Should you outsource IT or manage it in-house? Getting the best ROI for your business

Managed IT · Oct 9, 2024

When you’re running a small or medium-sized business (SMB), your IT infrastructure has the potential to be one of your biggest differentiators. It can help you:

Optimize business operations through better collaboration tools, improving workflows and productivity, while automating mundane manual tasks that take away from your creative or strategic initiatives
Evolve your customer experience by engaging with your consumers across multiple channels, and ensure your product and service offerings can meet them wherever they are
Protect your business with
enhanced cybersecurity
, putting robust defence systems in place to mitigate the risk of cyberattacks, as well as reliable data backup and disaster recovery solutions

IT can be one of your biggest investments. So the question that all business owners need to ask is: How can you maximize your return on IT investment while also

managing IT costs

efficiently?

When it comes to IT for SMBs, you have a range of options:

Hire internal talent to have IT capabilities on your payroll
Outsource to a third-party managed IT service provider (MSP)
Take a hybrid approach, by managing some needs in-house and outsourcing others to an MSP

Each business has its own needs and circumstances to consider when

developing an IT strategy

. As a managed service provider, we have many years of experience helping SMBs with their technology needs across various industries. However, we know each business is unique and has different IT needs. It’s important to understand the key considerations when evaluating your options so you can make an informed decision and get the highest ROI.

Unpacking the approaches: Managed IT services or in-house talent?

Before making your decision to hire new talent or start developing your IT expertise from ground zero, you’ll need to crunch some numbers to determine what’s best for your business today and in the future. Taking time to assess is important, because making the wrong decision can have some expensive consequences. Here’s a more detailed look at what each option offers.

Managed IT services

An MSP lets you integrate a range of functions and capabilities into your business when you otherwise may not have the resources to support them.

For example, a third-party MSP can provide

IT management for day-to-day needs

, including managing servers, networks, user accounts and system updates. They can also assist with cloud migration, cybersecurity and future-focused strategic initiatives such as a full-fledged IT roadmap.

Another major benefit is on-call technical support. When you experience issues, you can consult external experts whose job is to troubleshoot the problem, rather than having to wait for your own employees to start their shift or ask them to work extra hours.

Internal IT talent

When you have an IT department as part of your small business, you have full-time team members who are invested in

procuring and operationalizing your technology stack

, and strategically building its capabilities for future growth.

The leader of this team is

typically a hands-on chief technology officer (CTO)

. Depending on the size and scope of your business, they may be supported by other roles such as developers, engineers, UX or UI designers and security analysts — or they may have to be a ‘technical wiz’ who wears many different hats.

Having dedicated IT talent on your payroll can be reassuring, especially if handling your technology needs is their sole focus. But it can also be expensive to retain those skilled employees — and if your internal talent spends all their time focused on short-term IT management and troubleshooting user issues, it can be difficult trying to set longer-term goals. Not to mention, IT expertise can be limited to what that individual knows as an expert in their area, which may be a challenge if new needs arise for your SMB.

A hybrid approach

A small business can also have elements of both managed IT services and internal talent. You may have a CTO on your team that oversees procurement, deployment and strategy, while a third-party MSP helps manage your day-to-day operations, cybersecurity, network and servers.

However, successful implementation requires effective coordination between teams and a clear understanding of roles and objectives to ensure seamless integration and cohesive IT management.

Evaluating the ROI of managed IT services

From on-demand tech support to enterprise-level technologies at no extra cost, MSPs provide a scalable, flexible solution that helps ensure your IT capabilities grow with your business.

Leverage on-demand expertise

With an MSP, there will always be someone on-hand for tech support, whereas your own staff members may be tied up in other projects or otherwise unavailable. And when an in-house technology expert retires or changes jobs, it presents a major pain point for SMBs. Relying on an MSP ensures consistent expertise and support, along with access to a deeper pool of knowledge in specific and technical areas.

Beyond day-to-day needs, your business is going to continue to grow and evolve in its strategy and its specialties, and an MSP provides experienced professionals who not only support this change, but can actively advise and consult on it.

Access the latest technologies

Paying for a suite of enterprise-level technology solutions

can be prohibitively expensive for SMBs

, but the best MSPs already have an ecosystem of enterprise-level solutions and vendors. This allows you to take full advantage of their products and services at no additional cost. They keep track of upgrades, updates and patches as part of their purview.

Ensure scalability and flexibility

As the size and scope of your business shifts, your IT capabilities need to transform with it.

Partnering with an MSP

can be a cost-effective option because you can scale services up or down based on your current and future needs, remaining resilient and adaptable in a changing market.

Foresee and control your costs

An MSP helps you minimize the unknowns that could impact your business. You have fairly predictable monthly costs that you can factor into your budget, while mitigating the risks of IT outages, downtime and security incidents that make calculating the cost of internal IT difficult. These risks also have the potential to significantly detract from your bottom line.

There are also notable savings opportunities, since recruitment, onboarding, employee benefits and insurance — as well as maintaining your own proprietary IT infrastructure — can be costly. When partnering with an MSP, you will also relieve the burden of dealing with third-party vendors and suppliers, since those relationships and contracts will be managed externally.

As mentioned, MSPs can provide multiple enterprise-level software solutions as part of their service, at no extra cost. This provides you access to technologies internal IT teams would otherwise need to purchase separately, whereas with an MSP, both labour and software are covered, as well as training your teams on how to use these solutions.

