The True Cost of Outsourcing IT

Abstract

In a previous article, Prism explored the benefits of outsourcing IT as opposed to IT management services so commonly used by businesses in the past. In this article Prism, delves into outsourcing IT and what all growing small to medium enterprises need to know about Internet technology.

Productivity

In many organizations, especially those growing quickly or lacking a formal management structure, it is common for people to assume roles or functions which they enjoy as opposed to their original job description. While productivity does not top the list when business owners are deciding what outsourcing services they require, it is vital to all that it is considered as part of their decision making process.

IT management is one of the most common business functions that someone simply assumes. In the absence of an IT manager or outsourced IT agreement, this function quite often is picked up by an individual who originally was recruited to perform different tasks.

When the role assumed, IT management in this case, is of higher value than the person’s originally recruited role, one could argue this offers reasonable value. However, when the original role was more profitable or of higher value to the organization, then this could be deemed as false economy, even from the most simplistic hourly rate calculation. For example, if the de facto IT manager is a fee earner or sales person – then this value is questionable.

For many smaller businesses this role can become even more expensive when assumed by the business owner himself, who could be performing higher value functions. By outsourcing the IT management function, businesses can ensure high value employees are focused on core activity.

Cost

Gartner Inc. reported in 2006 that 50% of IT professionals said they expected to see significant cost savings by using outsourced IT. There is no doubt many believe this has proved to be the case. But it is worth noting the cost of outsourcing can be a dilemma for businesses. It is not purely based on a calculation of hourly rate versus lack of productivity. The true cost can be factored into a number of areas.

In losing the employee who assumes the role of IT manager, you jeopardize that person’s potential for expanding or adding value to the business. If the person’s core function happens to be product development, client care, or any other high value service, the business deliverables are compromised.

In addition, IT management as a function suffers within the business due to the lack of foresight and trend spotting in the technology sector. After all, no one can be an expert at everything. Finally, reaction and response times are severely limited in the event of a disaster, potentially leading to costly and unnecessary downtime.

To conclude on costs, it is crucial business owners know both what, and how, they want to outsource. Keeping to a budget is important, but equally, quality can be the breaking point.

Expansion

As the business does grow, something has to give. If expansion plans are to be met, the business owner soon realizes that each area, department and function must be scalable. Without a suitable technology or IT management partner, the organization may find a weakness in its overall plan.

Therefore, it is important if you outsource your IT management that the person or firm is aware of your business plan. You must ensure they are suitably equipped to scale their organization in line with your demands, growth plan and overall deliverables. It also is worth noting that, by default, the client in charge of IT management is solely responsible for the overall service. The person in question would be the one who signs the IT agreement on behalf of their organization.

Conflict of interest

Matters become even more blurred should your ‘star sales person,’ who also has assumed the role of onsite ‘technical guru,’ fail to deliver on what now has become arguably two of the most important functions within the business. How do you manage this conflict?

The best approach is ensuring businesses explore their options and choose the best IT management outsourcing model for their needs. Making a long-term decision in the short term can be extremely serious. But if professionals put their business’ interests at heart, then their profits will continue to escalate.