Home
We have several maintenance companies we contract and also fund a group called "core staff" on these contracts. These folks are mainly support staff and indirect labor on the contract. The direct labor are the folks actually performing the maintenance work. We are studying this "core staff" amount on our contracts. Can anyone share data that shows direct to indirect labor ratios? What is best in class? If anyone knows research/articles that could add context and help guide us, please share.

We have several maintenance companies we contract and also fund a group called "core staff" on these contracts. These folks are mainly support staff and indirect labor on the contract. The direct labor are the folks actually performing the maintenance work. We are studying this "core staff" amount on our contracts. Can anyone share data that shows direct to indirect labor ratios? What is best in class? If anyone knows research/articles that could add context and help guide us, please share.

Outsourcing & Managed Services Peer Insights People & Leadership

205 views1 Upvote3 Comments

Sort By:

Oldest

CIOa month ago

It depends on your culture, what you are trying to achieve, and the level of disruption present or coming to your industry. In my experience, having a large ratio of indirect to direct labor shifts power to the maintenance companies, because the direct labor often does not have the skills or experience to be able to ask the right questions, to guide and deliver the right outcomes for the company. When there are significant levels of disruption and uncertainty in the industry, I have seen companies start with, move towards, and oftentimes remain with a 40/60 split of direct and indirect labor. Where companies are more transformed and focused on the end-to-end transformation of value streams, colleagues have expressed ranges from 60/40 to 80/20 splits of direct and indirect labor.
The distinction between the two appears to be:
- where they are in their journey from a value delivery standpoint,
- executive sentiment around “blame” for internal versus external resources, and
- whether they are shifting from “tossing maintenance over the wall” to “agile teams develop/deliver/configure value until the technology is mature in the organization.”

While the focus is solely on maintenance, it is difficult to justify the activity as differentiating in many industries. As a commodity, many leaders would agree that it should be outsourced. If a more holistic approach is deemed to have value, then the above metrics could come into play for organizations.

1 1 Reply

Chief Supply Chain Officer in Transportationa month ago

Thank you Christopher. We are trying to achieve effeciency (are we at optimal ratio?) without damaging work productivity. I appreciate your sharing!

Please join or sign in to view more content.

By joining the Peer Community, you'll get:

Peer Discussions and Polls
One-Minute Insights
Connect with like-minded individuals

Director of Operationsa month ago

The service being ordered, phase and size of the project will impact the “core staff” percentage. The larger the project the greater the need for “core staff”. Generally, I have seen “core staff” costs being in the 8%-12% of the total deal value.

I support technology contracts and above numbers may not apply to another type of service being ordered.

I have seen that the initial phase of a project will require more "core staff" (support staff, project manager, and indirect labor) and could be as high as 30% of the cost of the initial phase of the project. With the initial phase of the project costing between 5%-10% of the overall cost of the project
During the operational phase of the project, the requirement for “core staff” will drop to 5%–7% of the cost of the operational phase of the project.