The Fractional Allocation of Talents
A way you won’t inefficiently lock your budgeted FTEs with vendors anymore
The golden era of body leasing and long-term team augmentation is definitely at the end of the cycle. Such a move is visible across the market, where customers are no longer interested in leasing engineers and would like to invest in permanent resourcing as a company value.
Does that mean that the idea of resourcing centers and software houses is no longer valid and is going to die naturally over time? Definitely in current form - yes, the change has already started and only those thinking broader and upfront are going to grow their business or even survive.
Body-lease at scale to gain quantity and cash out
Controversial but unfortunately a real case that is a chronic disease of the IT market across the world. Besides the price per head, the lead time and scale are important as well. During the years of being a Manager, I met with the question of how fast you can provide me XYZ number of engineers. The IT market is not a grocery but the big all-in-one corporates make it like that - no matter of quality and efficiency, the numbers and money are the main metric.
The demand for leasing talents to accelerate operations and conclude goals is going to significantly grow in this decade as per the Delloite Insights Global Outsourcing Survey 2022.
The report says that 50% of executive respondents see the biggest challenge in talent acquisition and sourcing. And the demand is growing year by year, that’s why the body leasing keeps its strong position.
I hate the term “body-leasing” which totally dehumanizes and brings down unique skills and valuable engineers to just the resource on an invoice for service. Over the years I declined many opportunities to get involved in projects where I didn’t see any higher value than just being cheap, code & forget.
You ask me why? Because since the very beginning, I’ve been working with the people first, not resources. I’ve been working for many customers for which I delivered the teams or individual engineers but we did it in a way of team augmentation where we’re working closely with the customer and onsite people in symbiosis.
What was and still is the differentiator? The unique skills, quality, commitment, and flexibility of engineers I work with. Keeping those factors with the growing demand for IT talents is not possible without a different approach to the topic and that’s what the respondents of the Delloite Insights point out as well.
The sunset of large-scale allocation and body-lease
Another controversial statement. I don't believe the sun will set on body-lease as allocating the teams to the cheaper regions of the globe is still going to be accountable - I’m not saying it will become more efficient as the quality won’t change and quantity won’t improve it. I’m targeting this statement more to the point of view of potential customers who are starting to look for more efficient use of their money and better outcomes.
Nowadays when you estimate the build time providing the dedicated FTE of Project Manager, Researcher, Designer, couple of Engineers, DevOps, and QA you will probably lose the deal. But why? Of course, it’s reasonable to build a cross-functional team like that to deliver the best quality in measurable and predictable timelines, but customers have started looking for much more flexibility in resourcing which implies a better cost-per-person ratio. Moreover, there is visible turnover to the fixed price model or capped time material projects which makes the budget & investment discussions more predictable and accountable.
Let’s bring to the picture what options in terms of external sourcing companies have at this very moment.
Body Leasing
In a nutshell, it’s typical hiring of talents from external sources like agencies and large corporations who are able to provide full portfolio of candidates the next day. Moreover, after some period, they are “selling” engineers permanently to the customer. Sounds ideal, but those companies are just proxies, without a care for the culture, quality, vision, and skills of people they are exposing via the “shop window”. For customers, it’s a short-term win because most likely they are going to lose the bought talent who does not feel any connection with the next employer.
Team augmentation & nearshoring
A humanized alternative for body leasing which I’m using in practice, not just in the theory. Customers are getting exceptional expertise and skilled talented engineers who are working together, know how to cooperate, and how to build relationships with on-site customer engineering & business teams. Development of talent, skills & culture is fully driven by and on the side of the vendor. Augmented team works as part of a customer organization without visible managerial borders. Moreover, you know where is the team located as that’s the idea of nearshoring to bring the additional value of the people who can appear onsite and work with customer permanent employees - they are not randomly distributed “resources” around the globe who sometimes you even not seeing during online meetings, just as an author of pull requests.
Managed Services
It’s something more than traditional outsourcing & body leasing. When the company outsources part of its development activities that service consists of business consulting, end-to-end process management, and performance management via the service level agreements (SLAs). Moreover, the pricing is defined slightly differently from the typical “day rate” as it is based on the outcome and volume consumption. Operational responsibility is fully transferred to the vendor which applies to the increased scoring in corporate risk management.
Operate Services / Consulting
Highly specialized cooperation model based on the outcome and oriented on the innovation. In my personal opinion, the one with the biggest return on investment for the potential customer it’s because of payment for expertise and hard-to-source talents who are landing, setting foundations, training, and departing. That sounds like a special operations team and in a nutshell, it is how it should be classified. Operate Services are unique and not possible to be built without proper niche targeting and years of experience, so mostly not reachable for most companies.
The ultimate goal for utilizing each of the models is to get exceptional knowledge and expertise to accelerate the initiatives within the company. Own sourcing is still a bit aside and during the years this position hasn’t changed as setting your own team, with solid foundations, culture, and goals is a really challenging task. It’s a long-term goal and vision, where in the short & mid-term external sourcing is the best solution.
