Small Businesses Save Money Outsourcing IT Management

Small and mid-tier companies are missing an opportunity to create large cost savings in this tough economic period.

Small and mid-tier companies are missing an opportunity to create large cost savings in this tough economic period. They should be taking advantage of outsourcing their IT management to eliminate current costs, avoid additional expenses, and to achieve business gains without significant additional costs. Without a comprehensive approach to IT management, costs generally rise over time, while system performance and employee productivity decline. But good news is on the way. Many companies now offer outsourced state-of-the-art IT management with significant cost savings for the SMBs.

Outsourcing and its inherent benefits are not new. For many years large companies have been creating significant benefits by outsourcing non-strategic IT functions. However, as the outsourcing industry has matured, companies have been achieving significant savings through outsourcing only IT management and services.

This trend has been slow to reach the small/mid-tier business (SMB) segment (20 to 500 employees) even though the same cost savings are available to them. Often cited reasons by management of SMBs include loss of control, security over their own processes and a perception that no one understands their business like they do. More significantly, most SMBs believe they can manage their IT cheaper in-house than through outsourcing.

Most SMBs do not measure the lost productivity due to system down time, and periodic costs associated with preventable catastrophes. System downtime can result in lost revenue, lost customers, and business disruptions. According to a Yankee Group survey of 229 corporate and government network administrators managing more than 50 network devices, 31% of outages over the last year were caused by human error. Having an employee on call to bring up a crashed system will add overtime costs and will divert resources from planned projects. Many companies require 24/7 up time to satisfy customer requirements. The need to maintain backup equipment, a site and personnel that can ensure service full availability to employees (and customers) when disasters strike can take a large bite out of a SMBs IT budgets. An outsource company usually provides these insurance" services as part of its offering at a far lower price by leveraging the cost across its full complement of customers.

In addition there are business gains that the SMB can achieve through the outsourcing of IT management. With outsourcing, the SMBs IT resources that were consumed on internal activities can be directed towards revenue generating and customer supporting functions, or focused on strategic IT services vital to the organization. For example, they can increase customer satisfaction by implementing and supporting a Customer Relationship Management (CRM) System.

One company in Houston that has a high success rate in applying the outsource model to deliver these benefits to satisfied customers is Epic Managed Services. Shafique Pappa, the CEO of EPIC, is no newcomer to the field. He has been working in the SMB market implementing and managing systems for the past 12 years. As a solution provider he was often called to deliver emergency repair or help desk service to his clients. Mr. Pappa founded EPIC after realizing that the savings that he was bringing to individual companies one at a time, could be provided to many companies though and outsource model.

New Model
Many companies are starting to recognize the inherent flaw in the break-fix approach and have struck up a long term outsourcing relationships with Service providers based on a comprehensive approach to IT management along with standardized system documentation to smooth out maintenance issues. As companies have moved to more standardized platforms, the benefits of outsourcing become more apparent," according to Mr. Pappa. Service providers are able to implement the necessary systems efficiently, and without upfront costs, spreading the costs across multiple clients. In many cases, companies adopting this approach end-up with more-efficient processes, enhanced security and better service-level agreements than if they managed the same processes in-house because of scarce resources and a lack of formal processes and policies.

For example US Pipeline, a Houston based pipeline builder achieved high value from outsourcing. In October 2001 they completely outsourced their IT management function to EPIC Managed Services, Inc. of Houston. According to their CIO, Andrew Crooks, they have achieved a $55,000 savings in the last 12 months on support of our IT infrastructure (Servers and desktops)." EPIC Managed Services deployed full monitoring, remote control, web based help desk along with configuration and change management tools to automate and control the IT infrastructure. By automating much of the redundant tasks US Pipeline was able to focus their IT personnel on customer service and system planning necessary to provide a higher level of service while saving money for their customers. I was very impressed, stated Mr. Crooks. We got a whole team of professionals along with a state-of-the art IT management infrastructure for less than the price of just one full-time staff member. In this economy, thats an ROI that I couldnt pass up."

Making the Outsourcing Decision
In a recent article by the Gartner Group, their analyst noted, Gartner believes that for many SMBs, outsourcing can provide opportunities to free up funds and staff to better focus internal staff on reaching increased competitive advantage vs. simply 'keeping the lights on. As an added benefit, it can offer access to more effective processes and better service levels."

Companies have a clear choice, build and retain a team of qualified individuals internally, or look for high-quality process based service providers. The cost savings can be around 30% or more. As long as the economy remains sluggish, CIOs and CEOs will be required to do more with less. Outsourcing IT management can be a great first step to freeing up valuable resources. It appears that the SMB owners and executives in Houston get the message. They are taking up these service offerings at an increasing rate. We are seeing the market for our services grow as fast as we can deliver," said Mr. Pappa. And, according to Gartner, the trend is expected to accelerate over the next few years.