In most industries, IT is crucial for operation. Despite this, the level of work involved typically does not justify a full-time expert, making outsourcing a very attractive option. The question is: how much should IT outsourcing cost? Based on our experiences, far less than most SMEs are currently paying.
The Standard Cost
The standard model of IT support billing is based on workstations, servers, and managed additional devices. Your invoices may include extra lines in the form of subscriptions for software like Microsoft and domain names. Many IT companies will bundle these for you, acting as an intermediary and generally adding some percentage for their management. In Australia, these rates are roughly:
- $99 to $250 per user / $25 to $100 per workstation
- $75 to $400 per server.
- $15 to $50 per additional network device.
This approach is similar to insurance where support companies make a solid margin relying on most clients who rarely engage with them. However, the difference between this industry and insurance is how much coverage you already have outside of these support agreements, and how comparatively cheap it can be to outsource for individual jobs.
The Reality
Most software these days is not bought outright but instead rented with ongoing licensing fees. This model requires the original provider ensure their products are kept compatible with current practices, and that bugs are addressed, if not fixed, quickly. Furthermore, today’s security and recovery standards have meant that most products have a range of automatic storing and recovery processes in place. For instance, it’s now standard practice for duplicates of your cloud files to be stored across multiple sites and hardrives to protect against potential disasters or failures. Whereas a fire in your own server may have been a disaster a decade ago, these days, you may not notice any drop in quality provided by online services.
This doesn’t mean outsourced IT support is unneeded. Setting up systems can be difficult and should often be done by someone with experience. There are updates and changes to operating systems whose patches and notes are often incredibly technical, and it can help to have someone there to confirm there is no issue with them. Additionally, you may have personal databases that need some level of management and checking, or you may not feel comfortable trusting third-party software providers to be the only holder of your records. Each of these situations requires someone with experience, but again, it often takes a lot less time to cover these needs than you might assume.
Hourly Outsourcing
Initial setups and major updates can be very time-consuming. However once systems are in place, automatic triggers can to warn if things go wrong; Combined with internal onboarding guides and period disaster reviews you will often be covered to a similar degree as daily human monitoring. We have clients who, despite their sizes, need at most 15 hours of support in a year because of their automation and practices. With your standard IT person costing between $150-$300 AUD, that equates to between $2,250-$4,500 a year, far less than what you will see on most annual support contracts.
The downside to this method is the inconsistency in cashflow. When things are going smoothly, you will have little to no IT cost outside your periods of review. This is different from standard support where prices are set unless special circumstances like security breaches or onsite visits result in extra charges. The question is whether you think this smoothness in cashflow justifies the increased cost. You must also ask yourself if your company is one of those groups that, for whatever reason, truly requires a lot of low-level support. Give it a think the next time your contract renewal is due.
