How Does IT Outsourcing Reduce Costs?

How Does IT Outsourcing Reduce Costs?

Businesses outsource IT services for a number of reasons. Some seek strategic tech expertise that they don’t have access to in-house. Others have overwhelmed IT teams that need supplemental support. But often, businesses outsource their IT simply because they want to increase their bottom line and save money in the long run.

What It Means to Outsource Your IT

Rather than fulfilling IT functions in-house, you farm out part or all of your business’s IT obligations to a more equipped third-party company (i.e., a managed IT services provider or MSP) or individual (i.e., an IT consultant). These third parties provide a variety of service offerings, from ad hoc support that’s charged by the hour to monthly recurring service contracts that include support, maintenance, and consulting.

With an external IT partner, you always have someone to rely on — not just to help you solve problems when these arise, but to provide you with technology and support that could help your business grow.

Why Outsourcing Is Cheaper Than an In-House IT Department

When you outsource to an MSP, you have at your disposal a team of trained and certified IT professionals. You also have access to advanced tools and software that you can use to support your day-to-day business activities. This means you won’t have to buy these, which reduces your operating costs as well.

Here are some other reasons why outsourcing is cheaper than having a full-time in-house IT department.

1. You don’t need to spend time and money looking for employees with specific skills, onboarding them, and providing them with compensation and other benefits. An MSP provides you with a pre-formed team of specialists that’s ready to start work at any time.

2. You don’t have to regularly enroll your current IT staff in training courses to upgrade their skills. For instance, software development is a constantly developing landscape for coding languages and frameworks. You’ll have to continuously upgrade your team’s knowledge and skills to keep up with rapidly changing IT trends.

MSPs like Integrated Computer Services have a large pool of specialists who are constantly trained and certified in the latest technology. They can therefore provide you with an experienced team whose capabilities are in line with your project requirements and business goals. And if your project requirements change, an MSP can quickly change team players to ensure a better project outcome.

3. You don’t have to purchase new software or hardware and perform upgrades yourself. An MSP will assess your current IT resources, make recommendations, and provide you with what you need at a price point that you’re comfortable with. What’s great is that many MSPs also partner with reputable vendors, and can sometimes get you better deals on the latest software and hardware.

4. You pay only for the support you need or the specific number of hours spent by the MSP’s team on a project. This lets you maintain an agile IT team without having to pay full salaries and benefits, even when IT workload is low.

Given these reasons, businesses of all sizes choose outsourcing as a way to reduce expenses and utilize enhanced expertise.

How to Budget for IT Outsourcing Costs

With a reputable MSP, budgeting for IT costs should be reasonably straightforward. However, there are some shady pricing structures that you need to watch out for.

  • Hourly block fees – Many MSPs charge for a predetermined set of services that they’ll provide for a predetermined number of hours per month. But while it may seem like you’re paying less by purchasing only 40 hours per month of service, some MSPs will actually charge exorbitant fees once you go over that limit.
  • Flat fees – Unlimited monthly support for a fixed price sounds terrific — that is, until you read the fine print. Your initial payment may not cover important service offerings such as on-site support, quick turnaround times, and hardware setup, among others. Some MSPs will nickel-and-dime you for all they can.
  • Any pricing structure that isn’t per user or per month – Generally, MSPs charge per user (or per device) or on a monthly basis. The cost typically covers comprehensive support, which includes proactive monitoring, round-the-clock support, emergency repairs, and more. These pricing structures allow you better control over the type of support you need and how much you’re paying, and are the safest ways to avoid surprise charges and overpaying.

It’s important that you carefully and thoroughly review a service contract to make sure the provisions meet your needs. On top of this, a service level agreement (SLA) will ensure that you and your MSP see eye to eye in terms of service and standards.

An SLA goes into detail about the type of service you can expect from your MSP, and it allows you to hold them accountable to these. If your MSP fails to meet their obligations, your business’s reputation and bottom line could suffer serious repercussions.

That’s why it’s crucial that your SLA includes consequences and an alternative plan of action if performance standards are not met. For instance, you could set monetary penalties to help offset any losses incurred, which will help your business recover quickly should any major service issues arise.

How Outsourcing Can Improve Your Bottom Line

Outsourcing helps you cut costs dramatically, as you won’t have to pay full-time salaries and benefits or invest in expensive software and equipment — you can pay for exactly what you need. This leaves you with more money and resources to boost core business functions, like marketing and developing new products and business ideas.

What’s more, a reliable IT partner is capable of completing tasks and projects faster and with greater accuracy. This increase in productivity can mean better sales, better revenue, and ultimately, a better bottom line for your business.

If you’re interested in learning more about IT outsourcing or want to see how you can balance growth and operating costs, contact us today.

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