If you get a bad feeling when it comes to the word “outsourcing”, you’re not alone. The word can evoke images of companies cutting local jobs in favor of hiring low-wage offshore workers.
Outsourcing isn’t inherently good or bad, though, and it comes with it’s own set of benefits and challenges. In this blog post, we’re going to talk about a type of outsourcing that works particularly well for many small and medium-sized businesses: outsourced IT, commonly known in our industry as managed IT services.
Let’s review the major pros and cons involved with hiring a Managed IT Service Provider (MSP) versus hiring an internal employee.
Pros of Outsourcing IT
First, the good stuff! Let’s examine the benefits a small business can expect to reap when they hire an external company to manage their Information Technology.
(Note: many of the benefits and costs discussed below would easily apply to other types outsourced services as well, not just to managed IT services and outsourced IT services.)
Expertise and skills gap coverage
Many small businesses and startups manage to run their business on a bootstrapped IT budget – at least for a while.
However, the longer a business tries to save a buck by using inexpensive hardware, software, and unskilled labor (i.e. paying somebody’s cousin $50/hr to engineer and support a business network), the more likely it is that over time those hidden costs will creep in.
If not addressed, an IT skills gap at a company will inevitably lead to accumulated technical debt, system failures, and down-time. Fortunately, outsourcing to a Managed IT Service Provider is a great way to fill that gap by leveraging the combined expertise and experience of an external team of IT professionals.
Easier than hiring internally
It’s generally quite difficult for a company to hire an employee to fill a highly-technical position, such as an IT Manager or Director of IT position, and companies trying the non-outsourcing route often face an uphill battle in the highly-competitive tech labor market.
Many questions arise for a company in this situation: how do you (as the employer) know if your new IT worker possessed ALL of the skills needed to manage your IT systems? How would you hold them accountable if you don’t fully understand the work they are supposed to be doing? This is major reason why many companies pay for technical recruitment or “headhunter” services, to help with the challenging internal hiring process.
With an outsourced MSP, your business doesn’t have to worry about making a major hiring mistake. A typical MSP contract is relatively low-cost to start and includes access to a whole team of experts that have all your major IT needs covered – quality IT service at a fraction of the cost of hiring in-house (more on cost later).
Faster, more productive business technology, efficiency gains, risk reduction, better up-time
Smart business owners see Information Technology as a way to empower their organization to run faster and more productively – but the details of how to do this are complex, and vary from business to business.
One of the major benefits of contracting with an external IT company is that a business can get ongoing expert technical advice, and guidance on the best way to manage their IT spend for max return on investment.
Through regular upgrades and proper network maintenance, an outsourced MSP company will proactively make sure that your business hardware and software systems are up-to-date, and that your critical systems run with as close to 100% up-time as possible.
It’s a win-win: when a customer’s IT environment is stable, an MSP can focus its resources on high-value projects aimed at improving efficiency at the customer’s business – not fighting fires and scrambling to fix old servers that frequently break down.
Cost savings over hiring internally
It’s no secret that hiring an employee is expensive for a business, especially when all costs like recruiting, training, insurance, taxes, and benefits are added up.
This is especially true when hiring for an IT position. A quick check on job site Indeed.com shows that hiring an IT manager in Los Angeles can cost anywhere from $75,0000 to $150,000 per year – and that’s just salary alone!
MSPs typically offer cost savings of 50% (or more) when compared hiring internally – a significant benefit for small businesses lacking the internal resources needed to properly vet, hire, train, and pay an internal IT employee.
Local “boots on the ground”
This is a question no business ever wants to ask it’s IT provider:
“My network and server are DOWN – how fast can you get here?”
No matter how much proactive maintenance work your IT provider performs, or systems you upgrade: the reality is that hardware and software isn’t perfect. Eventually, a failure will happen, and remote resolution just won’t be an option (for example when the entire network is down).
When an emergency situation like this happens, make sure that your MSP has “boots on the ground” and can do on-site remediation at your location quickly when needed (Los Angeles traffic permitting, of course!)
Cons of Outsourcing IT
Look, we’re not going to sugarcoat this for you: outsourced IT is not a good fit for every business, especially for very small or very large businesses. Here are some of the common friction points we’ve seen:
A common concern with any type of outsourcing, if you are a business owner who is used to running every part of your operation with 100% oversight and control, then you may have serious reservations about handing over the management of a critical business function (such as IT) to a 3rd party.
And who could blame you? Hiring an outsourced MSP literally involves handing off the “keys to your castle” and transferring sensitive administrator passwords to someone who isn’t your employee.
It’s a risky prospect, and a potentially very costly mistake if you hire the wrong MSP, and/or don’t set clear expectations at the beginning of the engagement about what the MSP is supposed to be in control of (and what they aren’t in control of).
Most outsourced IT companies in Los Angeles and in other metro areas will require a minimum twelve (12) month commitment for all new client engagements.
This is a common standard in the MSP industry. The reason MSPs require contracts is simple: we know that an outsourced IT contract is effectively a business partnership, and a very close partnership at that, so we must be sure our client understands and agrees to this by requiring that they sign a year-long contract.
Fun Fact: our GenCare IT Support Programs do NOT require a 12-month contract to start.
External communication problems
The biggest challenges between MSPs and their customer business have to do with communication.
Example: Help Desk Support Tickets. Despite our efforts to encourage the use of our help desk ticketing system, some clients and their end users just won’t submit a ticket through the proper channel(s) when they have a tech issue. This makes it difficult for our Help Desk staff to accurately track and resolve tech issues in a timely manner. If the MSP’s ticketing system isn’t used, communication problems often arise – and problems go unsolved.
Communication is a two-way street, however. On the MSP side, some providers fall into a pattern of complacency, and fail to communicate proactively with their clients. This can lead to unseen problems that go unsolved for months or even years.
In fact, we talk to many small business customers in Los Angeles who were in this exact situation, and signed with GenCare after realizing they were being neglected by their previous IT person/company, and were looking for a better alternative.
There are a variety of reasons that small-medium businesses need help from third-party IT firms. IT skill and expense for low cost tops the list for smaller businesses.
If you’ve never considered an outsourced IT service offering and are trying to manage your own IT, it’s worth being aware of this cost effective way to have your IT burden lifted.