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Switching from Staff Augmentation to Managed Services

Jul 26, 2017 | Milestone | Managed Services
Switching from Staff Augmentation to Managed Services

When a business experiences vast growth in a short amount of time, it inevitably runs into the dilemma of where and how to scale its IT support. The larger an enterprise gets, the more technology requirements it will need to support and manage. As a result, exponential growth often drives businesses to seek outside help through either a staff augmentation or  managed services engagement. But before deciding on a support model, it’s important to understand the differences between both options:

Staff Augmentation is a model for outsourced IT support in which a provider contributes personnel to fill gaps in a business’ existing resource pool or skill set. In this project-based model, businesses are responsible for managing the resources supplied by staff augmentation firms.

Managed Services refers to a model for IT support in which a business outsources strategic IT functions to a Managed Services Provider (MSP), who is responsible for managing the resources, tools, and processes used to execute both projects and ongoing operations.

Staff Augmentation vs Managed Services

To learn more about the differences between staff augmentation and managed services, check out our blog post.

Why Make the Switch?

While both models are viable options for ramping up IT support, managed services provide a level of proactive improvement and strategic partnership that adds value to businesses looking to grow more efficiently. These enterprises often decide to transition from staff augmentation to managed services to achieve certain objectives:

Scalability

As an organization grows, it encounters an entirely new set of challenges and requirements that signal the need for more robust support. In a staff augmentation model, resources are managed by the client rather than the provider, meaning that businesses are responsible for providing outside personnel with training on new processes and tools. At a certain point, high levels of staff augmentation can translate to a rise in internal management and spending, ultimately detracting time and resources from the client’s ability to scale.

MSPs can accommodate rapid expansions because they are responsible for managing their own resources, which means that they can provide support on demand. As a result, managed services engagements are more effective at providing reliable support for businesses with growing or fluctuating needs.

Cost-efficiency

A major difference between staff augmentation and managed services is pricing structure. Staff augmentation engagements are usually billed by the hour or resource, which can cause businesses to accrue large costs for leveraging extra support. In addition, since staff augmentation models do not account for resource management, businesses can incur even more unanticipated overhead costs.

Managed services models have results-oriented pricing structures, wherein businesses pay for outcomes rather than hours billed. Because MSPs set fixed prices and KPIs for their services, businesses with an MSP engagement can benefit from economies of scale. So, if a project is time-intensive or requires more robust oversight, a managed services model can prove much more cost-effective than staff augmentation in the long term.

Performance

In the staff augmentation model, resources are placed directly into an enterprises’ existing environment and processes, often as a reactive approach to short-term engagements. However, this means that if enterprise’s processes are inefficient, staff augmentation resources will work within them rather than optimize the process itself. While some businesses prefer the straightforward approach of staff augmentation, most would be better served assessing their legacy processes and technologies to avoid compound inefficiencies and identify opportunities for improvement.

Most MSPs follow ITIL guidelines to drive continual service improvement by leveraging analytics components to gain visibility and insight into their clients’ existing technology and processes. Because managed services engagements are ongoing rather than project-based, MSPs are able to partner with businesses to implement data-driven improvements over time that can dramatically improve IT performance.

When Is It Time to Switch?

Given the range of benefits that growing businesses can gain from switching to managed services, the question isn’t if, but when should they make the transition? Some indicators that an enterprise is outpacing its staff augmentation model are:

Exceeding Budget.png
Consistently exceeding company budget due to projects that require a high number of staff augmentation resources
Internal IT Issues
Widespread internal IT issues detracting from the ability to focus on strategy and business goals
Poor Performance
Lack of access to industry-leading tools and expertise preventing analysis and optimization of performance

When an enterprise recognizes these types of issues – specifically challenges related to cost, growth or expertise – it is time for them to consider the advantages of transitioning from a staff augmentation to a managed services engagement.

Making the Switch

Once a business has made the decision to change its model for IT support, it should take the time to assess its needs and build a plan accordingly. The following checklist, while not exhaustive, includes major considerations and millstones that should be a part of any enterprises’ transition from staff augmentation to managed services:

Planning for Improvement

  • Assess process gaps
  • Conduct cost analysis
  • Identify best practices
  • Ensure sponsorship
  • Plan change management

Finding the Right Partner

  • Identify vendors
  • Evaluate vendor capability
  • Conduct due diligence
  • Evaluate ownership
  • Negotiate contract

Monitoring Effectiveness

  • Oversee communication
  • Establish governance
  • Monitor costs and SLAs

As cost pressures increase in today’s markets, more businesses are turning to managed services to control costs, improve performance, and regain focus on their core competencies. Yet, the transition from staff augmentation to managed services can only be successful if meticulous attention is given to finding the correct partner. To learn how one Bay Area tech company successfully scaled IT operations by partnering with an MSP, check out our Customer Spotlight written by IDC.

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