Should we Manage IT In-house or Outsource it to a Managed Provider?

IT As a Strategic Function

It is important to understand that IT is a strategic function in your business. It’s not just a formula where you add up all the functions and divide it by the cost and calculate the best value. The IT functions need to be weighed according to how critical they are to your business along with your tolerance for risk. One useful framework for evaluating that question is to ask yourself how long can you afford to have your business systems unavailable due to a security breech. The closer your business is to being mission critical, and highly regulated the more it should lean towards an in-house IT function.

Operational and Predictable Costs

The more IT functions that can be supported by in-house personnel the more predictable your operating costs will be. Tools like software, servers and licenses would usually have fixed monthly costs. If your company is growing and needs more IT services, then more of it would need the IT function that could be moved to fixed cost (Managed Service Provider, MSP). This strategy isn’t exact, but roughly speaking 40 users can handle the unique requirements of your business from within. Up to 75 users is breakeven in terms of cost, and above 75 more of the cost burden can be shared with in-house resources.

Breadth vs. Depth

Direct employees will have a deeper understanding of business workflows, rational decision making, and customizing software. Of course an MSP is going to have a broader set of experiences overall.  Most anything that requires some development will be within the knowledge base of an experienced provider of managed services. This combination of depth from within and breadth brought in on contract can be a very cost effective way to expand your company’s capabilities.

Security and Compliance

This is an area where an MSP partner can be really helpful and cost effective.  Almost every industry will have specific requirements for security and compliance.  The managers and operators would know the specifics of their industry, which regulations apply, use cases and historical application of regulations. Usually these highly structured requirements for specialized businesses can be built as a custom data base applied with a structure which is a series of Boolean logic filters. There is usually a rhythm to updates: quarterly, annually, every five years. This sort of structure lends itself very well to building a body of tribal knowledge.

Summary

These examples hint at some of the trade-offs you should be considering when deciding to use in-house skills or an MSP when it comes to IT issues. The main elements to consider include cash flow, specialized knowledge, skills required and specialty requirements depending on the industry. You can apply these considerations to any aspect of your business and depending on how critical they are to your success, make your decisions accordingly. The discussion, here, is not intended to be totally inclusive, but to provide a framework and food for thought. Just about any part of your business that relies on accuracy of execution should include a review before execution. For example, aside from the specific subjects covered here, scalability, growth and governance are other example subjects that should undergo a review of how much should be under direct control of in-house personal and how much can be handled by an MSR partner. These sorts of decisions tend to be rather “sticky” in the sense that they tend to stick around long after the decision is made, so you want to get it right from the beginning.

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