IT Staff Augmentation Market Procurement Intelligence Report

The market for Consultancy and its sub-segments such as IT Staff Augmentation are at an interesting intersection. The market is rapidly showing signs of a great divide - at one extreme is a low-cost market with almost commoditized services and at the other end is the market for high cost specialized services. IT Staff Augmentation vendors are adopting starkly different business models and cost structures in an effort to address both the markets.

Certain non-compliance scandals in the broader professional services industry has pushed both clients and suppliers to put in proper processes and protocols that reduce non-compliance, protect data and information and demonstrate ethical business practices.

The concept of virtual firms is getting popular. By placing the entire infrastructure in cloud services, and utilizing a small number of physical offices, IT Staff Augmentation suppliers are trying to cut their costs and developing cost competitive propositions for buyers.

Trends like these and many others discussed in this report are necessitating a relook at the way IT Staff Augmentation is procured and the procurement cost saving opportunities that exist.

Sometimes, procurement functions are unable to timely alter their practices while responding to market conditions. Industry experts acknowledge that periodically reviewing procurement best practices and adopting learnings from across procurement categories can help procurement teams respond to market needs in a more agile way. This report combines our experience of other categories with IT Staff Augmentation procurement insights and hand picks best practices that can work for category managers delving in this market.

For example, Adequate RFP response time should be built in for prospective suppliers to enable them understand the scope and performance requirements.

Category managers must ensure that they have clearly identified and listed down potential negotiation levers to maximize the value of their category spend before entering into contract-related discussions with service providers. Common negotiation levers to maximize value include deadlines, terms related to payments, (including fees, expenses, and payment timelines) and assistance required from the buyer's organization.

Investing in benchmarking studies help category managers improve their knowledge on market pricing or billing rates of consultants by job role and function. This also allows them to save costs as well as negotiate better with service providers.

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IT Staff Augmentation procurement managers also need to proactively identify and mitigate potential risks that can arise in the supply chain or contracts for IT Staff Augmentation procurement. Some examples include:

• When requirements of the buyers are not absolutely clear or usage patterns are not stable or predictable, suppliers often build in \"cost buffers\" for unforeseen risks due to a lack of complete understanding on buyer's requirements. This increases the risk of overspending on IT Staff Augmentation
• Procurement without consulting the actual users of IT Staff Augmentation may result in a mismatch in expectations of the buyer's internal stakeholders versus the actual contract executed
• Suppliers may face a situation where they are unable to honor a contract in its entirety due to shortage of resources, finances or capabilities. While contractual terms safeguard buyers from the non-performance, their operations could still face massive disruptions due to suppliers' non-performance

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