Stratistics Marketing Research Consulting released the figures for spending in the worldwide IT outsourcing market. Expectations are that the amount will reach $481.37 billion by the year 2022.
The figure is not at all surprising- this is because companies are looking forward to reduce their IT component spending. The focus is shifting to the main functions of the organization.
To solve the various enterprise challenges, the two models of IT outsourcing- staff augmentation and managed IT services are considered the best.
We take a closer look into both these models to determine which one is better suited to the needs of companies.
Staff augmentation refers to hiring professionals from outside the company. This is done on a contractual basis to cover up for the in-house staff.
Staff augmentation model has several benefits-
There are a lot of companies without the need for added staff. This eliminates the point to pay regular wages. Staff augmentation provides businesses with complete support through skilled professionals.
Whenever a project comes up to a company, it is easy to understand and make a note of the missing skills to complete the project. Staff augmentation comes with the feature of adaptability. As a result, you can quickly scale up and down as per the project range.
- Resistance to Attrition
Obtaining and keeping a permanent staff is a difficult task for companies today. Because IT services are growing in demand, employees move over from their present employer to another more quickly.
There is not much companies can do to avoid this, but staff augmentation makes it less difficult to fill their staff with qualified specialists.
These are the important attributes of staff augmentation. However, it is interesting to note that staff augmentation is perfect only as a short-term solution. Future-oriented companies want to keep their technological development safe for a long time.
With the benefits on offer through staff augmentation, many people in the top management look to make this model a permanent one in their operations.
A Few Limitations of Staff Augmentation
Choosing staff augmentation from a permanent hiring model brings two critical disadvantages to light-
- Overall Cost- Effectiveness Gets Challenged
When you choose staff augmentation, the labour costs increase. These expenses include overheads and positive margins too. Regularly hiring freelancers on a contractual basis is not a permanent solution, as the administrative costs become higher also.
- You Don’t Get Enough Insights For The Work Done By Your Contractor
Staff augmentation model does not generally mention any other service commitments than the work hours. As a result, the permanent staff often ‘invents’ new tasks to keep temporary hires busy.
Staff augmentation brings you high-cost permanent resources. Yes, the quality of their services will be outstanding, but every company will also need favourable results too.
With staff augmentation, the customer company is entirely responsible for the infrastructure management procedure as well as quality assurance. The result, therefore, also becomes the responsibility of the company.
Managed IT Services
The managed IT service model is a definite mix of services, responsible for applying an external degree of control on a company’s non-core systems.
The model brings in all benefits of flexibility and skill access of staff augmentation. It then overcomes the major disadvantages the former model has to offer.
The advantages of managed IT services are the following-
- An Improved Cost Model
The vendors of managed IT services tie the pricing of the contract to the outcome. In other words, if customer demand for certain services grows or decreases, the price of the contract will differ accordingly.
- Guaranteed Output
Because service delivery includes a service level agreement (SLA), the overall scope and time limit of the service are all documented. Service providers try to fulfil their commitments, so they are required to put their value of work at a maximum.
- Access To Many Different Skills
Organizations providing managed IT services are often more significant than staff augmentation companies.
As a result, these companies offer their customers an extensive base of skills, knowledge and solutions necessary to meet the ever-evolving requirements of customers.
Managed IT service model keeps your focus on the core business and transfer all the supporting services to a skilled and result-oriented company.
Adopting Managed IT Services
Stepping to a managed service model is not a single step, but involves a gradual procedure of four phases-
Firstly, it is essential to have a clear definition of what to outsource.
It is vital that you do not delegate the processes, knowledge-intensive and makes you stand apart from the crowd. If you choose the wrong service for outsourcing, it can result in vendor lock-in.
Also, have a clear decision regarding the scope of managed IT services. If it is a hosting service, for instance, you should have a clear idea when the hosting begins and ends. It looks pretty ordinary but can have problems in the future.
- Choosing a Vendor
The reliability of a managed IT service vendor is a huge factor in making companies doubtful of selecting this model.
Shortlist managed IT service providers based on criteria like recommendations from experts, the capabilities of vendors for a particular technology and testimonies from previous customers.
The rest of the process is simple. Interact through one-on-one sessions to get more information and proceed ahead.
A transition plan is generally in an SLA, where the methodology and schedule of a project are specified. Over-specification on the way the service will be delivered is a common problem to avoid in this phase.
Transition is the phase where the actual transfer of knowledge happens. At the start, a new vendor observes how the internal staff works. Right after that, this vendor takes over the overall responsibilities of service management.
For maintaining the consistency of managed IT services, it is vital for a customer to conduct regular reporting and performance audits, review the services in line with the SLA and ensure that the vendor stays alert to what the IT service market offers.
The Dilemma Among Staff Augmentation and Managed IT Services
Choosing between these two models depends on the kind of company looking for them. Essentially, the best way to choose is to have a detailed cost-benefit analysis.
If your company requires specific services for a limited period, staff augmentation is the perfect option for you.
However, if you are looking for a continuous operating model, having a predictable cost structure, you will want to consider managed IT services for your company.
You can connect any time in case of any doubts about the two models we have discussed above. Also, we offer staff augmentation services and co-working space, Reach out to us, if any of the above service interests you.