Part 5 - Outsource IT or parts of it
Outsourcing is probably a dirty word to some, especially when it is referring to jobs being sent overseas. That is not what I am referring to here, though it is difficult to know where the employees are if you use a large corporations services. I am talking about outsourcing either components of your system or perhaps all of it, but in the case of all of it, it should be done in a considered way or it may not work for you.
Partial Outsourcing
The first type of outsourcing I want to cover from a perspective of saving money is that of outsourcing one or more components – which could be an application or service that you currently run in house but could be done better by partners, either because it is not your core competency or it simply can be done cheaper in an alternative fashion.
My favorite current example of a component of IT being outsourced is that of email and in particular Microsoft Exchange. First of all, Exchange is a fabulous product that has been one of Microsoft’s best over the long haul and I have been involved in many implementations over the years and have never had a customer unhappy with the product or delivery. However, Exchange is a complicated product that requires continuous management and maintenance performed by someone with good messaging skills – there is more to it than meets the eye.
So consider this, even in the smallest organization, say with 5 users all with mailboxes, all requiring calendaring, contacts, tasks etc, the cheapest way to have the benefits of MS Exchange is probably to buy Small Business Server and a basic piece of hardware. Now the cheapest server with SBS 2008 costs around $3000 in the box, and that doesn’t include setup, backup and restore or anything else. Once it is in and all up and running, you then have the ongoing management costs, the upgrades, the electricity, etc.
Microsoft also provides Exchange via their Online Services (as do others but I haven’t been impressed by several other offerings I have tested) and for around $40 per month you can get your 5 mailboxes, the exact same benefits but literally none of the other costs from purchasing to managing and maintaining. You could enjoy the same features using the online edition for 6 years before it will cost you more than the initial outlay for hardware and software for your own internal version. To me that makes economic sense for any small or medium business.
The decision point as to whether it is relevant to you will be the number of users you have as there is a cross over point where it may not be so viable but I believe this could be a very high number in the thousands due to the increased levels of hardware and software you need to support big installations. Also for consideration is whether you use the server for other tasks. SBS will definitely provide other benefits that make it cost effective, as the server in a small environment will be performing multiple roles. Once you have Exchange on its own server the online version works out even better. I would love to see many companies taking advantage of this and having a professional email domain name to go along with it!
Total Outsourcing
Total outsourcing or outsourcing your entire IT operation provides definite savings if managed correctly. By removing your employee costs (and maybe re-allocating them to business growth tasks) and moving to a fixed cost contract you can save a large amount of money per year. A fixed cost contract means no more payroll, no more benefit expenses, no more overtime when the servers go down at 6pm on a Friday and instead hopefully a team of people who specialize in running IT for a business as their main task. They will have the procedures and skills in place to deliver a consistent security baseline, alert you to issues before they occur and be able to present to you improvements as technology develops and becomes relevant to you.
Here are a couple of thoughts:
1. If you do outsource, consider that local outsourcing is the way to go as you need to know that the company will have people on the ground to understand your environment and service needs quickly in the event of a problem - also the IT team external or otherwise is a key function of your business and knowing who they are is critical for success.
2. Key to saving with outsourcing is ensuring your IT house is in order before committing to a relationship, otherwise your fixed cost quickly becomes very variable. By this, I mean that if your systems are not standardized and rationalized first and you just handover a mess, then you are going to endure ongoing issues that will generate additional charges on top of the standard rates. Systems should already be built to a well documented standard then the outsourcer will only have to perform to the contract rather than performing continual ongoing fix projects. It is these fix projects that generate the extra fees and all of a sudden make outsourcing less effective.
Now for the shameless plug – Squeeze Technology (www.squeezetech.com) can hook you up with either of these options if you so wish and can help you evaluate which is more beneficial to you, as always, these are multi-faceted issues.
