Staff augmentation engagements are being converted to Managed Services. Managed Services, defined as a third party running a service for a firm with agreed quantifiable objectives, offers cost savings and efficiency by giving the provider more control of a process. Staff augmentation provides a flexible workforce and short-term knowledge. Should companies stop “augmenting” resource deficiencies with outsourced staff? Which model is better? What hazards are involved?
Staffing
Staff augmentation arose from the short-term resource, financial, and personnel restrictions. This technique helped the company when abilities were needed quickly. IT and operations managers used external workers to cover internal shortages and avoid fixed-position recruiting. When the project was over, the manager’s budget no longer included the external resource. This concept functioned until staff augmentation became a long-term answer. The external resource’s contract was not canceled when projects were finished. The external resource became invaluable as he or she learned internal systems, procedures, and people. When one job concluded, he or she moved to the next and remained a contractor for years. The ongoing expansion in staff augmentation is attributable to a profusion of experts opting to work as independents, progressively dropping rates, apparently never-ending margin pressure facing most organizations, and corporate regulations prohibiting recruiting. Budget-wise, staff augmentation only works with short-term contracts.
Managed Services
Managed services clients seek beyond standard outsourcing criteria or short-term contract workers to achieve longer-term benefits from a solutions partner. Beyond early savings, consider “what’s next?” A typical Managed Services model allows a firm to outsource process management, operations, and delivery to minimize total cost.
Managed services are lifesavers. Managed services eliminate time-consuming activities. You can allocate the proper personnel and resources. Your strategic endeavors will be effective and efficient. It’s a good long-term approach. Regular monthly invoicing based on service levels and volumes, rather than per diem fees for staff augmentation, keeps business expenditures within the projection. Cost stability helps with proper budgeting.
Managed Services savings include:
- Pay only for service use
- Improvements
- Maximized internal value-add
- CSI and efficiency benefits built in overtime
- Reduced business risk from service demand fluctuation
- Supplier is flexible with the workforce, resource use, and management.
Managed Services is attractive in today’s market for additional reasons. The provider accepts transition and future operations risks based on an established scope and tenure.
SLAs And Managed Services Reports
Any service, whether personnel augmentation or managed, should be regularly measured and reported. Managed Services reporting provides an end-to-end perspective for the client with an emphasis on service performance improvement.
Staff Augmentation Measurement Issues
- Users receive limited and incomplete reporting (mostly only upon special request or escalations from the business side)
- Users can’t correlate end-to-end service experience with service reporting (which is usually simply passed on in form of KPIs provided by the external supplier)
- Current reporting doesn’t represent business impacts
- Reporting has little impact on service discussions and CSI (CSI)
- IT-centric, component-based reporting (not business service focused)
SPI-Model
There is an increasing tendency towards a more mature and relevant reporting paradigm that no longer relies on KPIs that aren’t measurable or understandable by the end customer. A Managed Service’s aligned commercial motivations make service reporting more focused and valuable to all stakeholders.
For Managed Services, the Service Performance Indicator Model is driven by internal customer expectations (requirements), which form a shared knowledge of the objectives all parties (provider, IT, and internal business customers) desire to accomplish.
In their Service Level Agreement, the firm (managed services buyer) and the provider (managed services provider) specify the scope of work, price model, and control KPIs.
SLAs explain which KPIs drive each SPI (Service Performance Indicator). SPI is a customer-friendly indication of service quality. It’s the sole performance indication the client receives at agreed-upon periods.
Modeling
If a company is using staff augmentation, switching to a managed services model can provide it with the flexibility and skill access it needs while eliminating the downsides.
In managed services, the supplier is committed to producing an “output” at a predetermined price, vs. an “input” in staff augmentation. An input is merely doing an action without guaranteeing the desired result. The managed service model measures value based on planning since the company must set service and performance goals.
Outcome-based pricing. If service demand drops, so do expenses. This enables “scalability to demand,” but it’s related to service.
A service commitment accompanies managed services. The sole service promise in staff augmentation is hours worked. Under managed services, the supplier takes all service commitment risks. Massive value generation. Assuming delivery risk for a set fee, the supplier is heavily encouraged to satisfy service commitments. The supplier cannot risk not delivering the service obligation by depending on personnel, thus tools, processes, and thorough documentation are implemented.
Documentation and procedural rigor help the service provider deliver work globally. The service provider can offer services consistently with fewer, more productive resources using documentation, tools, and processes. The managed services approach delivers a commercially viable, low-cost solution to the enterprise.
Conclusion
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