Why Companies are Making the Shift from Staffing to Managed Services

By Celerity View Comments

Staffing sales are currently reaching more than $130 billion annually in the US, but what happens when traditional staffingwhich is highly transactional and often lacks flexibilityno longer serves a business’ needs from a value-based partnership perspective?

Today, many enterprise-level businesses with complex skillset requirements have reached critical mass with staffing providers, left with too many individual contributors, management nightmares, and a lack of tangible results. How did they get there?

The Outsourcing Trio

Depending on how companies engage with business partners, they typically invest in employees in three ways: staffing, managed (or project-based) services, or consulting. Let's dive deeper:

  1. Consulting: Solves a business problem with a blend of strategy and expert resources.
  2. Staffing: Provides single contributors who focus on a specific competency area with minimal strategic value.
  3. Managed (or Project-Based) Services: Offer a flexible approach that allows companies to plug in additional capacity with expert teams and resources to alleviate management burdens.

Businesses are often challenged to balance the cost-value-risk equation when working with outsourced vendors, and managed services provide stasis across those three considerations. It's no surprise that companies are rethinking their outsourcing approaches. In fact, managed services global spend, currently at $107 Billion, is projected to reach $193 Billion by 2019.

What Happens When Staffing is Overused?

Companies that choose staffing as their primary source of outsourcing typically have multiple vendors providing multiple managers for projects. This can lead to numerous challenges:

  1. Lack of Efficiency: If a company has an engagement that requires multiple resources to perform a function (i.e. development, documentation, design), using one-off staffing resources typically creates more work, not less.
  2. No Single-Source Accountability: Team management can be difficult because there are varying sources of accountability. At the end of the day, quality and delivery rests on your shoulders.
  3. Integration Issues: An excess of one-off staffing hires are difficult to integrate into an existing business system with proven results. Many vendors come with many systems and processes.

Managed Services are Different

Managed services alleviate many of staffing's pain points, and can be tailored to drive significant value in a more flexible and agile approach. When considering managed service providers (MSPs), the business buyer must assess its feasibility for their business needs, then determine if it will fill the void.

To start, the business should have a project area that requires an integrated team of resources to maintain specific processes, which are usually tied to discrete deliverables. The functions should be definable, repetitive, and able to be optimized by the vendor partner. In other words, a business must be able to establish boundaries and define the expected output of a team on a consistent basis.

Once those criteria are satisfied, a managed service provider can step in to handle those tasks and provide additional value by reducing management burdens and improving quality of resources.

When compared side-by-side, here’s how staffing and managed services stack up:

Staffing IT Managed Services
Single contributors with specific skill sets Team of expert resources with domain knowledge
Client assumes project risk Client and vendor share project risk
Deliverables are the responsibility of the business Deliverables are the vendor's responsibility, anchored with SLAs
Quantity focused Quality focused on best practices
Loosely-defined tasks Well-defined and repeatable tasks
Minimal reach-back into vendor organization for thought leadership and best practices Significant reach-back to thought leaders from partner organization and oversight by SMEs
Varying sources of accountability Single-source accountability integrated with business needs
Less control over individuals and associated tasks Greater control over process, quality, and management
Transactional models often lack flexibility Flexible models
Low level of quality assurance High level of quality assurance

 
Additionally, a managed service provider takes away the burden of administrative work. They’ll interview, onboard, and train resources as part of their services. This depth of knowledge and pattern of shared risk ensures a level of quality assurance that isn’t always available in a staffing model.

Now that you know the differences between staffing and MSPs, how do you chose the right vendor for your needs? Contact one of our experts to discuss the managed (or project-based) services model that best fits your business.

Posted in: Vendor Management