In-House or Outsourced IT Staffing?

In-house or Outsourced IT Staffing

Knowing how to effectively resource your business in terms of IT staff and infrastructure can be a headache....

Read on for our advice on the different options available.

 

What is the best solution for an enterprise’s IT needs?

Enterprise IT is an inescapable necessity and an unavoidable cost. The most effective IT is one that fulfils all a company’s IT needs whilst achieving the best value for money – and the more effective the IT, the more efficient the business.

Companies have a choice between using their own staff for IT or contracting to an outside source — which could simply be one or more contractors or the employment of a managed services provider (MSP). Either way, the associated cost of, and requirement for, cyber security (which is discussed in our article The Present and Future of the SOC) must also be considered. [i]

Outsourced IT

The cost-effectiveness of externally provided IT staff should not be underestimated. Internal IT departments are costly to run and time-consuming to establish. Experienced IT staff are difficult to find and hard to recruit. Using existing staff would entail cross-training expenses and likely reduce staff productivity in other areas of the business. Implementing any form of in-house IT will disrupt the business’ usual operations until the process is complete.

For many businesses, especially small and medium enterprises, in-depth IT expertise and specialisation is not feasible in-house. The ideal breadth of IT knowledge would require staff with many different skills, which becomes prohibitively expensive due to training and salaries.

Outsourcing IT staff requirements to an MSP provides an immediate fit between skills needed and skills available. There is minimal (or no) disruption to the business while the company seeks to find and employ or train the necessary staff – an MSP already has all the skills required.

This doesn’t mean that outsourced IT is completely free of pitfalls. Unless the service provider takes time to work and communicate with its clients, its services may be too standardised to accommodate unusual, innovative or specialist company needs. Additionally, outsourced IT leaves the client at the mercy of the provider’s uptime. An unreliable IT provider may leave an enterprise without IT support at critical moments – so the choice of MSP is important.

The option of individual, part-time contractors as a form of outsourced IT needs to be mentioned. For new and very small businesses with few or infrequent IT needs, a local contractor may be a cost-effective solution, but many businesses will rapidly outgrow this model. IEA Greenhouse’s general manager commented on their experience using part-time IT before switching to a fully managed service: “We used a local IT manager on a part-time, freelance basis, which was OK but our needs on his time began to increase and then began to conflict with the permanent role he had with his employer. As a respected, international research body, we needed proper, professional IT services to support our work.” [ii]

Hiring or training in-house

For internal IT staffing, management needs to make a difficult decision between dedicated, full-time IT staff or having IT form a part of other employees’ duties, with either path leading to potential difficulties and complications. A large part of IT’s role is to provide a help desk for other staff. Any business may go through periods of low demand for technical support, which makes a dedicated department an unnecessary continued expense.

An attractive aspect of in-house IT is the close connection to the business. Internal IT can be relied on to run on the same schedule as the rest of the enterprise; when IT’s services are needed, there’s no waiting for a provider’s support system or opening hours. When the internal IT staff are properly trained and qualified, they will also know their business’ systems and operations on an intimate level. But with smaller departments, this advantage can be inconsistent; an unlucky combination of sick days and time off could leave a business with no IT support at all.

Even a small IT department can be expensive. Salaries, benefits, office overheads, ongoing training and equipment investment can quickly drain the business’ finances. Filling IT roles with existing staff can cut down on these expenses, but often creates false economies. The staff will still need full IT training, and even then, will not be able to work at full effectiveness in either their primary roles or their IT duties. This reduces the enterprise’s overall productivity and risks increased disruption from unexpected IT issues.

The cost of IT

We’ve talked about the cost-effectiveness of outsourced IT compared to in-house, but what can a business expect to pay for either one? Unfortunately, giving a specific estimate without a full analysis of any given enterprise is impossible – even to the point that many executives are unable to get a clear idea of their own company’s IT budget.[iii] We can break down the sources of internal IT expenses, however:

Labour costs

  • Salary
  • Benefits & Perks
  • Insurance & Taxes

Administrative costs

  • Training
  • Travel
  • Compliance & Certification

Infrastructure costs

  • Equipment & Devices
  • Support & Maintenance
  • Floorspace Overheads
  • Software & Service Subscriptions

