Managed services, often defined as a third party providing a courtesy to a company and delivering an agreed-upon tangible outcome, promise more significant cost savings and efficiencies, allowing the provider to be more accountable for the process. Leveraging employee expansion can also offer workforce flexibility and short-term engagement experience. When we talk about the difference between managed services and staff augmentation, what are the risks of these methods? Should organizations forgo staff expansion altogether, the practice of “stretching” the resource gap with the use of external resources?

The HR and managed services models are not mutually exclusive. There is always a need to add additional staff in a dynamic environment. Organizations that find the right balance between employee development and managed services will benefit by being able to focus on their core competencies.

Staff augmentation

Employee recruitment is driven by the need to address short-term resource constraints, budget pressures, and staffing limitations. This practice is helpful for organizations that require the skills necessary for short- and short-term commitment. Operations and IT managers use external resources to fill internal resource gaps and avoid hiring for permanent positions. Once the project is complete, external resources are no longer included in the manager’s budget. This model works well until employee growth is considered a permanent solution.

As external sources learn about internal systems, processes, and people, they become valuable, if not essential. The continued growth in headcount (tens of billions of dollars worldwide) is due to various market factors, such as the wave of professionals interested in freelancing, falling rates, and the seemingly constant pressure to work—companies on the company’s hiring policy. However, from a budgetary point of view, staff growth is only effective when the recruitment period for external resources is short. 

Managed Service

Traditional managed services models allow organizations to efficiently outsource management, operations, and delivery processes, reducing the total cost of business ownership. Conventional outsourcing or short-term contracting standards have moved beyond that to achieve the long-term benefits you expect from a solutions partner. The key is to look beyond your initial savings proposition and ask “what’s next.”

Comparing models

If your organization has human resources commitments, moving to a managed services model can provide all the benefits of flexibility and get you the skills you need while overcoming the major staffing disadvantages described above.

The main difference between managed services and staff augmentationis is that in the managed services model, the vendor promises to provide “outputs” at a set price, not “inputs” as in the staffing model. “Contributing” is simply acting without promising that the move will produce the desired outcome. The managed service model promotes plan-based value measurement, as organizations must define requirements based on service and performance criteria.

Employees in staff augmentation have a place in the IT department’s arsenal. Even in managed services models, staffing is typically used for selected services at specific times. However, when employees become the de facto operating model of an IT organization, it is an inefficient form of outsourcing that involves high costs, low commitment, and high risks. IT departments that add staff in this way should recognize that they have been “outsourced” and strive to adopt an indeed managed service model to maximize value knowing the difference between managed services and staff augmentation.

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