Traditionally, when a company wanted to grow its business and keep staffing flexible, it worked within a staff-augmentation model; it hired more contractors. In most cases, those were part-time or contract-based, but they were like employees nonetheless, with all or more of the accompanying costs and potential difficulties.
Today, companies can grow their businesses without hiring additional employees or contractors by engaging managed services. Under the managed services model, client organizations outsource the management and operation of business functions to external service providers. Although the nature of the engagement may vary in terms of assets and staff, third-party managed services alleviates many of the client organization's burdens by taking over one or more operations — including management, monitoring, and maintenance of systems and data center infrastructure.
In fact, an increasing number of companies are utilizing managed services to complement staff augmentation for information technology and business processes; the compounded annual increase in demand for managed services was up 33% between 2001 and 2006.
IF THE CLIENT ORGANIZATION HAS ITS OWN EXPERIENCE WITH MANAGED SERVICES MODELS, IT SHOULD DRAW ON THAT EXPERIENCE TO UNDERSTAND THE REASONS BEHIND ITS SUCCESSES AND FAILURES.
While the first wave of services globalization is staff augmentation on-site, the second is the globalizing of staff augmentation. The third wave is about globalizing commodity processes on a great scale but with the client retaining significant resources and responsibilities. The fourth wave is the globalization of these processes at significant scale with full responsibility for Service-level Agreements (SLA) given to the supplier.
Staff Augmentation Vs. Managed Services
While a number of factors worked together to foster the growth of managed services (including the rising maturity of suppliers), one was certainly the significant disadvantages inherent in the staff-augmentation model.
The disadvantages of the staff-augmentation model are:
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Costs increase (generally) proportionally to growth in the business (as the amount of support required increases)
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Economies of scale benefits are relatively low
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It's unable to address important time-to-market and geographic-reach issues
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Training periods for new employees are often long
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It can be difficult for the organization to manage attrition
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The risk is borne entirely by the organization.
