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• Staff augmentation - This model provides specialized resources, cost
flexibility and satisfies short-term time-to-market demands. The staff
augmentation model allows organisations to add staff to their existing teams
based on the additional skills required to support their initiatives. This model
allows rapid access to missing capabilities and skills.
Staff augmentation usually requires minimal contracting effort, has a simple cost
model (i.e. rate times hours worked), can scale up or down quickly and has
minimal impact on the existing operating model of the IT function within an
organisation.
This approach allows organisations to augment existing in-house staff with
outsourced workers. It usually leaves the management and technical leadership
with the client while standard activities (e.g. development and testing) are
augmented with service acquisition from a supplier.
With the Staff Augmentation model, the span of responsibility is usually quite
narrow. It may include prototyping or technical implementation tasks as well as
development and testing, nevertheless the product vision and decision scope of
the augmentation team members is limited because they are directed by the
client.
The typical client business driver for such a model is cost reduction.
The model allows for quick access to missing capabilities and skills, avoids of
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direct hiring and firing costs and is able to respond to staff shortages due to
unexpected events. Costs are scalable to demand. However in the long term
costs may be higher than Managed Services and there is a high client
involvement in managing the extra resources.
• Out-tasking - This model is suitable for short-term business needs, to fill skill
gaps. However the integration of different out-tasked outcomes may not be a
seamless one.
• Project-based outsourcing - Vendors and clients share risks and rewards
through this collaborative model. This model has high client benefits as it
holds the vendor accountable for an entire project, and allows the application
of industry best practices in the outsourcing process. On the other hand,
working from project-to-project is a piecemeal approach to outsourcing. A
more consolidated view of the outsourcing initiative is required, within a
unified governance framework. This is provided by the multi-year managed
services model.
Managed services model - This model fosters the development of long-term,
multi-year, SLA-based relationships to provide integrated solutions across the
enterprise. The service provider takes responsibility and accountability for
agreed- upon strategic business outcomes. Projects typically have a large scope
and scale and the knowledge gained by the vendor is invested back into the
system so that the client's benefits increase year on year. These partnerships
allow the sharing of risks and rewards, encourage innovation, embrace business
change and contribute significantly to the strategic goals of both partners. As a
framework for delivery of outcome related services, the Managed Services Model
works best with a specification with a defined scope, budget and duration. The
supplier accepts risk and takes control of the execution of the project. With
result-based pricing, the supplier manages the delivery model, including
governance, processes and tools.
The Managed Services Model draws on detailed planning. The client must define
the requirement for the practical outcomes, applicable service levels and key
performance indicators in an operational context. Pricing is directly related to this
array of outcomes, and a key focus will be the delivery of benefits and outcomes
the client wants to achieve.
As the supplier assumes the delivery risk, it is highly motivated to establish
productivity control measures to ensure achievement of outcome and service
commitments. This manifests itself in the implementation of project governance,
methodology, tools and processes.
This model allows an organisation to outsource the management, operations and
delivery of processes to lower the total cost of the business. It is sometimes
attractive to organisations as the pricing structure is based on regular monthly
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billing with guaranteed service levels, quality and throughput. This greatly
reduces volatility in costs, and supports accurate and predictable budgeting.
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The essential difference between the two models is that under a managed
services model
(outsourcing), the provider is committed to delivering an “outcome” at a defined
price versus
an “input” as under the staff augmentation model. An input is simply the
performance of an
activity with no commitment that the activity will res
ult in the desired outcome. The managed
service model drives a measure of value based on planning, as the organization
must define
the
requirement on a service and performance criteria basis.
Pricing is tied to the outcome. Should the service requirement
diminish or disappear, the
associated costs react in kind. This provides the “scalability to demand” often
sought in a
staff augmentation model, but scalability that is tied to service.
Linked to managed services is a service commitment. Under the staff
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augmentation model,
the only service commitment is hours of work. Under the managed services
(outsourcing)
model, the provider assumes all of the risk of meeting the service commitment.
