When you outsource IT staff, it is crucial to justify the budget to ensure that IT staff augmentation is worth the investment. Businesses often use the Return on Investment (ROI) metric to verify whether using the staff augmentation model is profitable.
ROI allows you to assess the efficiency and profitability of your existing investment and, consequently, make informed decisions about future investments. By maximizing it, you can generate greater value for your stakeholders.
How do you measure the ROI of IT staff augmentation in IT projects? Can this outsourcing contract increase the profitability of your business? Let’s find out!
Why is it Important to Maximize ROI?
ROI is a financial metric that helps business owners compare different investment options and choose the most profitable one. While appropriately calculated, it can help you achieve the following benefits.
Increase profitability
At its core, a higher ROI translates to increased profitability.
Studies have shown that companies that actively work to maximize their ROI tend to have higher profitability levels. For example, a report by Deloitte on financial performance states that businesses with a consistent focus on optimizing ROI experience, on average, a 16% increase in profitability over those that do not prioritize ROI.
By diligently evaluating and optimizing your investments, you can unearth new avenues to boost revenue and optimize costs, resulting in a healthier bottom line. This increase in profitability provides financial flexibility, enabling organizations to reinvest in growth and innovation.
Measure the investment success
ROI serves as a powerful method for measuring the success of your investments. It provides a clear, quantifiable benchmark against which you can assess whether your financial goals have been met. This helps you track the performance of specific investments and guides you in refining your investment strategy over time.
Increase investor confidence
A strong ROI not only enhances profitability but also attracts potential investors. According to data from PitchBook, startups with a track record of maximizing ROI are more likely to secure funding. A robust ROI can be compelling for venture capitalists and angel investors looking for promising opportunities.
For startups and growing businesses, investor confidence is not just beneficial; it's often critical. An attractive ROI demonstrates financial viability and sound decision-making. When potential investors see that your investments generate robust returns, they are more likely to provide additional funding. This influx of capital is essential for securing growth opportunities, expanding operations, and driving business success.
Can You Improve Your ROI With IT Staff Augmentation?
IT staff augmentation has become a valuable option for many businesses – they can receive the highest quality for their projects. Still, at the same time, they don’t have to invest in hiring full-time resources. You pay for temporary services, which allows you to manage your budget better and pay only for the work the resources perform. You fill skill gaps, increase capacity, and get a chance to receive new ideas, knowledge, and best practices. As you save money and time, your budget is spent more effectively, and you can focus on your business growth. Therefore, there is a close connection between using external resources in the form of staff augmentation and your business performance (ROI).
How to Measure the Effectiveness of IT Staff Augmentation and ROI of Staff Augmentation?
ROI is calculated by dividing the net income by the original capital cost of the investment and then multiplying the number by 100. Before you evaluate the return on investment of staff augmentation, you should revisit your goals and have a clear idea of your augmented team’s role. Then, you should determine the metrics and identify how you will track the data. You can use the following tips to measure the return on investment of IT staff augmentation correctly:
Human capital ROI
You can use human capital ROI that measures the employee's value to your expenses. For every dollar you invest, this metric tells you the rate of return on the costs of a particular employee. In the case of augmented IT experts, you don't need to worry about costs that quickly stack up to high amounts, like hiring and training costs, paying for PTO or medical leaves, and employee benefits. Your cost is just a final payment for their service - usually billed for the time they actively provide a service to you.
Staff Training
Staff IT training is another important KPI. Thanks to staff augmentation, you increase the knowledge rates, which gives you higher professional satisfaction. Measuring the ROI for staff IT training involves assessing increased productivity, reduced error rates, enhanced project success, and comparing training costs against realized improvements.
Company attrition rate
Very often, employees leave due to long tenure in the same position. It pushes employees to seek job improvement and go to the company. Therefore, the attrition rate may be an important KPI for staff augmentation. In this case, the ROI can be measured by evaluating the reduction in company attrition rates as an increase in job satisfaction and opportunities for professional growth.
Other relevant KPIs may include productivity index, service time, customer satisfaction, etc.
