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Outsourcing a Managed Support Service - Benefits, pitfalls and practicalities

In IT generally, we are familiar with the idea of contractors providing temporary assistance. This stems from the project-based nature of IT development, where temporary staff can be brought in to help cope with the peak of a bell-curve of activity, injecting additional manpower or specialist skills. But it is not just in IT development where external resources may be invoked, but also in IT Services – and within that enclave, nowhere more so than in helpdesk or user support.

Headcount Replacement
We may see the different types of outsourcing as existing on a scale going from headcount replacement to managed service. 

Commonly called ‘body-shopping’, headcount replacement is the addition of individual contractors or the replacement of permanent staff with contractors. It may be used as a device for increasing the resources available to service delivery without actually increasing headcount liabilities, which for some companies can be an advantageous financial tactic. 

Headcount replacement is also useful for quickly acquiring skills by engaging an individual, either privately or through an agency, who has a requisite skill set, rather than hiring a staff member and developing skills to suit. The contractor (or agent) removes from the host company the responsibility for his or her skills development as well as employment and income taxes.

The question of productivity however still rests with the host – and it is here where we see the starkest difference between ‘headcount replacement’ and ‘managed service’, not just in the continuing need for task setting and monitoring, but in the whole area of man-management in general.

With headcount replacement, all that really changes is the individual employee. At the opposite end of the scale, under a managed service arrangement, the relationship shifts from one of managing people to a purely commercial and formal undertaking of requiring and taking delivery of a service.

To summarise, the benefits of headcount replacement as an outsourcing tactic are:

• Availability of specialist skills at short notice
• Skills maintenance is the responsibility of the contractor as an external provider
• Flexibility in the scale of resource commitment
• Reduced taxation commitments
• Lower permanent headcount

The drawback of this method, if it can be seen as such, is that the host company retains continued man-management and staff productivity responsibilities. A further drawback has been known to appear in some IT departments, in that the apparent differential between the remuneration of salaried permanent staff and fee-charging contractors can cause some resentment, as contractors appear to be paid more. This can divide a team and cause rifts in process operation, presenting management with a separate problem. Continue..