Are you a small to medium-sized business wondering how to get the IT services you need at the best cost? You’re not alone! In-house IT staff can be expensive, and dealing with 3rd party managed IT services providers can be confusing. Don’t worry, we’ve got you covered! Check out our guide to learn about the benefits and risks of IT outsourcing, what functions to outsource, and how different IT outsourcing pricing models work.

Managed IT Services – Benefits, Risks, And What You Should Outsource.

Peter Drucker has the best answer about outsourcing, “Do what you do best and outsource the rest”. Definitely, this applies to information technology functions in your company. For both Small / Medium Businesses (SMB) and Small / Medium-Sized Enterprises (SME) there are many benefits and few risks to outsourcing a lot of your IT functions. At the same time, you do need to evaluate which IT function to outsource. Also, you will need to build a business justification based on the benefits and risks that IT outsourcing can bring to your company. For a detailed breakout benefits and risks, see my article Benefits and Risks of IT Services Outsourcing.

Outsourcing IT Services – Best Advice On The Benefits And Risks

For advice on which IT service to outsource, you need to do a self-assessment of each of your IT functions. As an example, one technique to use is to give yourself a grade on each of your company’s IT functions. For instance, you may give yourself a “green” on phone systems, and a “red” on another IT function such as backup solutions. For a list of IT services for a typical small / medium business, see the next section below.

Recommend you always use a breakout list of IT services to assess how IT is supporting your business. This is because you can understand what parts of IT are doing well and which are not. Also, you can use this same assessment checklist in evaluating managed IT services providers. Lastly, this assessment checklist will help you to measure how a 3rd party IT services provider is doing when they start supporting your business. Obviously, you do not want worse IT support than you have right now.

Managed IT Services – 8 SMB / SME IT Functions To Keep In-House Or Outsource.

As stated above, it is important to do an assessment of your current IT services. As every business is different, some IT functions may be more critical to one business than another. Also for each business, there may be some IT functions that are either very large or even not needed for some businesses. 

Below is a descriptive list of IT functions found in most SMB / SME organizations. Especially in very technically advanced businesses, such as a software services company, some IT functions should not be outsourced. In some cases, this is because your current in-house IT staff is already providing a significant competitive advantage.

1. Network, Server, and Application Management.

Managed IT services can provide network, server, and application management services. Specifically, this includes installation and maintenance of hardware and software, performance monitoring, and system updates. Also, they can also provide custom solutions to meet your specific needs.

2. Disaster Recovery and Backup Solutions. 

Outsourced IT Support can provide robust disaster recovery and backup solutions. For instance, this includes data backup and recovery, off-site storage solutions, and business continuity planning.

3. IT Consulting and Software Development. 

3rd party technology companies can provide IT consulting services, such as system design, implementation, and optimization. Also, they can also provide software development services, such as custom application development, web development, and mobile app development.

4. Cloud Computing and Virtualization Solutions. 

Managed IT services can help you make the most of cloud computing and virtualization solutions. Specifically, this includes setting up and managing virtual machines and cloud services, as well as cloud migration and optimization.

5. Data Storage Solutions.

Outsourced IT Support can provide data storage solutions, such as on-site storage, off-site storage, and cloud storage. Additionally, they can help you select the best storage solutions for your business and ensure that your data is secure.

6. Security & Compliance.

Managed IT services can provide solutions to ensure that your systems and data are secure. Specifically, this includes security auditing, vulnerability scanning, firewall configuration, and compliance with industry regulations.

7. Help Desk Support.

Managed IT services can provide help desk support, including remote technical support, troubleshooting, and system maintenance. Also, they can help you identify and resolve any issues quickly and efficiently.

8. Telecommunication and Phone Systems.

Outsourced IT Support can provide solutions for setting up and managing telecommunication and phone systems, such as VoIP systems, video conferencing, and call forwarding. Additionally, they can also help you optimize your systems for maximum efficiency.

For more information on types of managed IT services, see Electric’s Guide to Outsource IT Support.

Outsourcing IT Services – 9 Common Pricing Models for Small / Medium Businesses and Enterprises.

