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Outsourcing contains the following data:

Outsourcing IT support: the cost differential

For many companies, IT takes up a considerable portion of the operating budget. This is particularly true in a downturn when budgets are heavily scrutinised and cost-cutting measures are often considered to reduce overheads and increase profit margins. But the dilemma facing businesses is how to achieve the delicate balance between effectively providing vital IT systems (such as email, CRM, e-commerce and databases) and finding the most cost-effective methods for providing these. One of the big questions for any company is whether to handle IT support in-house or outsource the service to a specialist.

While many people have a good working knowledge of front-end IT systems, when it comes to networks, it is in the realms of the IT expert 

Dealing with essential services such as network security, network management, IT maintenance, disaster recovery and network monitoring take up the majority of the average IT budget. While it is fair to say that many people have a good working knowledge of front-end IT systems, when it comes to wider network issues, it is still very much in the realms of the IT expert. Traditionally this has been the preserve of the in-house IT manager and team to manage - but knowledge comes at a price.

"For many companies having a full-time IT specialist or team of specialists has been considered the norm and for large companies this is still often the case," said Robert May, managing director of IT outsourcing company ramsac. "But the pressures of the current economic situation mean that business leaders are looking at how much value-for-money this actually provides. It soon becomes clear that effective, well-targeted and comprehensive outsourced IT provision offers an enticing prospect."

Costs at a glance
In-house versus outsourced support 

Inhouse IT manager
Annual salary: £40,000
National insurance: £5,000 (12.5%)
Training: £3,000
Absence cover for holiday (25 days), training (10 days), sickness (5 days)
Ad-hoc support £6,000
Overheads £2,000
Total: £56,000

Outsourced support
Monthly support fee: £750 (includes one site visit by dedicated IT manager, unlimited remote support)
24/7 network monitoring £80 pcm
Ad hoc IT project work on-site: £975 per day (ten days per annum)
Total: £19,710

Cost comparison 

Looking at a breakdown of the costs for IT provision in an SME gives a good indication of the point. Taking the example of an average 50-user network, with two servers and some remote users, the comparison between in-house and outsourcing is an interesting one.

The average salary of a dedicated IT manager is approximately £40,000. Taking into account other needs such as national insurance at 12.5 per cent (£5,000), yearly training (£3,000) and absence cover for sickness (five days), holiday (25 days) and training (10 days) per year, the costs mount up.

IT cover, based on a telephone/remote support contract, with some on-site days and ad-hoc call outs during the IT manager's absence could add an extra £6,000. Even overheads such as office space can add to the cost - £2,000 per year, based on the average serviced office. This breakdown gives a total of £56,000 per year as an approximate true cost of maintaining a permanent, in-house IT manager, let alone any additional staff that person may manage.

The cost of outsourcing

Using an outsourced option makes an interesting comparison. According to figures from ramsac, a typical SME of the same size would pay around £750 per month for a monthly visit from a dedicated outsourced IT manager, plus unlimited remote support and for an extra £80 you can include 24x7 automatic network monitoring. Even factoring in an additional 10 days ad-hoc project work for projects such as server upgrades or office moves, the overall total still comes in at no more than £19,710 per year - a saving of around 65 per cent over the in-house alternative.

"The financial incentive is very persuasive, but there are other benefits too," said May. "The other side of the equation is the wealth of knowledge, experience and training that is at your fingertips when using a dedicated, outsourced IT professional. At ramsac, for instance, we have a Microsoft Gold Partner accreditation and are Dell Certified Partners, which gives us access to the highest levels of support and technical input from these vendors as well as the latest training and product knowledge. We also work with a wide variety of client organisations and companies, which gives us an excellent breadth of experience in the common, and not-so-common issues that face the business community in their IT provision and maintenance. A full-time, in-house IT manager is unlikely to be able to match the training, experience and specialist technical support available to our consultants. Many organisations also worry about having all their IT knowledge vested in one individual IT manager - an outsourced approach ensures that no system is dependent on any one individual."

Mixing support needs

There can be a middle ground providing a combination of in-house and external support. "We appreciate that sometimes a company or organisation will want a mixture of a permanently onsite IT team, mixed with the benefits of specific IT help from a dedicated consultant," said May. "At ramsac we have specifically built our service offering around the degree of help that is most suitable to the client's needs. For instance, a school may find that its day-to-day IT provision can be maintained by an in-house team, but that it needs help with more technical issues and guidance on its overall provision, direction and development of its IT provision. On the flipside, an SME that derives much of its business through the internet is much more likely to require continuous and reliable support of its IT provision, to keep pace with the specific and time-sensitive issues that can be critical to the running of the whole business."

It is the ability to tailor the IT provision easily that really gives outsourcing the edge. "Outsourcing gives a degree of flexibility that is more difficult to achieve within the constraints of in-house working and permanent staffing levels," added May. "It offers an ideal way of giving adaptability and cost-effective, well targeted IT cover, which has to be even more attractive in uncertain times." 

http://www.ramsac.com/