August 31, 2018
As the shift in technology continues to affect businesses, Information Technology (IT) companies have been looking to increase their competitiveness and agility to overcome the increase in demand. Business Process Outsourcing (BPO) has provided solutions not just to overcome short-term capability deficiencies but to also accommodate the impact of hiring with staff augmentation and managed services. Although both are cost-effective and viable solutions for IT businesses, these two processes have unique differences that companies should consider before deciding on which one will work best for their business. What is Staff Augmentation? Staff Augmentation is the addition of temporary staff with specific expertise and qualifications to the existing team, thus becoming part of the in-house team working on a certain project. Some businesses might consider this as a practical solution for one-time or short-time projects that don’t justify the hiring of a new team member as an executive hire that may require extensive training to do the job. Managed Services, also known as MSP is where a third-party contractor remotely manages the client’s IT projects and infrastructure. The operative distinction that sets it apart from staff augmentation is its proactive delivery services, as compared to reactive IT services, which have been around for decades. Their roles have evolved over the past decades from simply maintaining legacy systems to taking full responsibility for patches repairs to developing new software applications and cloud services to data security services.
Staff augmentation processes have evolved to address short-term resource constraints, headcount limits, and budget restrictions. Instead of aligning your staff to the processes with a team of third-party contractors, you can closely integrate staff and manage your business resources with existing processes. Adding an in-house staff, even though temporary, can fill in the gaps in specialized skill requirements allowing you to take advantage of both internal and external resources available.
With augmentation, companies can easily add or subtract resources to meet the demands of any project at a certain time. This also avoids the cost of investing too much in internal skill development and the liability that comes with being one of the direct employees. When you’re on a tight deadline, being able to assign the right resources quickly is sometimes the only option you have in order to complete a job on time. The temporary nature of staff augmentation helps your existing staff feel comfortable with inevitable negative changes within the organization. They will feel less threatened and it’s easier for them to lean and adjust into new workflows with the help of a few new individuals rather than outsourcing an entire project, introducing them to an entirely new process.
As for the challenges, price discussions for staff augmentation services typically center around different rate cards and are decoupled from productivity and various service dimensions beyond a number of hours worked and capability classifications. Because of its nature, staff augmentation represents higher labor costs as compared to managed services. On-boarding and training augmented individuals into an organization with a compartmentalized understanding of different divisions can be challenging and will require more internal resources. Skilled employees’ learning processes and training take time and may not be scalable across the organization’s current standing as additional resources involve an increase in visibility and management.
In this case, you can’t skip training the temporary staff as it will help you speed up the process of understanding the current standing and goals of the project. Overcoming the company’s flaws in internal processes will be a gradual transition among the different individuals in your existing staff. Compared to other models, staff augmentation doesn’t normally meet high internal resistance. Change is always difficult but it’s essential to address it to fully benefit from the industry’s best practices. Staff augmentation has its place in an IT department’s arsenal. It is relatively low-risk in general. Even in a managed services model, an option for staff augmentation is available for selected services at specific points in time. However, when staff augmentation becomes the de facto and only operating model for an IT organization, it creates an ineffective form of outsourcing that involves high cost, high risk, and low commitment. If the company’s management team has effective communication leaders and needs a flexible staff that can quickly adapt to new responsibilities in a changing environment, staff augmentation is the way to go.
Managed Services: Benefits vs. Risk
Today, the managed services (MSP) business model presents a huge opportunity not just for big businesses but for small ones and start-ups as well. A well-managed service partner can help your company in several ways. This may or may not include management, maintenance, monitoring of the systems and infrastructure Hiring an MSP can propel your company to streamline the workflow and dedicate more staff to mission-critical and sell-related tasks. The primary benefit MSP partner is providing its clients a third-party monitoring and maintenance assistance, which is designed to prevent unexpected interruptions in system availability that can cause huge losses in businesses. This increases system uptime, which ultimately increases employee productivity and company profitability. The best value of managed services is the income predictability and the consistent utilization of expert technicians, who can forestall possible problems or discover them early, rather than relying on the customer’s report of an emergency. When the customer has a problem, the MSP team will always be available to solve the problem, as part of the monthly service fee.
On the relative contrary of the augmented staff, managed services can spare you costly onboarding training and interruptions. The managed service business model drives a measure of value based on planning, as both parties must define the requirements of services and performance on a per criteria basis. Therefore, the service fee is tied to the partner’s work outcome. Should the service requirement fails or disappear; the associated costs react in kind. This business model will help keep the business’ expenses manageable and predictable.
However, the challenges, lack of experience, reseller uncertainty, end-user anxiety, and the tepid economic recovery are stopping solutions providers from taking full advantage of the opportunity offered by managed services providers. Furthermore, as modern technologies continue to evolve with increasing rapidity, it can grow even more difficult for organizations to capitalize on the managed services opportunity. Internally, getting a managed service partner can make your existing staff feel threatened. According to The Balance, to date, the 14 million outsourced jobs are almost double the 7.5 million unemployed Americans. Forbes also added that a new survey from Pew Research has shed some light on job security in the United States as well as the top factors American workers feel most threatened by. Today, the vast majority of Americans feel confident about the security of their jobs, though some do have a sense of foreboding amid several emerging threats. 8 out of every 10 adults think increased outsourcing of jobs to other countries hurts American workers, according to Pew. Although the nature of engagement may vary in terms of different assets and services, between staff augmentation and managed services, the latter is the more scalable, reliable, and secure option not just for the long-term but for short-term projects as well.
This takes out all the possible worries a company might have when they are unable to meet unexpected challenges along the way. If the business needs a more consistent, long-term, and committed approach, then managed services are the right way to go.
What Outsourcing is Right for You?
In an increasingly complex networking environment, IT management needs a strategic approach to make sure that the company can handle the competitive nature of the industry. The choice of a suitable model can be a tough decision. The essential difference between staff augmentation and managed services is that in staff augmentation, the cost comes with the input while in managed services; the cost comes with the outcome. An input is simply the undertaking of an activity with no commitment that the activity will result in the desired outcome.
Linked to managed services is a service commitment. With the staff augmentation business model, the only service commitment of the staff is the number of hours worked. Under the managed services model, the provider assumes and takes responsibility for all of the possible risks of meeting the service commitment. This makes the value creation and the difference between the two models huge.
For most companies, the complexity of the IT industry makes it that there’s no right choice between the two models. Even as organizations are becoming increasingly globally competitive and sophisticated – leveraging one model over the other altogether is not the best choice. The balance between staff augmentation and managed services exist, thus, it is possible to optimize the benefits of both models. There might be instances where staff augmentation is the right execution needed, and surely, there will be chances that getting a managed service provider is the best possible approach. There can be even situations where the combination of both business models is the only way to go.