Understanding Strategic Sourcing Arrangements

Staff Augmentation (Capacity Services) - Executive Summary

Overview

If you need to add additional resources to your current team, either to provide specialty skills or additional capacity, consider Staff Augmentation arrangements. This model allows you to maintain control over the work effort and accountability for the results.

Staff Augmentation is easy to implement and can be discontinued without much hassle. Since there is little to no change to your existing delivery model or organizational structure, the change management impacts are minimal. Fees are typically paid on a time and materials basis, with limited vendor accountability for the quality of delivery.

How Staff Augmentation Works

Staff Augmentation is best described as a model where the Client defines "what, when, who, and how" the work will be delivered. The Client is responsible for delivering the product according to IT standards.

In this arrangement, the Client provides direct oversight of the work and is ultimately responsible for the quality of the delivery. The Vendor's role is to provide the agreed-upon resources for the identified hours.

The Vendor presents candidates for the Client to consider. The Client interviews and selects the resource that best fits their needs. Fees are traditionally based on time and materials, following a rate card structure.

Managed Services - Executive Summary

Overview

Managed Services represent the most complex form of Strategic Sourcing models. This model is ideal for companies seeking transformational changes in how IT delivers services. When selecting a Managed Service delivery model, the IT vendor assumes accountability and control over the outsourced services. They are responsible for successful delivery, often facing financial penalties for non-performance.

In this model, significant changes occur in the existing delivery model and organizational structure. Often, a portion of the current IT staff will be severed or redeployed to other roles. New vendor resources typically replace existing IT staff, often operating from low-cost locations such as near-shore or off-shore.

Managed Services arrangements can be challenging to discontinue. There are usually contract restrictions on terminating services, and since previous employees have been displaced, there may be no resources readily available to take over the performance of the services.

How Managed Service Arrangements Work

Managed Services can be described as a model where the Client defines "what and when" something needs to be completed. The Vendor then determines "who performs the work and how it will be executed."

In this arrangement, the Vendor takes accountability and direct oversight of the execution of the work. They are responsible for delivering the product according to the agreed-upon performance measures.

Conclusion

Understanding the differences between Staff Augmentation and Managed Services is crucial for making informed decisions about your Strategic Sourcing arrangements. Each model has its strengths and weaknesses, and the choice depends on your specific needs and desired outcomes.

By carefully considering your requirements and the implications of each model, you can align your sourcing strategy with your organizational goals. This alignment will ultimately lead to better resource management and improved service delivery.

For more insights on optimizing your sourcing strategy, consider exploring additional resources on Strategic Sourcing.

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