Why Managed Services and Why Not Staff Augmentation? Difference Between them
Managed Services Provider
In recent years, many information technology departments have tried to increase their agility, overcome short-term capacity deficiencies and / or adapt to the impact of hiring restrictions through staffing agreements with IT service providers or by hiring directly with independent contractors. . As a temporary strategy, this approach has a series of advantages compared to the alternative of hiring personnel directly. Under a staffing model, the cost of hiring for temporary requirements and disengagement once those requirements have been met may more than offset the higher cost of hiring more permanent resources. In addition, the increase in personnel requires a minimum hiring effort, has a simple cost model (rate per hours worked), can be expanded or reduced quickly and has a minimal impact on the existing operating model of an IT organization. The increase in personnel, however, can become problematic when it becomes a permanent operational model. As a long-term solution, it has none of the benefits of alternative models of long-term outsourcing, such as managed services (outsourcing) and, in fact, can create a series of serious risks and potentially destroy value.
DISADVANTAGES OF STAFF AUGMENTATION AS A LONG-TERM SOLUTION
By its nature, the increase in personnel represents higher labor costs. Contracting organizations must add overhead and margins to their labor costs and, although some of this can be avoided by contracting directly with people, this also imposes higher administrative costs internally, as well as some inherent risks. When used as a long-term solution, the natural compensation provided by the increase in personnel to the higher labor costs is lost through the avoidance of hiring / elimination. Even more significant, the dependence on the increase in personnel as a permanent model tends to encourage a style of management that does not plan the consumption of resources. The resources are very easy to access. The consequence is a gradual "personnel change" and an unrecognized "staff count" that slips under the organization's human resources governance radar. Contractors are continually added or integrated into the organization as permanent, high-cost personnel. Because the staff increase does not have associated service level commitments other than the hours available for work, the link to the derived value is unclear and is rarely measured. The response to any service problem is usually attributed (and conveniently) to staff shortages, which adds to the staff's crep.
ADVANTAGES OF A MANAGED SERVICES (OUTSOURCING) MODEL
If an organization participates in a staff improvement commitment, the transition to a managed services model (outsourcing) can generate all the benefits of flexibility and access to the skills it seeks, while overcoming the main disadvantages associated with Staff improvement described above. The model of managed services (outsourcing) differs from the improvement of the personnel in several ways.
The essential difference between the two models is that under a model of managed services (outsourcing), the supplier commits to deliver a "product" at a defined price versus an "input" as in the model of increase of personnel. An entry is simply the performance of an activity without commitment that the activity will result in the desired result. The managed service model generates a measure of value based on planning, since the organization must define the requirement based on service and performance criteria. The price is related to the result. If the service requirement decreases or disappears, the associated costs react in kind. This provides the "scalability to demand" that is often achieved in a staffing model, but scalability is tied to the service. Linked to managed services is a service commitment. Under the model of increase of personnel, the only commitment of service are the hours of work. Under the managed services model (outsourcing), the provider assumes all the risk of fulfilling the commitment of the service. The creation of value is enormous. As the supplier affirms the risk of delivery at a fixed cost, the supplier is highly incentivized to establish the productivity measures required to fulfill the commitment of the service. This is manifested in the implementation of tools and processes, as well as in ample documentation, since the provider can not risk not fulfilling the service commitment by trusting people.
Compare the models - Increase in personnel (outsourcing) vs. Managed services (outsourcing) Comparison of models • The supplier assumes control of all or part of the IT execution component • Service delivery commitments expressed as "service levels" • Committed scope and term • Fixation of related prices with levels and volumes of service when appropriate • Delivery model administered by the supplier; processes and tools • Affected employees; assets and contracts can be transferred to the provider (the provider must acquire or have the ability to deliver) • Knowledge must be documented and transferable • The provider assumes the risk of transition and operations • The provider is committed to provide resources of defined capacity at a price • No Commitments to deliver services related to products • Limited commitment • Fixation of prices related to hours worked and availability • The client manages the delivery model (including individual subcontractors); process and tools • No change in the client's operating model • Knowledge acquired in the individual • All delivery risk remains with the client Commitment to deliver a product Commitment to provide an input Model of Managed Services (Outsourcing) Staff increase (Out -tasking) 4 Documentation and rigor process also allows the service provider to move the work through a global delivery structure with ease. By applying documentation, tools and processes, the service provider can provide services reliably with fewer, more productive resources.
Therefore, the managed services model (outsourcing) is structured to offer the organization a commercially viable and low-cost service offering. From the point of view of what an organization really wants from IT Managed Services model (outsourcing) offers the following advantages: a predictable service / result of low price / cost; scalability based on business demand; less delivery risks; and operational performance metrics linked to the excellence of the process, documentation and results. Managed service organizations are generally large and serve multiple clients from multiple locations. Unlike smaller staffing organizations (or individual contractors), managed services provider have the ability to offer a wealth of skills and capabilities. Client organizations have access to a broad base of skills, solutions and knowledge to meet evolving requirements.