← Business Models: Core (all topics)
Staff augmentation vs outcome delivery
What it is
Supplying engineers to work under a client's direction and billing per person-month, as against taking responsibility for a defined outcome. Staff augmentation is simpler to sell and start but is priced on rates rather than value
Smaller IT firms are heavily weighted to it
Impact on industries
- Rate-based billing is directly exposed to AI deflation, since the client is buying hours that AI is making fewer of
- No intellectual property or platform accrues to the supplier, so nothing compounds - each engagement starts from zero
- Client concentration is severe in smaller firms, so losing one account can remove a large share of revenue
- Low capital requirement and fast revenue conversion make it a viable entry model, and government and PSU e-governance contracts provide a domestic alternative to export dependence