There has been some controversy regarding the outsourcing of IT technical support services. It is an argument that has been around for years and will remain so as long as computers exist.
For those that are not familiar with the outsourcing of IT support I can sum it up very quickly in one sentence. Instead of having an IT person on staff you hire an outside company to handle your IT requirements for you. On the surface it would appear that outsourcing makes perfect sense. Unfortunately the cold hard reality of it there are many reasons not to outsource IT services.
On a spreadsheet the initial numbers are very misleading in the respect that the company does not have to hire someone for IT support and as such will not have to pay benefits. Even if an in-house tech costs $150,000 a year in salary it appears to be a savings if that does not have to be paid. As such a lot of companies are shutting down their IT departments and are moving to outsourcing.
But what is not put into the figures is the cost for an outside tech to support the company. Let’s say you have an issue with an employee’s desktop PC, you call the outsource tech support company or managed service provider (“MSP”) and place your complaint. Now you have to wait for someone to call you back. That can be right away or might be several hours later.
With the later, the employee’s system is sitting idle and you are paying the employee for not working. The tech now returns your call and is able to resolve the problem say in five minutes. Most MSP’s bill by the quarter hour. So for 5 minutes of work you get charged 15 minutes. I have seen some that will charge the full hour just for 5 minutes of work.
Let’s put some numbers to that. The average rate for tech support by me is $250 an hour billed by the 15 minutes. The employee in question gets paid $22 an hour. A rule of thumb for benefits is half of the salary rate is what the benefits cost so that is an extra $11 and hour to the employee. That employee’s PC is down for 3 hours before a tech calls. It takes the tech only 5 minutes to rectify the problem. Let’s do the math:
3 hours down time @ $22/hr 66.00
Benefits for 3 hours @ $11/hr 33.00
15 minutes tech service @250/hr for 5 minutes service 62.50
Let’s say that an employee has a real bad paper jam in a copier. Generally that falls under the realm of the IT department, but if the IT functions are outsourced the employee calls the MSP about the problem. They in turn tell the employee to call the copier company unless they do that. And like before they charge for telling you to call or to make the call for you.
Now what if the problem requires that they send someone on site? You usually get charged travel time as well. When you do get charged for travel time is it from around the block or the other side of the county? Experience has shown it is always from across the county, several hours away. And let’s say that the tech they send is not familiar with the particular issue and needs to research the issue. You can and do get charged for that as well. Let’s put some numbers on that based on a real event.
A company of 80 end users was hit with a nasty virus that wiped out the user login in database known as Active Directory in the primary server or domain controller. The problem was escalated with the affect hitting other domain controllers in the network through replication. This had the effect of locking out all of the end users from their computers so no one could work. They had to call in the MSP.
The average salary for the staff we will say is $60 an hour which includes the senior execs. Again 50% of the salary rate goes to benefits. The server went down at 10AM and the outside tech was called. He did not respond until 5PM. The tech spent 9 hours researching the problem and making a diagnosis before repairs could made. An additional 3 hours to do the actual repair. The rate was $250/hr. and they tacked on 2 hours traveling time at $250/hr. Quitting time for the company is 5PM, which means the staff was idle for 7hrs. And the tech that responded was not familiar with the company’s network environment.
Let’s look at it:
80 end users with an average salary of $60/hr 4,800.00
Plus benefits @30/hr for all 80 users 2,400.00
Net salaries with benefits 7,200.00
Times 7 hours idle time for the staff 50,400.00
2 hours travel charge 500.00
9 hours to research the problem 2,250.00
3 hours to implement the repair 750.00
Net service charge 3,500.00
Total money lost due to no on site tech $ 53,900.00
What if it took the tech say a day or more to arrive? How much money was lost by paying people to stand around?
Now this was an extreme but realistic example. If you add that $54K to the rest of the calls to the MSP for the year and you could be shocked.
Now in this example the client had to wait seven hours before someone showed up. What level of priority was given to this client? Obviously it was not high up on the outsource tech firms list. The client can be told that they have top priority but in reality the MSP firm could have the client on the bottom of the pile.
With my previous company I reduced outsourcing of tech calls which meant that while I was there I handled about 19K hours of service calls. Multiply that by the MSP rate of $250 an hour you will find that was a savings of $4.8 million. Who’s laughing now?
Most companies do not have a tech savvy person on staff and the MSP‘s know this all too well. What is to say that they bill for services that were not done or that were not necessary? It happens and they can get away with it.
Here is an example, an MSP had a sales meeting with a client. As part of the meeting they brought along one of the field techs to the meeting which was not requested by the client. The MSP billed the client not only for the tech to be there at their hourly rate, but three hours travel time for the tech as well as lunch for him.
Labor is not the only costs that the MSP firm can embellish or control. A lot of times they state that they can and will supply all the hardware at the best pricing available. A savvy company would know that they can get better pricing for the same items by going elsewhere like PC Mall, Tiger Direct, New Egg and factory direct like HP and Dell.
