With demand for IT professionals at sky-high levels, companies around Australia and New Zealand are facing a growing challenge in recruiting and retaining top talent. This then leads to the decision to outsource several IT services to an external specialist consultancy.
If your organisation is experiencing any or a number of these challenges, outsourcing is a good consideration:
- Growth is exponential and likely to stay this way. You need to ramp up staff quickly and add extra capacity.
- Your teams have workloads of over 100% capacity for more than 2 months at a time. Workloads at this rate tend to fuel demotivation, staff burnout or team personality clashes which you want to avoid.
- Qualified technology resources are hard to find in your business area, or their cost (salary plus superannuation) far exceeds any headcount budget you have.
- Quality is essential but your budget is limited.
- You are being asked by the business to cut costs in the delivery of IT solutions
- You are seeing a decline in business stakeholder satisfaction over solutions provided by IT.
- Technology trends are rapidly changing and your competitors are rolling out technology services that you cannot keep up with.
- There has been a rapid change in business direction, or working arrangements, and you have to reorganise what activities internal IT staff need to focus on and offload the rest.
Outsourcing Cost Benefit Analysis:
Most outsourced IT providers make their recommendations based on three claims: it costs less to have them versus internal headcount, it is more efficient and it will provide better service and/or security.
In detail, we outline some the vectors to consider when looking at an outsourced external IT solution:
Cost vs. Quality
Not all outsourced IT providers are the same. Similar to airlines, their sales and delivery strategies are often fundamentally different and fall into different categories on the cost vs quality spectrum. Specialist providers will often charge higher for their subject matter expertise, whereas generalist providers will be more cost-efficient given their breadth of services. It is important to define exactly what level of service and support you need before going into cost negotiations.
Capacity to Capability Ratio:
When considering IT evolutionary plans or upcoming projects, it’s important to consider how many IT staff you have, how busy they are and what specialist skillsets they have. A common rule is to ensure those staff are working at around 80% capacity on day to day tasks which then gives them 20% of time for unexpected delays, meetings or administrative duties. If you project landscape looks like it requires heavy application development and integration work, and your internal developer is already at 120% capacity for the next 4 months – then you need to look at adding headcount or specialist expertise.
Costs of hiring:
In a global market where offshore technology giants such as Google or AWS are hiring Australian based IT and Developer skillsets for an average of $200,000 AUD per year, it can be almost possible for smaller companies to hire premium talent. Additionally, skillsets like DevOps specialists or cloud architects are also amongst the best paid, best looked after and satisfied in their roles so are very unlikely to be swayed into another role.
On average, it takes 68 days to hire in Australia at an average cost of $34,000 per hire. This is without a guaranteed successful candidate and does not account for the 4 weeks of leave notice that person may have to give.
Businesses that are requiring fast access to skills resources are best placed to do the maths on cost to hire versus outsourced before rushing into an internal hiring decision.
Access to the right toolset and advice:
The cost of a robust toolset is another key expense that should be considered, and is something that can be built into the cost of an outsourced IT model. Tooling licensing can often blow out, especially in the world of SaaS pricing, so it is important to evaluate tooling when considering your long term IT plans.
An efficiently managed IT system needs a toolset that must first be purchased, hosted, developed and managed. These tools can range from ERP’s, CX suites, CRM suites, cybersecurity platforms and various database infrastructure. The tools themselves are very expensive, and it’s even more costly to configure and set them up. A consideration needs to be applied to the time it takes to develop and manage these tools, where to find proven best practices that reduce risk and automate common tasks that make your IT systems more competitive and efficient.
The risk of under-budgeting and overworking:
Ineffective IT systems and plans can be an expensive risk for the business. Tell-tale signs of under budgeted IT systems include IT staff not being able to keep up with workloads, or acting surprisingly defensive. They won’t be proactive or actively contributing to long-standing projects.
The wrong internal IT staffing solution will result in major liability – good staff won’t stick around, cybersecurity risks increase and avoidance of IT changes will occur. These will leave your business ineffective, unable to respond to change and at risk of a major cybersecurity attack.
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