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When Should I Bring IT In-House?
A significant question a leader may ask is “When should I bring IT in-house?” It is part of a set of typical growth cycles, which often looks like this:
- Small business, with less than 20-40 employees, use a tech savvy employee assigned part time to do IT, perhaps one that is a CAD engineer, or the business owner’s son in college, or the accountant tries to do it.
- As a business grows, adding employees and new system capabilities, the demand grows in both complexity and volume. The organization may create a relationship with a local IT service for break fix support and assist the in-house resources.
- Over time the leadership notice things are not managed proactively, and they may look for a Managed Service Provider (MSP). This improves the reliability, capability, and predictability of costs in IT, and supports continued growth.
- As the business continues to grow, approaching 400-500 employees, the organization considers the prospect of insourcing many functions that have been outsourced, such as IT, marketing, HR, and perhaps some accounting components.
There are various reasons you may consider this, so having the right “why” will greatly assist you in not only finding the right answer, it will drive the timing and approach used. The reasoning for this commonly follows one of these lines.
- Your organization has grown beyond your provider’s capabilities. Growth brings added complexity and volume, which your provider may struggle to keep the same pace or add the capabilities needed. At this point you should consider another provider, but you may also evaluate the option to bring IT in-house.
- You view IT as a competitive advantage and need to maximize its integration the rest of the business. Some organizations have a high IT intensity, measured by the spend portion of IT compared to the rest of the business. For example, a typical manufacturing company spends 1.7% of revenue on Information Technology, but a bank or financial services company spends 6.3%. A financial services organization relies on information technology to drive service efficiencies and capabilities and generate market differentiators. If you spend more than the industry standards on IT, you have one of two things happening: you spend too much, or you spend more and get more. If you are in an industry that spends more, then you should view IT as a potential competitive advantage, otherwise, spend less and invest funds in new production lines, sales personnel, etc. And do not assume that bringing IT in-house will save money, that is usually not the case. So, if you will spend at or above the industry norms, and want IT to be a competitive advantage, insourcing may make sense.
- You view IT as important and have an overall impetus to control all important functions by owning them outright. This is more of a cultural issue – some companies just like their stuff and people be their stuff and people, usually related to a desire to control things more closely. There is nothing particularly wrong with this, but it is not required in this age of connectivity, specialization of skills, and ability to work collaboratively across organizational lines. Additionally, a contractual relationship with an MSP can help create better accountability for results.
- You have special needs in IT not commonly available from external providers and must largely develop them yourself. Some organizations have special needs for specific software or technology integration that are difficult to find in the market place. If you have custom built machinery or data collection in an assembly line, and the way it integrates into your network is nonstandard, you likely must hire and develop your own staff to support this.
- Some regulatory requirements mandate a high necessity of control over your technology. Some industries have strict controls over who can access the systems in place, particularly government. Other industries heavily regulated may make it advantageous for in-house control, such as financial and many healthcare verticals. It may still be possible to outsource some or all functions, but insourcing may be considered.
If you have these reasons present, evaluate them and contact us and discuss your options. Keystone has assisted companies in this endeavor and can provide a Virtual CIO to help you design the process and build the team and functionality integrated into your organization. Contact us discuss your options.
In our next installment on this subject, we will consider timing and process for this move.