The value creation is huge. As the provider assumes the delivery risk at a fixed
cost, the
provider is highly incentivized to establish productivity measures required to meet
the service
commitment. This manifests itself in the implementation of tools and processes,
as well as
extensive documentation, as the provider cannot afford to risk not meeting the
service
commitment by relying on individuals.
Documentation and process rigor also allow the service provider to move work
through a
global delivery structure with ease. Through the application of documentation,
tools and
processes, the service provider is able to deliver services reliably with fewer,
more productive
resources. The managed services (outsourcing) model therefore is structured to
deliver a
commercially viable, low cost service offering to the organization.
From the standpoint of what an organization really wants from IT, the managed
services
(outsourcing) model delivers the following advantages: a predictable low
price/cost
service/outcome;
scalability based on business demand; fewer delivery risks; and operational
performance metrics tied to process excellence, documentation and outcomes.
Managed services organizations are generally large and serve multiple clients
from multiple
locations. A
s opposed to smaller staff augmentation organizations (or individual contractors),
managed services organizations have the capability of delivering a wealth of
skills and
capabilities. Client organizations have access to a broad base of skills, solutions
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a
nd
knowledge to meet evolving requirements.
A managed services (outsourcing) model delivers all of the skills access and
flexibility of a
staff augmentation model. Because the model relies heavily on management and
process
rigor, clients generally exper
ience an elevated capability themselves.
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A key question new standards authors and owners often ask is “who will be
using my content?”
When we think about an e2e standard solution, we realize there are several
different aspects and components, where each is important to particular roles
performing specific functions. For that reason, GSAR users span a variety of
roles and its content applies to the entire scope of the account lifecycle, from
sales & engagement, to transition & transformation to steady state, both for new
and incremental business.
Let’s look at a broad view of the ITD account life cycle to see how GSAR fits into
this picture. The life cycle begins as sales teams present clients with high-level
information of what IBM has to offer. During this phase, the intellectual capital in
GSAR helps answer questions such as:
“What services do we sell?” and “What are typical client wants and needs?”
Later during engagements, Technical Solution Managers (TSMs) and Architects
(TSAs) develop solution designs and proposals describing the service(s) we can
deliver, how we deliver them, and at what costs. The standards in GSAR
provide a foundation for them to work from, and answer questions such as:
“How is the solution designed?” and “What are the cost drivers?”
Once clients have signed the contract with IBM, ITD Competency leaders,
architects, Delivery Project Executives (DPEs), and Subject Matter Experts
(SMEs) work to transition IBM into assuming the IT responsibilities for the client.
Finally, delivery and account teams take over operational responsibilities during
the “steady state” period. GSAR content is used during both of these phases as
well.
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•We utilize three key levers to drive quality and productivity…
•The first, standardization, is all about industrializing service delivery. We have
embarked on the quality journey long time ago and have made significant progress with
our quality methods, focusing on process simplification and eliminating non-value add
steps. We have broadened our continuous quality roll-out across all geographic
locations ...
•The second lever is Automation. Here we leverage IBM hardware, software and
Research assets extensively. A great example is our deployment of Maximo to
implement standard best practice workflows ... leveraging this tool from SWG allows us
to pool delivery resources and drive skill depth for quality and productivity gains…
•Lastly, skills are critical in a delivery business ...and as over 50% of our delivery costs
are labor, leveraging the right talent globally, at the best cost, is vital. Equally as vital is
continually looking at the skills we have, where we may have gaps and the
training/certifications that are needed to fill those gaps ... I'll also cover this in a little
more detail...
•So, let's look at some specifics on how we execute on these three levers…
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We will differentiate by applying assets through automation, our work practices and
processes that we reflect our point of view on the optimal way to deliver specific
services and through sourcing the right skills you need globally. We will discuss most
of these bullets in the next pages specifically.
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On this slide, you see the client account and vendor account team roles on the
left, our Delivery organization on the right -- including the Service Owner roles --
and the two parties coming together in the middle.
