Business leaders are no strangers to contractual documents, no matter what their line of work. In software, contracts are critical.
Something you will almost certainly encounter in the technology industry, specifically with staff augmentation, is a statement of work or SOW. It’s an essential clause or section of a contract that seeks to define arrangements between parties involved in an agreement regarding products, software, or service delivery. It is usually considered separate and distinct from a staff augmentation model.
What’s the difference between staff augmentation and a SOW? Can you actually have a staff augmentation SOW? These are some questions that are probably on your mind if you’re involved in software outsourcing.
What Is a Statement of Work?
A statement of work is part of a larger, legally binding contract. Its purpose is to outline the expectations for services rendered in specific terms: requirements, performance, design, features, and other aspects of the project including the responsibilities of both parties—usually the service provider, such as a software outsourcing company, and the client. Ideally, the SOW will prevent misunderstandings, misinterpretations, and other confusion down the line.
A SOW is a general overview, though it contains specific terms. It may be accompanied by additional documentation containing examples and other details, if need be. They should be written in clear, straightforward language that is comprehensible to all parties involved. That means as little jargon as possible since clients may not be versed in this type of technical language.
Everyone involved must agree to and sign off on the terms outlined in the SOW and larger contract.
SOWs are not limited to software or technology fields. You will find them across industries that involve project management. Many fields consider them vital to defining the scope and plans for execution of the project—a means of warding off conflict during the course of the undertaking.
What Is Included in a SOW?
A SOW includes many different components. Some of the most important pieces are outlined below.
Key Performance Indicators (KPIs)
KPIs serve as a standard that indicates whether the provider has met the conditions laid out by the client. Essentially, these are metrics that define success and offer a measure to evaluate whether the job is complete.
Purpose Statement
What is the purpose of the project? This should be stated at the beginning of the document, explaining the objective for and reasons behind the entire undertaking. It is important for both parties to have this in mind throughout the project.
Scope
The scope explains what is involved in the project, including the timeline for the initiative. One important reason to include it is to ward off scope creep, which is when the requirements get out of hand and exceed the terms of the contract.
Requirements
The requirements are the demands for the project—the elements that form the basis of the deliverable. These are must-haves, and the project cannot be declared complete without the provider having met them.
Timetables, Milestones, and Benchmarks
The SOW should pinpoint an estimated timeline for the project, including the completion date. Additionally, it should outline key milestones and benchmarks, which indicate how the project is going and whether everything is on track.
Deliverables
This is the actual product—the thing that the provider is expected to deliver upon project completion. The SOW should define what these deliverables are—precisely what the client should expect to receive.
Payment Terms
Payment terms are not just limited to the amount the provider will be paid—they also outline a budget for the project, the frequency of payments, the schedule of payment delivery, the currency, and so on.
Additional elements to include are:
- Industry standards and requirements
- Project complexity and risks
- Equipment, tools, and materials needed
- Relevant issues or complexities
- Signatures from all invested parties
What Is the Difference Between a Statement of Work and Staff Augmentation?
Now, then—what’s the difference between a SOW and staff augmentation? These are two common forms of outsourcing projects and work in general.
Staff augmentation in the US is typically defined as a more flexible alternative to a fixed contract. In this arrangement, a provider supplies talent on an as-needed basis for different purposes. For example, a client may need help with a specific project. The provider does not complete the project externally—rather, they help the client fill in the gaps and supplement the existing talent. Usually, there is no defined endpoint.
So, staff augmentation versus SOW—which one is better?
That really depends on your needs. Both models can be short- or long-term. Both can help you achieve your goals. But they differ on a number of key points.
For example, in a SOW scenario, you’re usually hiring the provider or distributed team directly to manage the project from start to finish. Meanwhile, when you use staff augmentation, you will most likely go through an external provider who can find you the right talent for your projects. This separates the client and the talent by one degree. Moreover, the model is meant to address particular challenges at a given time.
Additionally, in a staff augmentation model, deliverables are not as clearly defined—the client utilizes the workers as they see fit. Although these workers are not permanent employees, they still answer to the team’s manager. This is in contrast to a SOW arrangement, in which the project is handled externally in its entirety.
Another key point to consider when evaluating engineer staffing agencies: Workers in a staff augmentation model are usually paid by the hour via the provider, while a SOW defines the payment within the contract upfront.
Can You Have a Staff Augmentation SOW?
This is not to say you won’t have a staff augmentation contract—this is important for any work arrangement. However, it’s rare to find a staff augmentation SOW.
This is because the two arrangements follow different models, with a SOW arrangement being strictly defined and a staff augmentation arrangement being more flexible and on demand. That said, if you have clearly defined needs for staff augmentation and a clear start and end date, as well as outlined deliverables, it is possible to create a statement of work in this scenario.
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At BairesDev, we offer several different models for software and IT solutions, including Staff Augmentation and Delivery teams. Learn more about our approach and how we can assist you with your projects.