As an example an MSP wanted to sell Dell computers to a client. The client already had an account with Dell but was open to price comparison to see if they could get a better price. When the MSP provided their quote, the client went to Dell and built out the same computer for 40% less and is able to get the computer faster since it was shipped directly to them. Obviously the MSP did not get the sale.
Many times the MSP will try and is often successful in selling hardware, software and services that are not needed. They upsell whenever they can. After all it is in their best interest not the clients.
As an example there is a publicly traded company not far from me. Their network environment was simple and did not require virtualization. A MSP made it to one of the senior executives and sold them on the idea of going virtual. Not only that they convinced the executive to eliminate the in-house tech staff so they could run the show. In under a year the MSP cost the company over $1 million and the network has more bugs in it than you can imagine which of course equates to more billable service calls.
Another example a MSP wanted to sell a client all new desktop computers. The ones that they had were one to two years old but the MSP tried to convince them that their machines were outdated and were failing. They were looking at trying to sell 120 new systems at once which would have given them a $200,000 sale.
In once aspect it did make sense to replace all of the computers at once to keep them all the same. This way you can create what is known as one image of a computer with all the software on it and simply clone that to many others. This makes deploying and replacing computers easy. At the same time it would be prudent to have a few others of the same types on hand should you get a new employee or a system should fail. The image would be very useful here. But it is not a cost effective method by a long shot.
A lot of times the MSP will insist and put it into their service agreement that they get an exclusive to service your systems. In an event like what I went into earlier where it took the tech 7 hours to respond if the company had access to another MSP then they might not have been down that length of time. Unfortunately that company was in an exclusive agreement with the original MSP.
Some MSP’s feel that they own the clients network and the systems attached. The client has no idea what is going on and as such the MSP runs the show. They can and sometimes do withhold from the client a lot of vital information that the client has a right to.
As an example with the administration passwords. These are the master top level passwords to the systems that the client has. Being a tech myself I can say that it can be a bad thing to give these to the client. A lot of times it has been seen that an executive who has these passwords logs into a system, like a server just to snoop around. They feel that because they are an executive that give them the knowledge to access the server and generally will click on the wrong thing and cause all kinds of havoc. In some cases the executive or someone else with no tech skills reads in a magazine how to do things and invariably tries what they read and messes things up as well. I have seen this on several occasions.
But the client owns the systems and has a right to the passwords. The MSP can come up with some excuse in not giving them to the client. If the client has them, then they can, provided they know what to do can lock out the MSP from accessing the network. This is a good practice and should be set in place. This way if the tech firm needs access then the client can grant it on an as needed basis. Plus the client will have the freedom to have someone else look at the systems if they desire.
Granted most of the time the client has no clue as to what is going on. This is where the MSP needs to but does not educate the client to the nitty-gritty details. But they often do not do so just to keep the client in the dark.
With your own IT staff they know the systems inside and out in know how everything works better than an outside company can. In many cases it is the in-house tech staff that built the network from the ground up. This gives them the advantage over an outside company for they can respond to emergencies a lot faster. Plus the in-house staff would have extensive documentation on the network which an outsourced company would not have nor provide. True an outside company can learn your network but there is a learning curve involved which costs money as pointed out earlier.
Another bit of familiarity comes not from the hardware but from the end-users as well. With an in-house tech they would know how to interact with the rest of the staff. Plus a level of trust is built up between everyone something that an MSP could not hope to achieve. Sometimes an outside tech may have rubbed someone the wrong way and the company can actually prevent the tech from servicing them. And in with an MSP you may not get the same tech in twice.
A major factor to consider is security. Who are these people? They have no vested interested in the clients company, just their own. Who is to say that an outside tech does not walk off with crucial data on a flash drive or external hard drive? The client will never know. What is the outside tech doing with that data, sharing it with another client? What if the tech leaves the hard drive unattended in a car and that gets broken into and the external drive is stolen. Corporate espionage is a very real threat. An in-house tech would treat your data with more care and security than an outsider will. Granted even internal staff can steal data, but the chances are lower than an outsider.
A very good example is there is a company that had an outsourced tech there. An argument ensued between him and one of the staff. The tech blabbed his mouth off about the clients operation to one of his other clients who in turn shared that information with one of their clients. Where is the level of trust and security there? How often do things like this happen?
With an MSP you the client have no control over what goes on in your network. Keeping your network environment in operation at all times should not be left to outsiders for they do what they want, when they want and charge you for everything possible. Even with a network of 20 users would pay to have someone on staff to maintain your network for you, even if it means they have to do other jobs to justify them being there.
Outsource tech companies can and do have some usefulness. They see changes in technology faster than you can and are on top of these changes. They also can pull from a larger resource of knowledge to get a job done because you are not their only client. Someone else may have had a similar problem and that experience can be beneficial. So in some aspects it pays to have an MSP or two as standby help. But not as your primary tech support.
Ultimately the decision is yours. But the prudent thing is not to outsource your tech support. Of course the MSP’s would highly disagree with what is presented here, after all like I said earlier they are out for their best interest not yours.