The message here is how important our standardization strategy is, in our
outsourcing relationships. With this strategy, vendor is able to clearly articulate
our company's IT standards, particularly, what standard services we offer and
how they are delivered. Clients have IT standards of their own: such as existing
applications, roles and processes. For an effective vendor integration into the
client's existing environment, it’s essential to have clear communication and
knowledge sharing.
Therefore, the Account Team and the Service Provider (Delivery) need to be
working from the same, shared information. Four (4) key assets are typically
used to facilitate our collaboration are: a Service Catalog, a Solution Repository,
a Deployment Portfolio, and a Reference Architecture.
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The primary variation between outsourcing and insourcing is the method in
which work is divided between various companies or departments for strategic
purposes. Assigning a project to a person or department within the company
instead of hiring an outside person or company to do the work is considered
insourcing. Outsourcing is usually done as a cost-cutting measure. It can affect
jobs ranging from customer support to manufacturing, as well as technology
and the back office.
1. Cost
The cost associated with insourcing is different from the cost associated with
outsourcing. Insourcing is typically more expensive for an organization as a
result of implementing new processes to start a different division of the
organization. Outsourcing uses the developed workforce of an outside
organization to perform tasks.
2. Resources
Resources are another major difference between these two business practices.
Outsourcing uses the resources of an outside organization for services and
manufacturing products. Companies can use outsourcing to better focus on core
aspects of the business. Outsourcing non-core activities can improve efficiency
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and productivity. Insourcing utilizes developed resources within the organization
to perform tasks or to achieve a goal.
For example, an organization may insource technical support for a new product
as a result of already having technical support set up for another product within
the organization.
3. Control
The organization's control over operations and decision making differs while
using outsourcing and insourcing. Organizations that use outsourcing for a
particular service or manufacturing process have minimal managerial control
over the methods of an outside organization.
For instance, an organization that is renowned for friendly customer service does
not have the ability to enforce or manage how an outside support center interacts
with customers.
4. Location
Location is another difference between outsourcing and insourcing.
Insourcing generally places new operations and processes on-site within the
organization, while outsourcing involves an outside organization often away from
the primary organization's operations.
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IT outsourcing is not a new phenomenon; it originated from the professional
services and facility management services in the financial and operation support
areas during the 1960s and 1970s. In the 1960s, the use of external vendors
was confined to
time-sharing or processing services. Since computers were large and expensive,
most companies relied on service bureaus, systems houses, and other
professional firms to provide facilities management services. The 1970s marked
the beginning of the standard application package concept. To overcome the
increasing demand for IT applications and the inadequate supply of IT
personnel, managers began to rely on contract programming, which became the
predominant form of outsourcing
during the 1970s. Then came the rapid decline of some processing services
from the end of the 1970s, which can be seen in historical perspective as an
early manifestation of technological downsizing. The arrival of low-cost
minicomputers and then PCs
also hit the processing services business at the beginning of the 1980s. By the
time the focus shifted to IT-supported vertical integration in the 1980s, the
outsourcing trend of the 1970s had lost steam. Controlling the productdevelopment
cycle from raw
materials through product delivery grew in importance, and IT was now
considered a valued in-house function. Organizations generally operated their
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information systems environment on a custom basis, buying standard
equipment, system
and application software, and communications, and assembling them into an
infrastructure unique to each organization. Interest in outsourcing resurfaced in
the early 1990s, not for contract programming and specific processing services,
but for network and telecommunication management, distributed systems
integration, application development, and systems operations. While the data
processing service bureaus of the 1960s provided service from an offsite
location, the outsourcing vendors of the
1990s aggressively targeted onsite facilities management. IT personnel were
shifted from the customer to the vendor, with some vendors purchasing
customers’ mainframe hardware and managing client services onsite. System
integration
was another popular outsourcing segment in the 1990s and involved highly
complex technology, including network management and telecommunications,
along with associated education and training.
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