Engage/Maneuver/Outperform

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Managed Services Versus Staff Augmentation

Managed Services Versus Staff Augmentation

The managed services model works based on a defined scope and term, where a supplier assumes control of all or a part of a company’s Information Technology. The commitments are expressed as service levels with specific pricing attached. The supplier manages the delivery model, processes and tools, but also assumes the risk of transition and operations.

 

The managed services model works based on a defined scope and term, where a supplier assumes control of all or a part of a company’s Information Technology. The commitments are expressed as service levels with specific pricing attached. The supplier manages the delivery model, processes and tools, but also assumes the risk of transition and operations.

Staff augmentation on the other hand means that work is out-tasked to a supplier who commits to providing resources based on set requirements and price. There isn’t a service level agreement relative to outputs, pricing is based on hours worked and availability of the supplier and the customer manages the delivery model and the risks attached.

Augmenting your staff provides several temporary benefits, but can cause issues as a long-term solution. On the positive side, short-term staffing means there’s no impact on your operating model because the service can be easily contracted and scaled to the demands of your organization. In addition, the cost model is transparent and allows you to enhance missing skill sets to accommodate staff shortages without the burden of costly of training programs.

However, over the long term, higher business costs, increased overhead managing subcontractors and a lack of service levels agreements outweigh the benefits of augmentation. Companies may feel that they may get more control and cost effectiveness, but in reality, companies who use managed services have greater control through service levels and reporting metrics. They are also able to scale pricing based on output rather than paying a set cost for service. When staff augmentation becomes the de facto operating model for an IT organization, it constitutes an ineffective form of outsourcing that involves high cost, low commitment and increased risk. In the end, companies using managed services as a long-term solution get committed services for a set price where the provider assumes the delivery risk, helping to incent productivity. It also offers a lower cost as compared with staff augmentation and delivers a transparent line of site between service and cost.