Articles

Is vendor lock-in a thing in staff augmentation?

Published on September 24, 2024

Is vendor lock-in a thing in staff augmentation?

Table of contents

Vendor lock-in: what it means for hiring and staffing Reasons for single vendor commitments in staff augmentation The good, bad, and ugly of vendor lock-in in staffing Signs you should bring in more providers What businesses could consider multiple vendors? Vendor lock-in or out?

"Don’t put all your eggs in one basket." This might not be sound advice in love, but much more so in business. While many organizations stick to one team augmentation provider, bigger companies usually mix it up by working with multiple vendors.

So, is vendor lock-in in hiring a clever strategy or a risky move? Sometimes, having a single, trusted partner can pay off. But in other circumstances, spreading your bets across several partners might be the smarter play. Let's break down the pros and cons of going all-in with one provider versus building a diverse partner network for team augmentation.

Vendor lock-in: what it means for hiring and staffing

Vendor lock-in may come in two flavors: forced and voluntary. Forced vendor lock-in occurs when a company becomes so reliant on one vendor's products or services that switching to a different provider feels nearly impossible—whether due to high costs, incompatibility, or long-term contracts

That said, some businesses voluntarily stick with a single staff augmentation provider for convenience, consistency, or quality of service. While this approach offers stability, it also leaves the door open to exploring other providers if needed. And yes, both types of vendor lock-in apply to team augmentation and hiring, especially in the tech world.

Here’s how it might play out: A company with 150 in-house employees needs extra hands to ship its product faster. To bring in more talent, it partners with a staff augmentation company. Over time, the nearshored team grows to 30 members, and the company signs an exclusivity agreement with the partner, locking them into the relationship. Everything’s going smoothly, but could it be missing out on fresh perspectives by staying with just one vendor?

Reasons for single vendor commitments in staff augmentation

Before deciding whether vendor lock-in is a good hiring tactic for your business, let’s see why it occurs in the first place.

Contractual obligations: Long-term contracts, exclusivity agreements, and hefty exit fees are pretty common in team augmentation. If things go south, a better hiring opportunity arises, or you simply decide to expand your vendor net, these obligations can make switching providers a real hassle, both legally and financially. That’s why it’s important to choose your team augmentation partners wisely, ensuring you’re not locking yourself up into a lifetime commitment.
Personal preferences: Even with other options available, many companies prefer to liaise with one reliable hiring partner. Building a tech team might be quick, but refining and scaling it takes time and care.
Operational complexity: Once a hiring partner understands your processes and culture, why complicate things? Bringing in new providers can disrupt workflows, especially for smaller companies. Many prefer to continue with a single partner who knows the job and keeps things simple.
Dependency on a proprietary platform: Augmented teams often come with proprietary tools crucial to your operations. This can make switching or adding new vendors tough, especially if their technologies aren’t compatible with what you’re already using.

The good, bad, and ugly of vendor lock-in in staffing

Like any business strategy, working with one vendor has its pros and cons. The key is to find the right balance between stability and flexibility.

On the plus side, going with one service provider offers cost savings through fewer setup fees, lower onboarding costs, and a chance to negotiate bulk pricing. This comes in handy when you need to scale your tech team fast. It also makes life simpler. With one point of contact, you get consistent quality in hires and deliverables. And if something goes wrong, you know who to call—no need to track down multiple vendors.

As your hiring partner gets your business better, they can align new hires with your company culture more smoothly so they feel like a natural part of your in-house team. But building the perfect tech team is a two-way street. While your partner’s expertise matters, your feedback is just as crucial. By staying involved, you can help your partner fine-tune your team even after the initial hires are onboarded.

However, there are some downsides to consider

Relying on a single vendor can limit your flexibility, particularly if they can’t grow your team fast enough when the market shifts. Their geographic reach could also be an issue. If they only operate locally, you might miss out on talent from other regions.

Over time, costs could rise, too. With exclusive control over your recruitment, they might charge more for urgent hires when you could have found more affordable or better options elsewhere. Plus, your team risks stagnating without fresh talent and new ideas, which can hold back innovation and growth.

Signs you should bring in more providers

Now that we’ve covered the ups and downs, let’s discuss when it might be a good idea to mix things up and add some new providers to your lineup.

