Outsourcing vs In House?

Feature from: dominion post, christchutch press, waikato times- september 2007 

When is a business large enough to employ its own in-house technology team? Or is outsourcing a better option? Is it viable? and what are the upsides and downsides.

Another question SME business owners ask themselves is when is the right time or size to bring IT inhouse as opposed to outsourcing. We need to evaluate small business from medium business slightly differently. For the sake of this article, small enterprise is up to 50 employees, medium enterprise 51+.

Small business operators tend to fall into two categories. There are those that prefer to build their own infrastructure themselves with help from their ‘neighbours brother and his son’ who “know a bit about computers”. These businesses either fail as most small enterprises do or reach a stage whereby they need external help. Invariably these sites are extremely messy with licencing issues, incompatible hardware/software issues and generally no security or border protection. This instantly creates negativity in trying to get such a site up to a reasonable business standard and can be hugely costly to the business owner. It almost always also adds monthly bottom line expenses that have not been budgeted for. Shortcuts taken now in IT will cost you more down the line. It will always come out in the wash, one way or another. This may be in productivity, efficiency, staff retention or a plethora of other means and is not always directly measurable in dollars.

The second group plan their infrastructure in the same manner that they plan their business. They do what they are good at, leverage off other peoples skills in their specialised field, be it accounting, IT or otherwise and make use of this skill to put in place reasonable stages for development. This tends to mean costs are not surprising as they arise and they have less downtime and controlled structure when growing, which is a huge concern for small business.

I am in the blessed situation of meeting daily with successful businesspeople and seeing how they do business, many being owners of SME’s across multiple industries, and far and away, the most successful fit into the second category.

Medium enterprise however is a different case altogether. Invariably, growing pains have usually been ironed out and outsourcing has been leaned on highly in growth and planning. The question then becomes, when do we consider bringing this all inhouse? This poses an interesting paradox. Firstly, it would make sense that a highly skilled, forward thinking technician brought into the team could run the IT infrastructure, be at the beck and call of staff, keep a network running smoothly and the business IT hassle free.

The paradox however is firstly that technicians like toys and challenge, this urge only seems to increase with experience. Secondly, there also seems to always be a time when it becomes more about job justification than about what is the correct solution. Only medium enterprises with multi office requirements, complicated servers, challenging core program issues and a high user count will keep a good in-house technician happy. Otherwise we have found the churn to be extremely high, generally 0-2 years. This creates a huge issue in strategic direction and stability, potentially meaning technically the business may end up out of kilter with its IT requirements as it grows. This is usually because of reliance by the shareholders on the forward thinking of one or two individuals who tend to think more about what they themselves are capable of doing, obviously justifying their position, as much as what is right for the business. I have seen this countless times and to get a medium enterprise back on track after is a mammoth and sometimes thankless task!

Interestingly, if the outsourcing you are using is reliant on the knowledge or advice of one person, you will also strike exactly the same issue!

So then, what is the solution?

I believe the following standards should be adhered to. We believe that the general day to day identification and logging of issues, the running of tape backup systems, all first level Microsoft/Desktop issues, basic application updates and troubleshooting should be done in house.

On the other side, I believe an outsourced IT specialist should be used for the following:

- Strategic technology planning
- Server operating system migrations
- Groupware (Exchange) upgrades, conversions and migrations
- Internet security and access (firewalls, routing, security audits and monitoring)
- IT staff training
- Remote access solutions
- Level-2 network support (backup to internal IT staff)
- Service pack upgrades
- Wide-area-networking
- SPAM and email control
- Backup system architecture and policies
- Disaster prevention and recovery
- Network and infrastructure monitoring

In general, try and work with a supplier who is prepared to challenge your way of thinking and will propose various options and solutions. Leverage the knowledge of those that specialize in the IT field and work with a team that can offer a full range of the solutions to avoid numerous points of contact. 

Patrick Kershaw is a Business Partner for Horizon Pacific, a nationwide technology support provider specialising in assisting SME’s with all their technology requirements. For further information, go to www.horizonpacific.com