Reasons why IT Staff Augmentation Services can Help Increase Return on Investment for Your Company
If you ask yourself, ‘How does an IT staff augmentation team help improve ROI?’, we have a ready-to-use answer. Below, you will find the tips to measure and increase the metric with IT staff augmentation step by step:
Deliver new solutions and features for your core service or product
Maximizing ROI with IT staff augmentation focuses on making sure you develop the right solution for given business problems. As a customer-centric company, you want to focus on keeping your customers happy and making sure you can address the needs of niches you are trying to onboard to your service or sell your product to.
In a global competition market, your clients are accustomed to picking the best solution for them. SaaS model, worldwide shipment, and remote collaboration methods - among others, contribute to users focusing on their goals and the functionality and UX of your solutions as their main decision-making factors. When they find your product (or service) lacking, they will switch to another provider. Providing new and requested features, fixing bugs quickly, and addressing new users' needs are the keys to acquiring new customers and giving them reasons to become loyal to your company. Augmented IT staff can help you to do precisely that, giving you a significant boost to your development speed.
Identify the skill gap and business goals
Maximizing ROI with IT staff augmentation begins by thoroughly assessing your organization's skill gaps and aligning them with your strategic business goals. Identify areas where your existing in-house team may need more expertise to meet project objectives. Clearly define your short-term and long-term business goals, and understand how augmented staff can contribute to their achievement.
Verify the knowledge and skills of your in-house team
To make informed decisions about augmenting your IT team, clearly understanding your in-house team's knowledge and skills is essential. Conduct assessments to verify the competencies of your current employees. This process ensures that you can pinpoint precisely where additional expertise is needed and avoid redundancy in skill sets
Define the responsibilities your augmented team will take on
Before bringing augmented staff on board, establish transparent expectations and define their roles and responsibilities within your projects. Communication and collaboration are critical components of success when working with extended teams. Clear guidelines and objectives make it easier for in-house and augmented team members to work together effectively.
Evaluate your team’s performance
Evaluating your team's in-house and augmented performance is an ongoing and essential step in maximizing ROI. Define key performance indicators (KPIs) and metrics that align with your project objectives and business goals. Regularly assess how well your teams meet these KPIs and make data-driven adjustments to optimize performance and ROI.
Foster continuous improvement
Continuous improvement is the cornerstone of ROI maximization with IT staff augmentation. Encourage a culture of learning, adaptation, and innovation within your teams. Leverage insights gained from performance evaluations to identify areas for enhancement and refinement. By fostering a commitment to continuous improvement, you can ensure that your IT staff augmentation efforts consistently align with achieving the highest possible ROI.
In conclusion, IT staff augmentation services offer a strategic avenue for increasing ROI by providing access to specialized skills, scalability, faster time-to-market, and cost efficiency. To harness these benefits effectively, following a structured approach that involves assessing skill gaps, defining roles, measuring performance, and fostering continuous improvement is essential. By doing so, your organization can maximize the returns on your IT staff augmentation investments and achieve greater overall profitability.
Why Should You Consider Staff Augmentation in the Context of ROI?
When you use the tips above, you will quickly see the results in the effectiveness of an investment.
You can access out-of-the-box software developers on a project basis, even if you seek niche technologies. This can give you a competitive edge and, at the same time, minimize hiring risk. This, in turn, helps reduce project failure. It is easier to predict any possible issues and prevent them from happening. This way, the money you spend on a project doesn’t go to waste. When you add that staff augmentation improves your time to market – you speed up deadlines – you can quickly notice that IT staff augmentation also helps you improve revenue.
As you can see, maximizing ROI with augmented team members can be critical to improving your company's profitability. You need clear objectives and adequately defined roles and responsibilities to benefit from this outsourcing model.
Meet your business objectives and boost ROI with the right staff augmentation team
If you want to make sure you will improve the quality of the hire to generate more revenue, you need to find the right IT staff augmentation company.
At iRonin.IT, we only collaborate with highly skilled, well-trained software developers and engineers with specialized skills (including soft skills) who are ready to jump into your project and start working on the efficiency of your business. We're ready to show you all the benefits of staff augmentation! Contact us to get to know our team!
