The benefits of transferring from staff augmentation model to a manages services model can be vast, if implemented correctly. Requirements for flexibility and better skills can be met, whilst most of the major disadvantages of staff augmentation can be overcome.
The manages services model requires that the supplier assumes control of all, or part of the execution component of IT and all commitments to service delivery are expressed as “service levels“. Pricing can be determined based on service levels and the volume of requirements, and the supplier assumes all risk related to transition and operations. Furthermore, all processes and tools are managed via the supplier’s delivery model and all impacted employees, assets and contractors must be documented and fully transferable back to the business.
One of the most important benefits of this model is the fact that pricing is tied to the outcome. Should a service requirement diminish or disappear, the costs that are associated with it, react in kind.
The level of value that is created through managed services is huge because the provide assumes the delivery risk at a fixed cost so they are highly motivated to establish productivity measures and excellent levels of service at every step of the process.
Going beyond lower costs, the additional ancillary benefits that can be attained through a managed services model are not to be ignored. When it comes to discussing the costs associated with staff augmentation, conversation trends to revolve around rate cards instead of addressing productivity and service dimensions, beyond the hours that are worked.
On the other hand, because the price is decided based on the service levels that are linked to the objectives of the business, discussions on the price when it comes to the outsourcing context mainly focus on value and the alignment between SLAs and business requirements. More often than not, non-outsourced IT departments have over-engineered service levels in an attempt to try and reach IT targets of excellence – often adding unnecessary costs in the process.