Evaluating the ROI of an internal IT team

You may feel like your business needs to have tech talent as a core part of your internal team. This is often true for SMBs that build, or heavily depend on, hardware or software. In such instances, having a CTO on staff, as well as a full roster of supporting roles, makes sense and can sometimes deliver some tangible advantages.

Exclusive focus on the business

Your internal IT talent will be working alongside you every day, and participating in your meetings and planning sessions. That means they’ll have a nuanced understanding of your unique business processes, operations and challenges as well as organizational culture.

Connect and collaborate quickly

You have a direct line of communication with your internal team, and can coordinate quickly for issue resolution without having to mediate through third parties. Of course, this is contingent on your IT department being staffed with the right people at the right time. If your IT specialist is taking time off, or if a role is currently unoccupied — or underperforming — you may run into some real challenges.

Differentiate with deep expertise

If your clients, customers or partners look to your business for innovative and customized technology solutions, having IT excellence in-house is probably a must for positioning yourself as a market leader. However, remember that maintaining this expertise on-staff is expensive, and if their specialized knowledge is too niche, you’ll likely have to augment your tech department with more staff in order to support them.

In summary, here's how internal talent compares with managed IT services

Now that you have a better understanding of why some SMBs will opt for managed IT services while others choose to hire internal IT talent, here’s a more succinct overview of their main differences:

Capacity to flex and scale: An MSP can host, manage and monitor most of your IT infrastructure and scale it up and down to handle variable workloads.

An internal IT team may be less responsive, as any change to infrastructure is an important decision that requires a business case and an allotment of resources.

Reliability and consistency: An MSP can provide a greater guarantee of system uptime, with professionals available to triage any complex IT challenges as they arise.

An internal IT team needs to proactively guard against service disruptions, and quality and continuity could suffer if the right talent is unavailable.

Managing risk and security: Your MSP should be helping you comply with security and privacy requirements, as well as having protections in place for data backup and disaster recovery.

For an internal IT team, these are all factors that they will need to incorporate into their IT stack and strategy to satisfy auditors and regulators

Initial and recurring costs: Costs are typically more predictable with an MSP because you pay for the services you need.

An internal IT team has substantial upfront costs since you have to invest in infrastructure, and you have to resolve IT issues on your own, on top of handling the payroll costs for your staff.

Internal IT talent vs. managed IT services: Breaking down the costs

There are numerous variables to take into account when it comes to comparing the value of internal versus external talent, making it less straightforward to calculate. Some key considerations include:

Internal IT costs, such as salaries, benefits and insurance for employees, recruitment and training expenses, infrastructure and maintenance costs, and overhead.
Managed IT services costs, such as set-up and onboarding, monthly service fees and any additional fees for special projects or emergency needs.
Operational considerations, such as how your IT systems affect productivity, how much you need to spend on updates and security measures, how outages or downtime impact your business, and the opportunity costs of scaling without the right processes in place.

Here are a few decision-making factors that should be considered when evaluating your approach to gaining the IT expertise your business needs:

How much might you have to pay an IT team lead at your SMB? At minimum, a base salary might be estimated at $80,000 CAD. When you consider that the average cost for an MSP is around $2,000 CAD per month, you realize that internal talent is 70% more expensive.*

And that’s just for one person without including benefits or additional compensation. To have around-the-clock coverage, you would likely have to hire three or four IT personnel, whereas an MSP can provide 24/7 support with a deep pool of expertise..

Finally, you’ll want to think about the number of hours you and your team spend managing and addressing IT, because that can lead to indirect costs. If you have a creative, innovative internal hire on your team who’s losing 10 hours a week to troubleshooting IT issues, that represents a significant yet incalculable source of missed opportunities and lost revenue.

Here are some example calculations of the potential ROI of managed IT services versus in-house IT:

Small business with minimal IT needs: Under 20 employees

Current internal IT costs: $60,000/year (one part-time IT employee, basic infrastructure)
Managed services cost: $2,100/month
Annual savings and benefits: $34,800/year in direct savings, improved productivity and access to expertise

Growing business with expanding IT demands: 20-50 employees

Current internal IT costs: $120,000/year (two full-time IT employees, growing infrastructure)
Managed services cost: $6,000/month
Annual savings and benefits: $48,000/year in direct savings, scalability and enhanced security measures

Business with frequent IT issues and downtime: 50-100 employees

Current internal IT costs: $110,000/year (one full-time IT employee, significant downtime costs)
Managed services cost: $7,500/month
Annual savings and benefits: $20,000/year in direct savings, reduced downtime and proactive IT management

There are instances where hiring internal talent is the right choice for SMBs, but it’s vital to account for the unknown variables that can impact your business. For instance, your company may be in a position to scale, but that would require additional IT hires. These hires come at a high cost — not just in terms of salaries, but in terms of recruiting for highly specific roles and then onboarding the new talent.

Comparing the value of internal versus external IT talent involves evaluating many factors, making it complex to calculate – and some of these costs are less obvious than salaries and hiring. Operational factors such as productivity impact, spending on updates and security, the effects of outages and the opportunity costs of scaling should also be considered as part of your decision-making process.

By opting for managed IT services, SMBs can free up resources to focus on growth initiatives like product innovation, marketing and customer engagement, while leaving IT management in the hands of specialists.

Making an informed decision for your SMB

To decide which approach is best for you, start by assessing your business needs and goals, and think about both your short-term and long-term IT requirements. Only you know what will work for your business — but if you want to learn more about

how managed IT services can support SMBs like yours

, we’re happy to help assess and advise.

Connect with a managed IT specialist today

to learn how TELUS Business can help you with your evolving IT needs.