost.
Opportunity Costs
Determining the cost of services is a personal matter for each IT staff augmentation company. Therefore, the prices for outsourced DevOps vary significantly from agency to agency. The difference in cost for an identical service can reach 20-35%. We will not name any ideal price points. Instead, we will note that a cost close to the market average can be considered optimal.
To get services of decent quality without overpayments, it is important to partner with a truly experienced and professional IT staff augmentation partner. He knows how to provide the company with the right staffing results. Therefore, such a performer will carefully study the organization's goals and offer the most appropriate scheme for optimizing the staff. The cost of services will be detailed in the estimate, allowing you to plan your expenses initially.
We recommend you read our article discussing staff augmentation vs managed services.
Pricing Models of IT Staff Augmentation
Choosing the right pricing model for IT staff augmentation is crucial for balancing cost control and flexibility. Here are three common models to consider for development team extension.
Monthly Retainer Model/ Frat Rate
The monthly retainer model involves paying a set fee each month for access to a team of IT professionals. This model is beneficial for projects with ongoing needs but uncertain workloads. With a monthly retainer, you have a predictable expense, making budgeting easier. It also ensures that resources are readily available when needed, providing flexibility to scale up or down without renegotiating contracts. However, it might be less cost-effective if your needs fluctuate significantly from month to month.
Fixed Price Model
In the fixed price model, you agree on a set fee for the entire project. This model works efficiently for projects with clearly defined requirements and deliverables. It provides cost certainty, as you know the total expenditure upfront. The fixed price model incentivizes the service provider to work efficiently and meet deadlines. However, it requires precise initial planning and may involve more time negotiating terms. Any modifications in project scope can lead to renegotiation and potential delays.
Continued Term Model/ Time & Material
The continued term model, also known as a time and materials contract, bills you based on the effective period and resources spent on the project. This model offers the highest flexibility, accommodating changing project scopes and unforeseen challenges. It is ideal for complex projects where requirements may evolve. However, the continued term model can lead to higher and less predictable costs, making budgeting more challenging. Close project management and regular progress monitoring are essential to avoid cost overruns.
We recommend you read our article discussing outsourcing vs outstaffing.
How is the Pricing for Staff Augmentation Determined
Next, let's discuss IT staff augmentation pricing for Junior, Middle, and Senior developers.
Junior Developer Pricing
Junior developers typically have 0-2 years of experience. They handle basic coding tasks and require supervision and guidance.
We have analyzed Salary.com, ZipRecruiter, and the Glassdoor website and concluded that the average cost of a junior developer is:
- Hourly Rate: $20 - $40
- Monthly Rate: $3,000 - $5,000
Factors affecting cost:
- Skillset. Basic programming knowledge and limited project experience.
- Location. Costs can vary significantly based on the developer’s location.
- Availability. Prices might be lower if there is a high supply of junior developers.
Junior developers generally have inexpensive pricing regarding their location in the offshore/nearshore development service course.
Medior Developer Pricing
Medior developers with 2-5 years of experience can work independently on complex tasks and contribute significantly to a project.
We have analyzed Salary.com, ZipRecruiter, and the Glassdoor website and concluded that the average cost of a middle developer is:
- Hourly rate: $40 - $70
- Monthly rate: $5,000 - $9,000
Factors affecting cost:
- Skillset. Proficiency in multiple programming languages and frameworks.
- Project scope. Ability to handle complex projects without extensive supervision.
- Location. Rates are higher in regions with higher living costs.
- Demand. Popular technologies can push prices up if demand is high.
Middle developers come with a higher cost-price tag than the starters and produce more sophisticated and quality outcomes.
Senior Developer Pricing
Senior developers have over 5 years of experience and can lead projects, mentor junior staff, and provide strategic insights.
We have analyzed Salary.com, ZipRecruiter, and the Glassdoor website and concluded that the average cost of a senior developer is:
- Hourly rate: $70 - $120
- Monthly rate: $9,000 - $15,000
Factors affecting cost:
- Skillset. Expertise in multiple areas, including architecture design and advanced problem-solving.
- Leadership. Ability to lead teams and ensure project success.
- Location. High cost of living areas drives up rates.
- Scarcity. High demand for seasoned professionals often leads to higher costs.
Senior developers are at the top of the staff augmentation pricing model.
2024 IT Staff Augmentation Pricing by Location
Here's a detailed look at IT staff augmentation pricing in 2024 by location.
South America / LATAM
South America, especially countries like Brazil, Argentina, and Colombia, has become a hub for IT talent. Companies are drawn to this region not just for the quality of work but also for the cost benefits.
We have analyzed Salary.com, ZipRecruiter, Glassdoor, and some other LATAM websites and have calculated the average salary for the following experts:
- Frontend developers: $25 - $55 per hour
- Backend developers: $30 - $60 per hour
- Full Stack developers: $35 - $65 per hour
- Mobile developers: $30 - $55 per hour
Why choose LATAM:
- Time zone compatibility. LATAM's time zones align well with North America, facilitating real-time collaboration.
- Skilled workforce. The region has a growing number of highly educated IT professionals.
- Cultural affinity. Similar business cultures and work ethics make integration smoother.
LATAM IT companies are popular in the global IT market.
Central / Eastern Europe
Central and Eastern Europe have long been favored for their tech expertise. Countries like Poland, Ukraine, and Romania offer a blend of technical prowess and affordability.
We have analyzed Salary.com, ZipRecruiter, Glassdoor, and some other Central / Eastern Europe websites and have calculated the average salary for the following experts:
- Frontend developers: $35 - $65 per hour
- Backend developers: $30 - $60 per hour
- Full Stack developers: $40 - $70 per hour
- Mobile developers: $30 - $55 per hour
Why choose Central/Eastern Europe:
- High education standards. These countries have robust educational systems, particularly in STEM fields.
