Today almost everything in IT is "outsource-able". When it comes to IT Outsourcing (ITO) and application development and maintenance (ADM) services, its best to distinguish between a managed service and staff augmentation. This differentiation may seem like an unimportant fine point, yet it has a very substantive impact on the relationship with the provider and the overall success of the arrangement.

First let's define the possible employer/worker relationships.

So what's the big deal? The most common problem is that clients think they are outsourcing some of their application development and maintenance when in fact they are using a staff augmentation or contractor approach. So what's wrong with that? Nothing if that is what you intended to do and have the proper management processes in place.

Why are management processes so important? If the contractor is on site, then regular management processes and techniques usually work quite well. However if the contractor is off site, or even more important half-way around the world, having a very rigorous process to communicate needs and specifications is of critical importance.

Know what relationship best fits your situation.

Contractors supplied under a staff augmentation approach have several advantages. First, this arrangement is highly flexible. In most cases the relationship can be terminated at will. This makes this approach appropriate for temporary spikes in labor or when a specialized skill is needed for a one-time task. It is also possible to include the contractors as part of a client lead development team. However, there are three major disadvantages of this approach:

1. The client is not leveraging the contractors processes such as CMM level 5,
   
   
2. If the contractor is not on site then the client must have good specification skills to communicate what needs to be done and how it interfaces with other project components, and
   
   
3. Often the client is paying a provider at fully managed services rates and thus not achieving the full value.

Outsourcing or managed services has a different set of strengths and weaknesses. First it addresses the weaknesses of the Contractor approach. The provider assumes full management responsibility for getting the job done and performing to a level of service (SLA). The client can take advantage of the provider's processes which should improve the quality of the final deliverable. And often the most important difference is that the provider assumes responsibility for communication of specifications to their staff. The main disadvantage of an outsourcing arrangement is most agreements are for a specified term which may be difficult to terminate.

While both approaches can work, in most cases outsourcing is a better approach particularly when applied to offshore resources. When looking at off-shore arrangements with a low level of satisfaction and/or quality, the most common trait is that the client signed an outsourcing arrangement, but is treating it like staff augmentation.