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IT Expense Considerations in a Bear Market



August 2022 | Nextworks

bear market

It is now self-evident that with little or no technology your business would struggle to compete. A strategic and successful use of technology decreases the entropy of your organization by increasing automation. Automation improves your efficiency and efficiency, in turn, improves margins. The return for each efficiency gain must be greater than TCO for the technology deployed for that gain.

Reducing technology TCO further allows you to either invest in more technology for further gains and/or increase margins. Here we discuss one means of doing this. Let us begin by contrasting the perceived versus the real value of your IT staff.

IT people can make themselves busy in almost any environment. There are many ways to stay in motion, beneficial to your bottom line or not. For the non-technology savvy manager, this can be difficult to identify. If you find yourself in this bracket, perhaps after reading this article you can be armed with a few tips to help make this determination.

Pourage   Goldilocks and the Three Bears

Too Hot

Let us characterize an IT manager who immerses herself in technology. We’ll call her Shannon. Shannon is intelligent, and her portfolio includes a qualified IT background with a formal education in technology. She has experience working in mid to large IT teams over her career. Shannon enjoys working with a range of network and cloud technologies and vendors. She spends much of her free time reading about new technologies, cybersecurity, and other IT developments.

We respect Shannon. She has found her professional passion and strives for excellence by utilizing her talents. But is Shannon right for your organization? If not, why?

As a business owner or manager, your technology goals consist of capability, reliability, security, flexibility, and cost. But is Shannon fully on the same page as you?

Being a discerning and capable employee, Shannon most certainly shares at least some of your objectives. We can’t always expect a perfect 1:1 correspondence. But it’s prudent to be able to be knowledgeable of the differences and similarities.

So, what IT objectives are likely out of alignment with your expectations? Overengineering and overspending are common gaps.

It is certainly recognized that having a sense of fulfillment in one’s profession is a recipe for success. A successful IT professional will be inclined to architect complex systems, use prevailing equipment and services, hire an excellent team, and so on.

As mentioned, we cannot expect a perfect synchronization of objectives. Shannon should be given a degree of margin to allow for inspiration and zeal.

But all too easily, “building complex systems” can also mean overengineering, which is not at all uncommon for small in-house IT teams given an adequate budget.

One example of this behavior may be to construct unnecessarily complicated layers of networking connecting all devices and locations. These layers are an important factor for load distribution and fortification in an environment with thousands, or tens of thousands of endpoints. But a complex network of this nature can easily pose a burden on smaller networks and IT teams.

A more forgivable form of overengineering is Shannon’s desire to fulfill every user’s technology requests. This result is the addition of more technology and more vendors while often overlooking the cost of ownership. (Perhaps you can afford the Porsche, but can you afford the insurance and maintenance?) As department managers come and go, they each may have in mind a new tool they wish to use. Requests to deploy these new technologies may all too easily be embraced by Shannon. The introduction of technology at a macro scale is constructive, but the unchecked introduction of technology at the micro-scale runs contrary to the K.I.S.S. approach.

Equipment can also be unnecessarily replaced with more contemporary solutions when it’s not truly needed. Cloud services with re-occurring costs may be selected without a TCO evaluation versus buying the equipment (or the other way around), taking advantage of open source, or licensing or service options may go unchecked without periodic auditing.

Defining a budget and performance goals for Shannon’s team can be considerable guesswork for the non-technical CFO. How do you distinguish what is a necessary upgrade versus what is instead the nonessential pursuit of building that better mousetrap? Just how much is all this costing your organization?

Too Cold

In scenario number two, and certainly the more common scenario, we’ll depict our fictional IT manager Gavin. Gavin has far fewer technical abilities than Shannon did. Gavin may have potential, but he (at least currently) doesn’t have Shannon’s background. Also, Gavin and his coworkers may not have Shannon’s mindset for complex technical tasks and planning. He therefore leans heavily on a reactive (break/fix) methodology.

Characteristic symptoms of underperforming IT under Gavin’s watch may include:

Your IT may be a jumble with Gavin. However, maybe it’s not.

Gavin might recognize and compensate for his technical shortfalls by hiring an array of outsourced technology services partners. This is not a bad workflow. Gavin can turn to these partners to fill in his knowledgeability or time constraint gaps. A vendor can be selected to manage the firewalls and switches. It’s a sound decision to place email with Microsoft 365, and most of the day-to-day email management and troubleshooting can be administered by Gavin and his team. There are numerous “value added” Microsoft 365 resellers who can provide the more complex project functions for Gavin, such as migrating to Microsoft 365 itself. Other technology partners can produce compliance and security procedures and auditing. And so on, as many IT functions can be apportioned in this manner.

In this makeup, Gavin spends most of his time doing help desk tickets and works with the various partners as required.

So then, why not go a step further and outsource Gavin? If he has help desk personnel under his management, they too can be outsourced.

Just Right

Outsourcing your entire IT department to a Managed Services Provider (MSP) is a consideration that yields three key advantages:

So why and how could this work?

An MSP is immersed in IT. It’s their only business. A good MSP will have in-house expertise in each of the core elements of IT, and they operate as a team. MSP core competencies are:

The MSP is also profit-driven, its management should have the experience and capability to avoid the “Too Hot” and “Too Cold” conditions as discussed. This is by nature of its existence, or the MSP would not be able to compete in the marketplace. Overengineering is kept in check as decision makers, having a pure technology background, must have a handle on weighting scalability investment against immediate outcome. Outsourcing core competencies are usually not required as the combined volume of each client legitimizes bringing that talent in-house. The MSP’s employees can more easily be given opportunities for personal growth in their IT education and advancement. A (good) MSP doesn’t have tolerance for IT personnel that are not both proficient and productivity minded.

Keep in mind that not all IT functions can be outsourced to an MSP. Your organization likely depends on one or more specialized software applications for its operations. Examples include shipping software, electronic medical records, or inventory and accounting systems. The support for this software is carried out by the vendor and not the MSP. The MSP does provide IT support to the vendor as required for the system to function in your environment.

The CIO role can be kept in-house or also outsourced to the MSP. Outsourcing this role is more suitable for organizations that are smaller or have fewer technical requirements.

Next Steps

Cost Review

To compare the TCO of in-house IT versus MSP a few metrics are required:

Do not include in the calculation:

Then ask for a comprehensive quote from an MSP for a full-service plan. The first list of items above will likely be included in the quote.

(You may or may not want to include telephony services in the TCO comparison depending on if the MSP provides this service or not.)

The MSP will likely save money if you employ an IT staff of 1-5 people. More than 5 and the in-house model may be more economical.

Performance Review

Most MSPs can provide an IT assessment by looking in from outside of the box. A simple assessment of only a few pages probably won’t cost anything as most MSPs are willing to invest the time to review your environment. Alternatively, an in-depth analysis can be conducted in anywhere from 10-50 hours for most small-mid-size IT environments. If the assessment is conducted by an MSP, you can expect some bias as the MSP would like your business. As an alternative, an MSP might be able to refer an independent organization to conduct the assessment.

An IT assessment will certainly put Shannon or Gavin on guard. A peer review can be accepted with open arms or not. The assessment can provide constructive criticism, or even little to no suggestions at all, and provide peace of mind. Or it might alert you of a pending disaster. It didn’t end well for Goldilocks1. It is good to at least know where you stand.

Contact Nextworks today for a no cost Cybersecurity Assessment.

Or, learn more about Nextworks IT Services.

1 Goldilocks’ fate in the 19th-century version by Eleanor Mure is particularly grim.

2 Soup icon created by Freepik - Flaticon.

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