Companies Moving From Staff Augmentation Model To Managed Services Model

There is uproar in the global corporate arena for the past two to three years that the companies are moving from staff augmentation model which is related to fixed price structure to the managed services model. In order to discuss this scenario, at first, both the models need to be discussed along with the parallel parameters.

First is the staff augmentation model. Before getting in to intricate details of the model it is essential to mention that many IT departments have extensively used this model in the past which has helped them to increase their agility by giving them faster and effective access to right skill sets and candidates at the time of crisis. In this model the recruitment and de-hiring costs are eliminated and there is no direct impact on the operational structure. It is an effective approach if used for a short period of time. However it also comes in with certain disadvantages.

• First and foremost, the cost of hiring a premium resource sometime is more costly than paying a regular employee.
• In this the management style cannot be planned before hand.
• Lastly, the knowledge is restricted to a single person which cannot be shared across the team as it is not within the partnership terms in usual cases

Hence companies go for a different approach which is more stable and flexible and yields noticeable benefits in the long run. Hence some of them go for managed services model. As the name suggests it is the outsourcing of services of a particular operational process or a section of the same to a service provider. This structure is often considered lucrative by many companies as the pricing structure is based on monthly billings which are directly related to the service volumes. This type of model also has certain disadvantages.

• Firstly, the transparency regarding the process is not ways present as the entire system is outsourced.
• The dependency arises on a single vendor for the output.
• It might lead to the loss of in-house capabilities in the long term.

So, now it is essential to put forth why companies are moving from staff augmentation to managed services.

• In case of IT organizations this move is profitable. These companies most of the times have strict commitments to meet. With this approach, they can focus mostly on the strategic segment rather than operations.
• Managed services model gives clear indication of the pricing structure. It is a direct proportion between the output and the cost incurred which keep the expenses under check.
• The outsourcing of the process is documented with elaborate agreement and notification. Hence the entire process remains more clarified at both ends. There is no scope for divergence.
• It can be assured that the service provider will implement the latest technologies available in the market for the process maintenance which adds to the effectiveness of the service.

Hence it can be rightly assumed that managed service model is the super set of staff augmentation model.