Organisations of 10 or more people will need at least one experienced Tier 1 helpdesk technician, for whom the average UK salary is £21,000 per year. More Tier 1 technicians and other IT staff will become necessary with larger organisations, which could leave even a 50-person enterprise needing to pay over £100,000 per year on IT salaries. [iv]

The cost of outsourced IT also varies significantly depending on the provider. In almost all cases, a single monthly rate consolidates all the necessary labour, administration and infrastructure costs, making it much easier to track and manage. Research from IDC found that transitioning from in-house or contractors to a managed IT service reduced infrastructure costs by an average of 24%, saving over $140,000 per year for every 100 users. Between eight different enterprises, adopting a managed service increased annual revenue by an average of $173,000. [v]

The size of IT

According to the US Bureau of Labour Statistics, non-store retail organisations have less than 5% of their staff in IT. For businesses with a turnover between $150 million and $500 million, the average size of an IT department is 11 people.[vi] But whatever the size, we know the IT functions that any enterprise needs to fulfil: [vii]

Support:

  • Internal tech support
  • Systems maintenance
  • Problem-solving

IT Governance:

  • Management
  • Budgeting
  • Inter-department communication

Infrastructure:

  • Deployment
  • Maintenance

Administration:

  • Internal network & systems administration
  • Cyber security

In smaller businesses, some of these roles can be handled by existing staff; for example, a particularly IT-savvy team leader might be able to handle the deployment and maintenance of a basic IT infrastructure. However, any internal IT department will need specialised staff to handle technical support and service desk roles for the rest of the organisation.

In or out?

When examining the benefits of outsourced and in-house IT, a key question is whether in-house IT’s availability and integration outweighs the cost-effectiveness and in-depth expertise offered by a good IT provider. However, availability and integration is not exclusive to in-house IT; it’s merely not guaranteed from every managed service provider. With a reliable, communicative provider – especially one that takes the time to develop an intimate working knowledge of their customers– outsourced IT can offer just as much, if not more, flexibility as in-house.

Larger organisations may reach a threshold where an internal department becomes more cost-effective, but this is rare for smaller and more dynamic businesses. A ratio of 1:100 IT workers to machines would be the minimum to achieve this economy of scale.[viii] With hybrid workplaces growing in popularity in the wake of the Covid pandemic and more organisations favouring less centralised office spaces, it’s going to become even harder to find a good reason not to outsource IT staffing.

Choosing the right service provider is critical. Only a dependable, communicative, agile and experienced MSP will unlock these benefits. OGL’s experience across a large range of industries and proactive approach to working with enterprises of all sizes to build a bespoke IT solution tailored to their clients’ unique needs puts them in a unique position to offer this. As the finance manager of Excelsior Panelling Systems said:

“OGL’s friendly and knowledgeable manner is a welcome approach, and we view them as an extension of our own business. They have consistently helped and advised on all aspects of IT, whatever the size of the issue, from our Account Manager to the First Line Helpdesk Engineer. All this helps with keeping the business running smoothly and allows us to concentrate on our core business practices and not to worry about any IT issues. It lets us do what we are good at, which is to manufacture and install high quality washroom cubicle systems and products.” [ix]

Find out more about IT packages from OGL

If you think outsourcing some, or all of your IT requirements, to OGL could be a good move for your ogranisation, drop us a line and we'll be happy to have a chat on the phone, via Microsoft Teams or even pay a visit to your premises.

Contact us

 

 

References

[i] https://www.ogl.co.uk/present-and-future-of-the-soc

[ii] https://www.ogl.co.uk/ieaghg

[iii] http://www.itmanagerdaily.com/executives-dont-know-how-big-it-budget-is/

[iv] https://www.payscale.com/research/UK/Skill=Help_Desk_%2F_Desktop_Support_(Tier_1)/Salary

[v] https://www.slideshare.net/IBMServices/business-value-of-managed-services

[vi] https://lyncstream.com/business/typical-size-of-an-it-department/

[vii] https://www.ciosrc.com/blog/the-ideal-structure-for-an-it-department-in-a-growing-business/

[viii] https://verber.com/it-staffing/

[ix] https://www.ogl.co.uk/excelsior-panelling-systems