[This is part of a series of posts describing how IT contracting compares and contrasts with the structure described in the PMBOK.]
IT initiatives and IT operations are notorious for requiring labor-intensive services provided by people with special skills. IT project managers will need to be familiar with the various kinds of technical and support services, and how they are typically contracted. In a nutshell, most such services are contracted using either firm fixed price contracts or time and materials. Unit-based pricing for these kinds of services is generally limited to certain specific exceptions examples.
Traditionally, there has been some distinction between services offered remotely and services offered on-site at the client’s location or data center. As the world moves to cloud, the distinction between on-site and off-site grows somewhat murkier.
I will outline some of the major IT service categories in increasing order of sophistication.
One of the simplest IT services is software usage support. A customer who has licensed a software package can pick up the phone or log into a chat service and talk directly with an expert in that software package. This live contact “how to” service is usually tied in with live contact software defect support (described in an earlier blog post.)
This service is usually available on an hourly basis, but is more commonly contracted on a unit-based basis, with annual price based upon the number software licenses or the number of eligible callers.
There is a limit to the utility of remote software usage support. This service can help the customer with “how to do?” questions, but cannot answer “what to do?” questions, and cannot directly perform the work needed. This is a natural segue to the next levels of service.
Technical Support and Project Services
When a new IT infrastructure is being created, or is being transformed in some major way, it is common to bring in a team of technical specialists to build the new solution, raise a cloud of dust, and then get out of the way when the transformation is complete. This is very typical for building new data centers and deploying new hosting environments. It is typical for various kinds of migrations. It is also typical for various kinds of optimizations, including urgent technical interventions. Traditionally, this work has been done by assembling the team on-site in the client’s data center. Nowadays, this may just as commonly be performed collectively but remotely for similar cloud deployments and transformations.
This kind of service IT technical service is usually performed on a project basis, and will likely require either a project manager embedded in the transformation team, though clients are advised to assign a corresponding project manager. This work is usually contracted on either a fixed-price or time and materials basis. The choice between the two mostly depends on which party is willing (or is required) to assume more of the risk in project completion.
If the project completion criteria can be sufficiently described, clients usually prefer to contract this work on a fixed-price basis. If the project has too many known unknowns, or it the contractor believes that it is too important for the client to directly participate in the project, the contractor may decline to participate without a time and materials contract.
In some cases, these kinds of projects may be contracted on a unit-price basis. An example could be a project migrating many servers or many storage objects from an old platform to a new platform. If the migration rate or the final number of objects to be migrated is uncertain, the project might be contracted on a per-unit basis (probably with contractual bounds on minimal number of units.) This provides for the case where the client might choose to wrap up a project early and wishes to simplify termination conditions and clauses. This can also encourage contractors to maintain focus on client satisfaction.
Ongoing services that grow large enough to extend beyond a fixed duration project eventually segue into staffing services, managed services, or outsourcing. Contracting for managed or outsourcing services are described in a separate post.
The previously described IT technical services are generally project based, and are generally external to a client’s regular operations. However, clients will frequently need to make a short-term to medium-term addition to their own staff for regular operations. Contracting for a full-time but temporary technical specialist is called staff augmentation. An important distinction about staff augmentation contracts is that the labor supplier agrees to provide a specialist with specific skills on-site, but the client must specify the work to be done and most provide its own project management of the specialist’s work. An exception might arise when the client is hiring a large enough body of specialists that they choose to hire project management services as part of the augmentation.
Staff augmentation contracts can be comparatively simple. These contracts include a short description of the skills to be provided and the time and materials rate to be billed. If the technical specialist is to work at the client location, travel expenses are included in the contract. These expenses are usually either billed separately from the hourly rate, or are included in the hourly rate. Clients contracting for services to be delivered in a major metropolitan area may reasonably be resistant to paying travel expenses due to a feeling that sufficiently skilled staff should be available locally. Some clients will have an organizational opinion that they should not pay travel expenses for philosophical or self-importance reasons. In both these cases, the contractor will likely roll the estimated expenses into the hourly rate. The contracted price is described at an hourly rate, but invoiced on a daily, weekly, or monthly basis.
[I welcome your comments and feedback based on your experience managing or procuring IT services projects. Feel free to contact me directly.]
(Image courtesy stevepb at Pixabay.)