Handle IT in-house, or hire a managed services provider? It’s a choice we see companies face every day, and one that requires a well-informed decision. And while there are certainly situations in which in-house IT makes sense, our experience tells us that contracting for managed services usually makes more sense. Let’s look at some of the compelling reasons we’ve found this to be the case for companies we’ve worked with.
Understanding What Professional Services Firms Have Long Understood
Many of our clients are professional services firms, offering accounting, legal or other specialized services to companies that need them. These firms quickly grasp the strategic advantage of managed services, which I would define as a company outsourcing a category of operations – managing IT, for the purposes of our discussion – that’s outside its core competency, in order to improve the company’s ability to manage effectively, control costs and maintain professional focus. Professional services firms understand the strategic advantage of doing this, because they deliver that same advantage to their own clients when they handle clients’ professional services needs.
Know When You’re Likely To Face A Choice, And How To Decide What To Do
In our experience, there are three events that typically drive companies to make a decision about whether they need managed services. By exploring a few examples of these, you’ll see what’s important to think about in the process.
1. The Fork In The Road: Could It Be Time To Take The Path To In-House IT?
One point at which we often hear from companies is when they’ve reached a certain level of growth that prompts them to consider bringing IT in-house. You don’t see a lot of companies with, say, 20 employees even thinking about in-house IT – but once a company grows to 50, 75 or more people, it’s natural to wonder whether it would be more efficient to just build their own IT department.
I’ll be the first to say that there are cases where that’s exactly what they should do. We talked to one company that, even though they employed less than 20 people, were running 25 servers because of the nature of their business – and they really did need someone onsite to help manage that technology.
But for the overwhelming number of companies under 100 people, it’s my belief that they’re better served by an outside company that does nothing but manage IT. That’s the lesson from professional services: If you’re a landscape company, for example, why would you want to have the responsibility of managing an in-house legal department? Professional services firms understand this, and I believe this is why for many of those who are our clients, the question when they came to us wasn’t whether to outsource IT, but to whom they should outsource it.
2. The Dawning Realization: What If In-House IT Isn’t Working In Your Favor?
We often hear from companies who at some point felt they had a compelling reason to bring IT in-house, but then learned some costly lessons about what can happen when you bring an area in-house where your company doesn’t have core knowledge or experience.
One of the problems in-house IT can bring is a lack of accountability. We had one company contact us because they’d hired an IT resource and then had come to suspect that he might be doing an inadequate job. But they had no way to confirm it, due to their own lack of IT expertise. We helped them assess his performance and make a decision about how to proceed – but in the interim, he continued to be employed and they continued to be uncertain about whether he was acting in their best interest.
In another case, a company reached out to us for backup when their internal IT person was going to be out for an extended time. Unfortunately, while there, we identified many major network issues and other problems – things the company may have never even known about had we not come in on that temporary basis. They’re currently reassessing whether in-house IT is right for them.
Another company called us after going through three internal IT hires in six months. This is an example of what happens when you hire someone and then find they lack the skills to do the job, or the breadth of skills or experience to handle all issues that might arise. The company ultimately went to a managed services model, but by then, the choice of in-house IT had proved quite costly.
3. The Financial Impact: Is In-House IT Costing More Than It’s Saving?
Speaking of costly decisions, the third set of circumstances under which people call to talk to us about managed services is when they begin to see evidence that in-house IT is costing them more than it’s saving. We find that at least 80% of the time, managed IT costs less than the fully burdened cost of an in-house IT hire. When it doesn’t, that’s likely to be because the in-house resource is being paid far below the going rate for a skilled, experienced strategic resource.
That’s what happened to one company that signed a managed services contract with us after trying to handle IT in-house with a relatively low-paid resource. They got someone who was good at troubleshooting, but not really capable of managing an IT network to avoid problems in the first place – which is what a good IT resource should be able to do. Once the company realized this, they moved to the managed services model.
In summary, most companies at some point find themselves with a choice between maintaining an internal IT department, and hiring a managed services provider to take care of IT. Our clients know that managed services can prove to be a true strategic asset, by delivering the services they need reliably and cost-effectively – and freeing them to focus on their own core businesses.
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Bill McCharen, COO
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