Risk mitigation

Imagine your company’s augmented team faces service disruptions because of issues with your provider. If you have another hiring partner working on your tech projects, you can keep your team running smoothly without interruptions, even when facing vendor challenges. It's also crucial to ensure a seamless launch of cooperation with your new vendor.

For example, all our clients are guaranteed a risk-free start of the partnership. That means no up-front costs and no binding commitment. You only start paying once we’ve found the perfect tech experts for your team. And if the first month doesn’t go as planned, walk away with no exit fees—no strings attached.

Risk-free start

We make starting with staff augmentation a breeze. No time and volume commitments, no start or exit fees, and absolutely no lock-ins. We're dedicated to ensuring your experience is as risk-free as possible.

Scalability needs

When your business grows to the enterprise level, one staff augmentation partner might need to be able to scale your team faster. With more projects, you need fresh talent to take the lead. Adding providers can help expand your teams, build new ones, and even provide extra management support as your operations grow.

To serve our clients at any scale, we rely on a vast, international network of professionals and keep updated on the evolving clients’ businesses. With 96% of our recommended candidates acing their trial periods and above-average retention of 95.7%, our teams are built for the long haul.

High retention teams

We are very good at building motivated cross-border teams. It’s not just words; it’s also numbers. The teams we’ve built have an attrition rate of 4.3% p.a. while 96% of our candidates pass the trial period. We put a lot of emphasis on cultural match-making, which is one of the reasons why our customers stay with us for more than 5 years on average.

Innovation

Are your current provider's ideas getting stale? Maybe you’re working on a new app or a big platform upgrade, but your provider’s tech expertise or creativity isn’t quite up to par… It might be time to bring in a fresh perspective. You can team up with a new partner to spark innovation while letting your current provider stick to what they do best.

Our Client and People Partners are always looking for ways to improve your team’s skills through ongoing training and exciting projects. This way, they make sure your experts stay motivated and challenged. And if you need new ideas, we can always bring in more talent with creative solutions.

Efficiency and savings

Over time, the balance between cost and efficiency can shift. Bringing in more providers can spark some healthy competition. When vendors know they’re competing for your business, they’re more likely to offer better prices, improve their services, and deliver great value.

Transparency

We don't gain from pushing the priciest talent. Instead, our monthly fee prioritizes the longevity and growth of our partnership. By focusing on delivering top-quality talent and service, we ensure that your success is ours.

At Pwrteams, we bring top-quality service with complete transparency. Instead of pushing the priciest talent, we focus on finding the best match for your needs. Any changes to team members’ compensation are discussed with you first to keep spending in check.

2024 IT Salaries Guide: The CEE Region

💡 Curious about the cost of building your future tech team? Download our 2024 IT Salaries Guide to see the full breakdown of hiring IT specialists in the CEE region, including salaries, taxes, benefits, and other costs.

What businesses could consider multiple vendors?

Technology companies: Expanding tech firms require specialized skills across different areas, such as software development, cybersecurity, AI, and data science. To stay ahead in a competitive and fast-evolving industry, they leverage multiple vendors to access diverse talent pools, enabling them to scale rapidly and adapt to ever-changing market demands.

Global enterprises: Large multinational corporations must navigate complex geographic challenges to tap into diverse talent across regions. By engaging multiple staff augmentation vendors, they can strategically source tech specialists from various countries, ensuring compliance with local labor laws while maintaining a global, competitive workforce.

Industries undergoing rapid digital transformation: Companies in sectors like travel, finance, or healthcare need tech teams with domain-specific expertise and deep knowledge of particular technologies and tools. To secure the best talent for their unique needs, these companies often partner with multiple team augmentation vendors who offer specialized skills and proven recruitment strategies, ensuring access to niche experts perfectly aligned with their requirements.

Vendor lock-in or out?

So, all eggs go in one basket? That depends. But we have other words of wisdom that are suitable for any situation. Our motto, “The power of together”.

Sometimes, it’s just us working closely with your teams to achieve your goals. Other times, we team up with different team augmentation providers who bring their unique skills and strengths. The goal is always the same: to deliver the best solution for you so your business can move forward with confidence.

Get in touch, and let’s see how we can make it happen together.