- Strong tech ecosystem. A robust tech community with numerous conferences, meetups, and innovation hubs.
- Language proficiency. High proficiency in English and other European languages.
In Eastern Europe, Ukraine boasts a strong educational system, particularly in STEM fields, producing highly skilled professionals. Ukrainian developers often align well with Western business cultures, facilitating better teamwork and understanding. We recommend you pay attention to Ukrainian IT companies and outstaffing partners when scaling the software development team.
Asia / Pacific
The Asia/Pacific region offers a wide spectrum of IT talent, with countries like India, the Philippines, and Vietnam being prominent players in the IT outsourcing market.
We have analyzed Salary.com, ZipRecruiter, Glassdoor, and some other Asia / Pacific websites and have calculated the average salary for the following experts:
- Frontend developers: $20 - $65 per hour
- Backend developers: $20 - $60 per hour
- Full Stack developers: $20 - $70 per hour
- Mobile developers: $15 - $55 per hour
Why choose Asia/Pacific:
- Cost-effective. Generally lower rates compared to other regions without compromising on quality.
- Large talent pool. A vast number of IT professionals, particularly in India and the Philippines.
- Growing tech hubs. Increasing investment in tech infrastructure and education.
Whether you’re looking to hire in LATAM, Central/Eastern Europe, or Asia/Pacific, each region presents unique advantages in terms of cost, skills, and collaboration potential. Choosing the right location depends on your specific needs and business goals.
How MaybeWorks Can Help You Save Costs with an IT Staff Augmentation?
We practice an intelligent approach to IT staff augmentation when our customer gets the knowledge not only of the augmented specialists but also the accumulated expertise of the entire company. We start by defining goals and requirements, which allows us to select the ideal IT professionals for you. But if the project encounters unforeseen difficulties, you will be consulted by our other staff to find the best solution.
Our advantages:
- High-quality services. We are professionals and do quality work for ourselves, solve problems comprehensively, and accelerate projects and transformation. We offer services for in-house developers only, reinforcing them with the free supervision of an outstaff manager and tech lead.
- A professional 360° view. Multidisciplinary expertise in every project: CRM, HRM, ERP, SaaS, software development, Hybrid Mobile apps development, etc.
- Creativity and innovation. We constantly learn to deliver the greatest value, combining experience with intuition, creativity, innovation, and personalized attention to each client.
- You don't spend, you invest. By looking far beyond the task at hand, we prevent potential losses at an early stage, mitigate risks, and help you grow.
- We work for results. We want you to recommend us to others, so we guarantee that we will do the best job possible! We have been on the market for more than 12 years and have had no negative reviews for this time.
- High ethical standards. We have an impeccable reputation and adhere to the highest standards of ethics and morality.
If you need IT staff augmentation service, we are here to help you. Contact us, and we will select the most suitable programmers for your needs.
Conclusion
Today, no product company can do without IT augmentation services. This service was born in response to the increased demand of fast-growing businesses that lack specialists with the right experience and expertise. Here's a summary of the key benefits of choosing an IT outstaffing partner:
- Addressing staffing shortages for companies with aligned IT processes.
- Savings on IT staffing and flexibility.
- Access to qualified professionals that are not available on the open market.
- Selection of proven performers with a real portfolio and reputation.
Still have questions? Write to us via the form below, and we'll tell you about the IT staff augmentation models that suit you. If you want to hire advanced developers, you can contact us anytime convenient for you. Our managers will tell you about opportunities and terms.
FAQ
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What pricing models do you offer for IT staff augmentation, and how do they align with different project needs?
We offer time-and-materials and flat-rate models. The time-and-materials model is ideal for projects with dynamic requirements, while the flat-rate model is best for well-defined projects, offering fixed costs, clear deliverables, and budget certainty.
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How do you ensure transparency in billing within your preferred pricing model for staff augmentation?
We ensure billing transparency through detailed and regular reporting. Clients receive comprehensive breakdowns of hours worked, resources utilized, and expenses incurred, allowing them to track the project's progress and costs in real-time. Additionally, we maintain open communication channels to promptly address any billing-related queries.
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Can you explain the differences between time-and-materials and flat-rate pricing models in your IT staff augmentation services?
The time-and-materials model bills clients based on the actual hours worked and materials used. The flat rate mode implies a fixed amount per day or month. There is no fixed scope for the specified cost, resulting in more effective work by the augmented developer.
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What factors do you consider when setting the pricing model for a client’s project in IT staff augmentation?
It’s always up to our clients to decide which model to choose—flat rate or time and material payments. We are flexible.
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How do you adapt to the changes in project scope under each pricing model, and what impact does this have on overall costs?
For time-and-materials projects, changes in scope are easily managed by adjusting the hours and resources allocated, directly affecting the overall cost. For flat-rate projects, there are no milestones; you, as a client, assign tasks on an hourly basis. Only the payment is fixed (either per day or per month).
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Can clients switch between different pricing models during a project, and if so, how is this managed?
Yes, clients can. Our clients can switch between time-and-materials and flat-rate models. We work closely with clients to ensure a smooth transition, minimize disruptions, and align the new model with the project's objectives.
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What are the financial benefits of choosing a blended pricing model for long-term IT staff augmentation?
It offers the predictability of flat rates and the flexibility of time and materials. This approach optimizes resource utilization and budget management over the long term.
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How do you estimate costs for a hybrid pricing model that combines elements of fixed-cost and time-and-materials?
We don't offer a hybrid pricing model. We work only per time-and-materials and flat-rate models.