So you have decided which IT functions are candidates that you could outsource. The next thing you should be aware of is pricing models. Managed IT service providers especially can use a variety of ways that they price their services. Also, some companies may offer a variety of pricing options for their services, some prefer using just one pricing model. 

There may be one pricing model that you prefer, and all these pricing models can have advantages and disadvantages. Specifically, the best pricing model will be dependent on your business situation, the IT functions outsourced, and the service provider you select. 

One thing I have learned about IT and outsourcing, you need to understand the pricing models both upfront and on-going pricing. In most cases the 3rd party vendor is using a specific pricing model to manage costs and risks as well as provide you the best service at the best price. However, beware that if you do not completely understand their pricing model, there will more than likely be hidden costs. Below is a detailed description of different pricing models that IT vendors may use.

“If you don’t understand the price of a product, it is definitely not for you.”

Mofoluke Ayoola

1. Cost-Plus Pricing.

The cost-plus pricing model is one of the most common models used for outsourcing IT services. Specifically in this pricing model, the vendor’s fee is calculated based on the actual cost of the service, plus an additional fee for the vendor’s overhead and profit margin. Hence, this model allows the IT vendor to accurately predict costs and plan accordingly, making it a popular choice for IT service outsourcing. 

2. Fixed Price.

The fixed price model is a popular option for businesses who are outsourcing IT services. To detail, in this model, the vendor agrees to provide the services for a set fee with no additional costs. Thus, this makes it an attractive option for clients who want to control their budget and predict the cost of the service in advance. However, this option many times results in poor service delivery and an inflexible client-vendor relationship.

3. Dedicated Teams Pricing.

The dedicated teams model is often used for large, long-term IT projects. Specifically in this model, the vendor creates a dedicated team of experts to handle the project from start to finish. Additionally, this model allows the vendor to provide a tailored service and ensure a more consistent and timely delivery of the project.

4. Managed Services Pricing.

Managed services are a type of outsourcing model where the vendor provides ongoing IT services, such as system monitoring and maintenance, for a set fee. In particular, this model allows the client to outsource their IT needs to an experienced vendor who provides services based on an agreed upon service level agreement (SLA).

5. Performance Based Pricing.

Performance based pricing is a model where the vendor is compensated based on the performance of the services they provide. Specifically, this model allows the vendor to be incentivized to provide the best possible service and ensure that the client is satisfied with the results.

6. Subscription-Based Model.

The subscription-based model is a popular choice for IT service providers. In this model, the client pays a set fee for a set period of time, usually on a monthly or yearly basis. In particular, This model allows the client to receive ongoing IT services at a predictable cost. Additionally, the vendor usually have different levels of subscriptions allowing for more flexibility as your business grows or IT needs change.

7. On-Demand Services Pricing.

On-demand services are a type of IT service outsourcing model where the vendor provides services on an as-needed basis. To explain, this model is ideal for clients who need IT services but don’t want to commit to a long-term contract.

Risk Mitigation For Supply Chains: How To Best Identify, Make Assessment, Overcome

8. Shared Risk/Reward Pricing. 

The shared risk/reward model is a type of IT outsourcing model where the vendor and the client share the risk and reward of the service. Specifically in this model, the vendor is incentivized to provide the best possible service, as their profit is dependent on the success of the project.

9. Variable Pricing.

Variable pricing is a model where the vendor charges a variable fee based on the complexity and duration of the project. To explain, this model allows the vendor to adjust the fee to account for any unexpected costs or changes. Especially for complex IT operations, this makes for a popular choice for IT service outsourcing.

For more information on pricing models, see CIO’s What is outsourcing? Definitions, benefits, challenges, processes, advice and Outsourcing IT Services – Best Advice On The Benefits And Risks.

Offshore Vs Nearshore Outsourcing: 11 Practical Decision Factors That Will Help You Make The Best Decision

For more on outsourcing from SC Tech Insights, see Offshore Vs Nearshore Outsourcing: 11 Practical Decision Factors That Will Help You Make The Best Decision and