| Did you milk your own cow, squeeze your own | | | | things like taxes, vacation and workman's comp. |
| orange juice and gather your own eggs this | | | | So you can see that right up front, you will save |
| morning? For the vast majority of us I would | | | | significant money. The other major benefit is you |
| safely bet that the answer is no. When we | | | | will be hiring a staff of engineers with different |
| bought those items at the store, we were | | | | specialties, so any problems that occur will be |
| effectively outsourcing those functions to | | | | dealt with more efficiently. The way for MSPs to |
| someone else. The term "outsourcing" has gotten | | | | be profitable is to keep your systems up and |
| a negative connotation lately and in most cases it | | | | running error free. The better they are at doing |
| is completely unmerited. I am not going to discuss | | | | that, the more profitable they will be. IT support |
| off-shore outsourcing or discuss the moral/ethical | | | | is like housekeeping (another good outsource |
| aspects. What I will discuss and am actively | | | | function), you only notice it when it isn't done. If |
| promoting is local outsourcing. I want to help you | | | | you pay an MSP what you deem to be a fair |
| decide when it makes sense to do the job | | | | amount a month and you never see them and |
| internally or hire someone else to do it for you. | | | | you never have any down time - you have made |
| Why Outsource? | | | | a great investment. |
| The first question to start with is: "Why consider | | | | When should I consider outsourcing? |
| outsourcing anything?" The simple answer is, in | | | | When I talk to business owners about outsourcing |
| most cases you get a better quality result for | | | | I have them answer a few questions to help then |
| lower total cost. I doubt there is a business | | | | narrow down what functions they can outsource, |
| person out there that would take exception to | | | | and here they are: |
| anything that is better AND cheaper. The other | | | | 1. Is this job function a profit center or a cost |
| major benefit is that it takes one more time | | | | center? In the case of the manufacturer - |
| consuming function off your to do list. This frees | | | | producing their product is a profit center, but A/R, |
| you up to concentrate on your core business. By | | | | A/P etc are areas that cost money but don't |
| removing such a task, your company becomes | | | | produce money (collecting money generated by |
| more productive and hence (should be) more | | | | another dept. does not make it a profit center). |
| profitable. The second question is: "What should I | | | | 2. Can this job be done by one person? If the |
| consider outsourcing?" The top job functions that | | | | answer is yes and it can be outsourced then |
| are typically outsourced are financial, technical and | | | | outsource it (unless it is a profit center). In the |
| functions that are labor intensive. This article is | | | | case of the CPA firm, one person can provide all |
| generally targeted at the small privately held | | | | the IT needs, but that is a bad spot to be in for |
| business, so I will not deal with things like Call | | | | both the company and the employee. The |
| Centers, Software Development or Research and | | | | employee is probably over worked (and underpaid |
| Development. However, most small businesses, | | | | - if you listen to them) and has little time for |
| even companies with only a single person | | | | vacation, training etc... The company on the other |
| performing all functions, can benefit from some | | | | hand is entrusting all their important data to one |
| form of local outsourcing. | | | | person. What if they became too ill to work, or |
| Let's look at an example of a small manufacturing | | | | became disgruntled? Basic rule of thumb if you |
| business with 5 people or less. In this type of | | | | don't need at least two people for a department, |
| scenario, the owner is probably the principle | | | | you shouldn't have any (this applies to cost |
| salesperson as well as the person that makes | | | | centers only when outsourcing is viable). |
| sure all the jobs are getting out on time and that | | | | 3. If the owner is performing one (or more) of |
| the employees are paid. Now, what is a better | | | | these "cost center" functions, I ask; how many |
| use of his time, cutting checks and making | | | | more money generating activities could you |
| collection calls, or focusing on selling more of his | | | | perform if you did not have to do this yourself? |
| product? That's a pretty easy question to answer | | | | 4. And finally, if you can outsource a job and get |
| isn't it? In this case outsourcing his back office | | | | it done better and cheaper than hiring a person, |
| duties will make this company more profitable. | | | | why would you want to hire a person internally? |
| Invoicing/billing, accounts payable, employee | | | | So, in conclusion, outsourcing is not bad. We all do |
| paycheck and tax preparations are functions that | | | | it everyday. When you outsource something you |
| can easily be doled out to a local company. The | | | | still provide all the same benefits to society as if |
| best part about doing this is the fact that if you | | | | you hired someone, plus your company is leaner, |
| hire a CPA/financial company to perform those | | | | more efficient and more profitable. This will allow |
| functions - they will be infinitely better at it, | | | | you to get more sales, grow your company and |
| because that is all they do! When you can hire an | | | | hire more people in your profit centers. By |
| expert to do a job cheaper and more efficiently | | | | removing cost centers from your payroll, you |
| than you can do it yourself plus it frees you up to | | | | help not only your company grow, but you also |
| increase your company's sales, it would be foolish | | | | help the specialized company to grow, and that is |
| and short-sighted not to consider it. | | | | a much better use of your money. Some small |
| Let's look at one more example. A CPA firm with | | | | business owners like hiring people because it gives |
| 35 employees needs IT help (even an outsourcing | | | | them a sense giving back to society, but when |
| company can use outsourcing companies). They | | | | you outsource locally, you are still doing that, just |
| have 35 people in two locations; they have 5 | | | | not internally. One company using another local |
| servers and 1 IT person - that just gave his two | | | | company helps in creating job security for all |
| weeks notice. This is the perfect opportunity to | | | | involved; it literally is a win/win. |
| look at the benefits of outsourcing. Consider what | | | | One Caveat |
| they had before - one guy. What do they do | | | | Most companies look to outsourcing to save |
| when he gets sick, or takes a vacation? When do | | | | money. My primary reason for promoting this is |
| they send him out for training? Most people know | | | | that it allows the company to focus on their core |
| that IT is an ever changing field, but most small | | | | business and grow as a result. The one thing I |
| companies never send their IT tech out for | | | | would caution against is choosing any outsource |
| training to keep their skills sharp and up to date. | | | | company based solely on price. My next article will |
| My experience has confirmed that you can | | | | deal with criteria for choosing an outsource |
| typically hire an MSP (Managed Service Provider) | | | | company, but remember the old adage, "You get |
| to manage your entire IT infrastructure slightly | | | | what you pay for." If you look at three |
| cheaper than you would pay the proper number | | | | companies, and one is significantly cheaper than |
| of employees to do the same job. So the upfront | | | | the others, try to find out why they are so |
| costs may look pretty close. Let's say you had | | | | cheap or is it that the others are over priced? |
| one IT guy making $50K/Yr and the MSP is | | | | Due diligence is required to make the right |
| charging $4K/month. It looks like only a $2K | | | | business decision, and realize that cheaper is not |
| savings per year, but you're not looking at the | | | | always the right business decision because even |
| whole picture. The cost of an employee is actually | | | | though these are cost centers, they are still |
| 1.5 to 2 times their salary when you figure in | | | | essential to your business health. |