Most of the executives state that their businesses are going to invest more in talent sourcing but consider different models compared to traditional outsourcing, body leasing, and team augmentation. The key factor for them is the efficiency of the service from 3rd party vendor which can’t be said about traditional body leasing or outsourcing where efficiency and quality are not top characteristics, but the cash return for 3rd party is.
Fractional Allocation: Multiple skills & top talents under the single cost item
Going forward with the Managed or Operate Services is the mindset turnover for many companies as both models contain the transfer of responsibility and process management outside of its roots. Traditional outsourcing, body leasing, or even team augmentation is not a way to go for long-term cost savings which are on top priority in current market conditions. It’s not a black-white decision and in every area, there is a kind of a “gray zone” that fulfills the gap. In the cooperation models selection, I’m an advocate of Fractional Allocation of Talents.
What do I mean by that and how is it different from the traditional approach? Let’s first say what the fractional in terms of time & material allocation means.
Fractional is some kind of part-time allocation but much more flexible as it contains not just a single person allocated to the project but a set of skills the customer can utilize during the project timeframes depending on the phase and need. Based on the example of a typical end-to-end project, how the traditional team can be set up like:
As a result, the customer got 7x FTE to be paid every month and the main raised concern would be “Do I need a Designer, DevOps, and QA Engineer during the whole time of my project?” or “Does PM and SM can’t be a single person?”. Both are valid questions asked and the Fractional Allocation proposal can address them as the following:
The Fractional Lead joins three roles within a single person being a functional lead for allocated people, project manager, and scrum master. There is probably no need for full-time allocation as well of such a Lead and 2/5 up to 3/5 would be efficient from cost & operational perspectives, as this person is responsible for management of the team, onboarding, offboarding, and all the incidental activities done commonly by the customer operational team.
Moreover, the biggest change applies to the roles of Designer, DevOps, and QA Engineer. By the nature of work their involvement is dictated by the phase of the project while the Designer is required to properly kickoff the product vision and prepare resources for engineering, then DevOps must set the infrastructure while engineering starts to work and in strict cooperation with them, ending on the QA Engineer who takes the case of all E2E tests, acceptance testing and final signoffs while DevOps again comes to the picture to support at least the first production release. It’s clearly visible that combining those three roles as a single Fractional Engineer / Designer role would be beneficial from operational and cost perspectives where at first costs are cut by nearly half and the remaining budget might be allocated to get the more sophisticated level of the engineering team, special consultancy.
The worry that might pop up is that customers won’t know who is working on the project and that the rotation of allocated talents is going to be significant and not manageable - nothing like that. The Fractional Talent Allocation approach has all the benefits of traditional body-leasing or team augmentation including the fact you know with who you’re working. This flexible approach focuses as well on the factors that have an impact on the productivity and efficiency of the team. Talent rotation, repeatable boarding processes, and knowledge transfer are the opposite of this and are aimed to be reduced to the necessary minimum. The flexibility as a foundation of this approach lets to apply it to the projects at various stages. Starting from the greenfield, through the executed build phase or even maintenance, where finding an attractive traditional full-time allocation is challenging.
That sounds really promising, so why don't all the corporations and software houses offer that kind of possibility to their customers? The answer is a basic one - to build such proposals efficiently and not fail you have to be an expert in what you’re doing and care for the people you’re working with. Why is that so? Simply because the Fractional Allocation is a challenge for your engineers and yourself to keep the momentum, motivation, and culture of the team. Without the relevant foundations, attractive skills development, trust, and long-term vision - you won’t be successful in it.
The Conclusion
In conclusion, the landscape of IT talent sourcing is rapidly evolving, driven by a need for greater efficiency, flexibility, and alignment with long-term business goals. The traditional model of body leasing, once favored for its ability to quickly scale teams, is increasingly seen as outdated and misaligned with modern business needs. Companies are now recognizing that while body leasing may offer short-term gains, it often leads to inefficiencies, a lack of commitment from talent, and ultimately, a disconnect between the outsourced team and the company’s core values and objectives.
As businesses pivot away from these conventional practices, the fractional allocation of talents emerges as a compelling alternative. This model offers the flexibility to access top-tier skills and expertise on an as-needed basis, allowing companies to optimize their budget without compromising on quality. By aligning the allocation of talent with the specific needs of a project’s lifecycle, fractional allocation enables businesses to be more agile, responsive, and cost-effective.
However, embracing this model requires a shift in mindset and operational strategy. It demands a deeper commitment to team integration, the development of a strong company culture, and a focus on long-term relationships with talent. Companies that can successfully navigate these challenges will not only achieve significant cost savings but also enhance their ability to innovate and stay competitive in a rapidly changing market.
Ultimately, as the IT industry continues to evolve, those who are able to adapt to new models like fractional allocation will be best positioned to thrive. This approach not only meets the immediate needs of businesses but also sets the stage for sustainable growth and success in the years to come.
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