Use of direct subcontractors remains prevalent

Organizations have been locally hiring subcontractors. This is often done in emergency situations where there is no time to undertake an outsourcing exercise. Deploying subcontractors has its perils as it does not lend itself easily to:

• Knowledge retention, including knowledge hand-over when closing
• The ability to respond quickly to market dynamics
• The costs involved
• The poor economies of scale involved

Often subcontractors are independent inpiduals who come in for one specific project and move on to another. As such, they are not necessarily being provisioned or hired through outsourcing service providers who might be better suited to change the engagement from a staff provisioning to a managed service.

Regardless of subcontractor origins, there are shortcomings in the approach of using subcontractors. In this chapter, we will discuss the key challenges associated with facilitating subcontractors and demonstrate, through real examples, the benefits (savings) accomplished by replacing subcontractors with managed services.

It is appropriate at this point to briefly define or outline of what we mean by managed services. While there are varied definitions and service offerings, the crux is that, with managed services, the provider is responsible for ensuring the agreed upon deliverables of the engagement, regardless of the specific members working on the engagement.

Variants of managed services include risk sharing, reward and penalties, regular tracking of SLAs and KPIs, pricing for output, and many more. Needless to say, these value additions cannot be accomplished with disparate members deployed to accomplish specific tasks without a holistic view or without unified members collaborating on a shared vision.