The relationship between resourcing and operation in high skill environments (i.e: Software, engineering, accountants, consultants, etc…) is a topic that keeps project managers up late at night. Different models of resourcing come inherent with levels of risk associated with them, as there’s a general inverse relationship between control and risk. In fact, the relation of the two introduces in a third constraint for the models being we’re covering in this blog post: cost.
Full Time Permanent Employee
One first blush- this model may appear to have the lowest degree of risk associated with it. You can design and enforce processes as you need them, ownership of the final deliverables, etc… and while perfect control doesn’t exist, it offers the highest degree of control available. On reflection, the risk is unassociated with control. The risk stems from an extremely high cost investment. Not just direct salary, but other overheads associated (i.e: office space, office furniture, supplies, insurance, etc…) and in intellectual capital based environments, anything more than what is planned with painstaking care, can eviscerate your budget and cripple your profit margins.
So, while the risk of having that person leave and take their intellectual capital and knowledge they’ve directly contributed to the projects with them, there is also huge risk that you’ve underestimated your production capacity or overestimated your direct cost budget ratio and need to lay people off.
This model is where an employee exists on a temporary basis for a finite time period or until a deliverable is complete. In this model, there is actually a high degree of control because they’re considered an employee, the end result is property of the company not the employee and the cost associated with it is higher on a per hour or diem basis, but temporary by nature and the company can scale the production to meet demand capacity as required. Contractors also have an expectation to ‘hit the ground running’ and be able to produce in a positive capacity in short order. If they don’t fulfill the needs, they are easily replaceable (disposal of a contractor has far fewer legal obligations than a full time employee).
In this- a single person is taken on potentially on an ongoing basis. They may or may not technically be an employee of the hiring company (which presents another risk, discussed later) and unless they are engaged full time over a long period of time, likely have other clients they are servicing. This opens the company up to incredible risk that they could contribute to your competitors (That’s not to say they will necessarily knowingly commit corporate espionage, but they could with best intentions let some of the secrets in your secret sauce slip).
There is also risk associated with freelance because of availability. While it is useful to an organization who requires specialized skill for a project and do not possess the demand or requirement to keep it on beyond the project. If the timeline changes, or scope changes or new subsequent builds or rollouts are planned, the freelancer could have other commitments and be unavailable to contribute further.
The deliverable (depending on the contract details) may be property of the employment organization or the freelancer, which also represents a high level of risk.
This is companies who provide specialized services. They differ from freelancers because they are structured as a company rather than one single person. A single freelancer has can have a ‘lone wolf’ element to them. Not to say that a company will comport itself better, but the reliability of a company is higher, reducing risk, but also increasing cost. The other element that increases the reliability is the fact that they can scale. If they have obligated themselves to another client and your project goes overtime or requires further work, they can use a different employee and keep the specialist who is already familiar with your project dedicated to you.
Offshore development has been a growing trend over the last decade in service firms. The visceral reaction has changed from cheap but shoddy to inexpensive but reliable. I’m sure as the market matures, the reputation will continue to evolve.
The current landscape is such that extensive control is handed over to the offshore development company. It’s not unusual for the process to include handing over technical specifications, hold a discovery meeting, and then sit back and wait for the deliverable to be completed (with periodic status reports of course).
The point is that there is no real way to track progress or truly control the outcome, exposing the organization to extensive risk. The cost savings are pronounced, however, so it’s a trade off that an organization has to grapple with.
In conclusion, different models of resourcing comes inherent with different challenges and risks, costs and benefits. It’s good for a company to do their research and figure out what works for them from a risk, control and cost perspective, and then try it all out and come to their own conclusion.