In-Sourcing vs. Out-Sourcing

A systems integration services strategy for small and medium-size companies

By Thomas McDonald, NSI Chief Operating Officer

The new year is upon us and the business world continues to change – globalization, regulatory issues, the rapid adoption of broadband and wireless networking, combined with a fragile economy, are stressing all of us. Budgets remain tight, and at a time when most IT networks are growing, many CIOs and CFOs continue asking, “How do we get more for less? How do we grow profitably and compete globally with fewer resources?”

These questions are causing an increasing number of businesses to compare the costs of continuing to in-source (utilize in-house resources) their technology needs versus out-sourcing (utilize third party) with the professional and managed support services of a local provider.

At first glance, it might seem appropriate to continue in-sourcing. However, any small and medium size company considering this path must evaluate several factors, including: the human capital costs (salaries, benefits, training, turnover), hard costs (hardware, software, testing resources), and soft costs (applying resources to non-core competencies).

First, a company must have employees with a variety of skills – experience with networks, systems, applications, etc. Here in Connecticut you can find a plethora of highly skilled and currently unemployed professionals available for between $80-150K. This begs an important question; with a person of this caliber, wouldn’t your company be better served to utilize this person in a strategic position, one that can add value to the company’s bottom line, rather than being focused on non strategic, reactive, trouble-shooting efforts?

Another consideration is the resources (software, hardware, databases, development, and testing time) consumed by in-sourcing. Costs include both hard and soft expenses. Hard costs include hardware, software, and salaries that are required to build the system. Soft costs are items that have no clear impact on the bottom line, but consume time, people and resources that could be applied in more beneficial ways to the company (lost opportunity costs in economic terms).

Take “IT Monitoring” as one example. Let’s say an organization wants to build or buy its own monitoring system for routers, switches, server platforms, as well as security events. Drilling down, let’s assume one of the devices is a router with approximately 300 variables that can detect problems, performance, and bandwidth utilization of your company’s existing infrastructure. Now, multiply that by the dozens of appliances, firewalls, servers, and applications that companies use to conduct business. You begin to see the time and effort needed for analysis and control of all of this – it quickly becomes time consuming and overwhelming.

If your business requirements change six months later, the “homegrown” monitoring system must be re-engineered or re-designed and the costs (plus, possible implementation delays) could be staggering. And what if your IT department has a high employee turnover rate? If your IT management developer/administrator of the homegrown system leaves the company, how will the homegrown system fare? Who will continue to evolve it and scale it? In the final analysis, building your own IT monitoring system can work, as long as short and long-term monitoring requirements are simple and stable, and the IT management solution knowledge-transfer time is minimal. However, monitoring is only one facet out of a complex array of IT management components that help you effectively run your business.

By opting for the out-sourcing of products and services (infrastructure, software applications, hosting, and education) your company can achieve increased productivity, at less cost, and in a much faster time frame. There will also be lower capital costs and increased tax benefits. For a fixed monthly fee a local service provider can remove the burden of managing, maintaining, and growing an IT platform by providing best of breed resources and solutions through a combination of remote and onsite services.

Additional outsourcing allows you to “pay by the sip”, because a majority of these products and services are modular, allowing you to deploy in small manageable chunks in a matter of days, rather than weeks, realizing a return on investment in a shorter time-frame. These services are there for you on-demand, as business requirements change, backed up and supported by your local service provider.

In summary, out-sourcing has become a viable solution in helping companies of all sizes maintain a flexible and scalable IT platform – with increased reliability, security, support, and performance – for less cost and with less risk than you can do it yourself. Backed up by a team of technology professionals from your local service provider that’s available for service 24/7, allowing your company’s IT staff to focus on helping you improve your bottom line.

In today’s ever-changing world of technology, it is now possible to get more for less and to manage your company’s IT needs profitably and with fewer resources.

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