Outsourcing IT: Do I save costs?
The term outsourcing refers to procuring services or products from a supplier in order to cut costs.
Why and what to outsource?
Most businesses’ core functions are supported by smaller business divisions or cost centers. For example, if you are running a manufacturing business with 50 staff, your core business would be producing your own product. The supporting arms would be the IT, human resource, administration departments, etc.
A conventional way of running a business would be keeping everything in-house which includes the supporting business division. While you are comfortable with this model, the likelihood is – it will cost more in the long run.
Outsourcing your supporting business division would save you the headache of managing it whilst enabling you to focus on your core business. An outsourcing company would usually specialise in their core business to support you.
To keep your IT operations running smoothly, you would need a fair amount of assistance. Consider the following options:
Fixing your own computer
Employees are required to fix their own computer problems. Those who are unable to do so would need help from colleagues or outsiders.
While this model saves you computer-fixing costs, the intangible cost incurred is – employees spend more time fixing their computers instead of working. If you factor in the loss of productivity due to the computer downtime, it will cost you even more.
Hiring an in-house IT specialist
While this might sound like a good idea and most organisations adopt this way, let me tell you about the disadvantages…
In a 50-strong working environment, the budget for an IT position would usually allow you to hire only one person. Additionally, you may only be able to afford somebody who is still raw in the industry as experienced IT personnel will demand higher salaries and better career paths.
In this environment, the career path for the IT specialist is limited as your core business would be manufacturing while he works in a different division. Isolated and disconnected from the crowd, the turnover for this position could be very high. As such, you may need to factor in getting a replacement and re-training.
With this model in place, you would also need to take care of training, annual leave, sick leave and other miscellaneous human resource hassles, e.g. what if this guy goes on a long medical leave?
IT outsourcing companies have one focus; relieving work stress by taking care of the computer issues in your organisation. They’re experts in this department, just as you are in your core business.
While the hourly cost per man is more than that of hiring an internal IT guy, you will be surprised that it will save you more in the long run.
When outsourcing, it is essential to hire a good and reliable vendor, pay them well and keep tabs on their work. You do not have to worry about training, certification, staff turnover, annual leave, sick leave, etc., as the outsourcing company will cover these areas for you. Depending on the contract, the outsourcing company will provide a back-up for you if the designated engineers do not show up at work. If the staff resigns, they will find a replacement for you and train them accordingly.
Another benefit of outsourcing: You can terminate the contract with a non-performing outsourcing company easily compared to getting rid of a non-performing internal staff.
Outsourcing companies usually have a set of IT policies that can be implemented in your organisation to improve the effectiveness of your operations. For example, they have a preventive maintenance policy that can be implemented in your organisation to detect a problem even before it happens. This will reduce downtime cost due to a server or workstation failure, e.g., you need to send your car in to the workshop for servicing/preventive maintenance regularly and not just wait till a problem crops up to fix it.
A good outsourcing company would usually provide detailed reports and documentation of your IT assets. Documentation is important if you need to appoint another vendor or IT staff to take over the job in the future.
As IT is the core business of your outsourcing company, they will have sufficient resources to get your problem fixed and provide advice on how to maximise your IT infrastructure. To help you run your “business at the speed of thought” (as Gates puts it), they can advise you on the best IT tools to employ for your organisation. Plus you can save time on testing out different tools like a lab rat!
You are working with a team
Most outsourcing companies have a team of experts to take care of your IT infrastructure instead of depending on an individual. Established outsourcing companies usually consist of junior and senior engineers, IT managers, account managers, and other experts. They work together as a team to support your business.
With the absence of all the above-mentioned worries, you can save more on operation costs in the long run while focusing on what matters most: your core business. Any problem with your computers? Just report it to the vendor and they will take care of it for you. A good vendor is able to detect potential problems before they happen. Computer problems don’t have to be your problem, anymore!