Insourcing vs. Outsourcing: Which Option Should You Choose For Your SME?

Kyle Lim
13-Jul-2021 17:47:49

Are you mulling over outsourcing your IT services? If you are, you’re not alone.

 

Not Sure Whether IT Outsourcing Is For Your Business In The First Place? Let's Find Out!

 

There's much to be said for outsourcing IT services, especially when you have a specialised platform or support needs.

But there’s also a lot to be said for insourcing these services as well. Both approaches have pros and cons, and both provide significant benefits.

Deciding whether to outsource your business’s IT needs isn’t easy, as many factors can impact your decision.

These factors include financial, resourcing, expertise, and a variety of other considerations.

 

Here's Our Quick Rundown Of Managed IT Services That Your SME Might Need From A Third-party MSP.

 

One thing is certain. No matter what option you choose, you’ll need to base our decision on your available resources, priorities, and business philosophy.

Put another way, you’ll need to base your decision on your SME’s unique needs and situation. So, there’s no one size fits all solution.

Many managers, however, choose to outsource their IT needs for its efficiency and reliability.

CompTIA recently found that, for 56% of companies with 100+ employees and 47% of companies with fewer than 100 employees, improving the efficiency and reliability of IT operations was paramount in their choice of engaging the IT services of a third-party managed services provider (MSP).

Whatever approach you decide on, however, you want to be sure you can reap the rewards from your decision right from the beginning.

 

Defining Outsourcing And Insourcing

Defining Outsourcing And Insourcing-1

Deciding which approach to take is simpler than you may think. You just need to figure out which approach brings your company the most benefits.

In other words, does engaging an MSP to handle routine IT tasks provide the most value for your business? Simple, right? Well, maybe not.

 

Outsourcing Your IT Needs Can Help Prepare Your SME For The New Normal Too. Here's 3 Key Roles MSPs Play In Doing So.

 

Outsourcing involves transferring some work to an external party, which may be located overseas or onshore.

The MSP provides your business its services remotely and on a contract basis. That means they work for you for a limited amount of time.

Insourcing also involves short-term contract work, and just like outsourcing it also entails a partnership of sorts.

The difference is that insourcing assigns tasks, duties, and responsibilities to a company or subsidiary that’s affiliated with your organisation.

Both approaches provide well-grounded technical expertise, and both provide cost savings and reduced workloads.

Plus, both provide the resources needed to help your company focus on essential business functions. In the right situation, both approaches can be difference-makers in an organisation.

 

Pros And Cons Of IT Insourcing And Outsourcing

IT outsourcing generally works well in situations where a small- and medium-sized enterprise (SME) like yours needs standardised and fast-delivered services.

On the other hand, IT insourcing generally works well in situations where major companies are working on special projects with a large investment.

Below is a deeper dive into the pros and cons of the respective strategies:

 

1. Costs And Budgeting

Costs And Budgeting

This consideration is often the driver of working with a managed service provider (MSP). Insourcing involves high capital expenditures (CAPEX), such as costs for hardware, licensing, maintenance, staffing, and so on. These costs are often borne by the customer.

Outsourcing, on the other hand, features lower CAPEX than in-house solutions. This approach removes the need for hardware, licensing, maintenance, staffing, and so on. Ongoing fees paid to an MSP become operational expenses (OPEX).

In this case, whether to insource or outsource your SME’s IT needs depends on whether your budget can absorb high CAPEX, or is better able to handle ongoing OPEX costs.

 

2. Availability Of IT Expertise On Demand

Availability Of IT Expertise On Demand-1

Insourcing implies that your business (or subsidiary) is maintaining an in-house IT function.

For some SMEs, this isn’t cost-efficient, as the specialised knowledge of an IT expert may not be required by your SME on a regular basis.

With outsourcing, MSPs employ dedicated IT teams, generally with a higher level of expertise than SMEs can usually muster with their in-house resources.

Also, MSPs often have the resources and availability to meet service requirements at any time, no matter when the problem occurs.

 

3. Ability To Scale Capacity As Needed

Ability To Scale Capacity As Needed

Insourcing your IT needs means that you’ll need to maintain sufficient IT capability for peak period usage. This results in wasted capacity during other parts of the year.

That doesn’t happen with outsourcing. MSPs can provide additional capacity as and when needed. You can then remove it when it is no longer required, cutting expenses to the bone.

Having this flexibility is also critical when you’re introducing new services or changing existing ones. MSPs also can provide virtual machines as testing environments quickly, and remove them just as quickly.

 

4. Enabling Focus On Core Competencies

Enabling Focus On Core Competencies

Because you’ll need to establish IT capabilities in your SME to make insourcing work, that takes resources and focus away from your business's core competencies.

That can make a tangible difference to your customers, especially when it comes to customer service.

Outsourcing IT services support to an MSP allows you to dedicate your resources and focus towards your core business, including boosting your customer service standards.

Your business is what you know best and where you want to put your most effort. Dedicated focus is among the biggest payoffs with this approach.

 

5. Ownership And Control Over Data

Ownership And Control Over Data

Insourcing your IT needs keeps IT hardware and software in-house and under control. That gives you full ownership and control over your SME’s sensitive data.

Outsourcing, meanwhile, gives your MSP control and responsibility for IT service management.

This lack of control is a concern for many managers, especially if you’re never worked with an MSP before.

However, you can eliminate these fears by talking to or meeting with some of the MSP's existing clients or past clients and reviewing activities at that company.

 

6. Customisability Of IT Support

Customisability Of IT Support

As an owner or stakeholder of your SME, you know your business processes best. Insourcing your IT needs gives you the opportunity to customise your IT support, to best complement these processes.

If you outsource your IT needs instead, it’s often hard to find MSPs that truly understand your business processes, especially if your business is highly specialised in niche services.

However, doing your due diligence can help you find an MSP that understands your business. Once again, you can talk with the MSP's clients to see what kind of service it provides and how well they understand your business.

 

Choose Between IT Insourcing Or Outsourcing Based On Your Business Needs

Choose Between IT Insourcing Or Outsourcing Based On Your Business Needs

When deciding whether to insource or outsource the IT needs of your SME, having a clear understanding of what each approach provides—and what your unique needs are—is a solid first step to take.

Should you decide to outsource, you can talk to your MSP to see how they deal with the outstanding issues that concern you. Also, talk to some of their customers, preferably in your industry, to get a feel for the MSP's service approach and business philosophy before deciding.

Outsourcing also provides you with a chance to try before you buy. This choice gives you an opportunity to see if the MSP can offer the value you're seeking and if the MSP is a good fit for you. That chance may not be possible if you're opting for an in-house approach to IT services.

Alternatively, you don’t always have to choose between one or the other. Instead, you could choose which IT support services you’d want a third-party MSP to manage, and which ones are best kept in-house to best support your business processes.

At AFON, we possess the IT expertise and technology to manage your IT functions at an affordable rate. We also invest heavily in keeping up-to-date on industry best practices, which makes us a good choice as a partner to co-source your IT needs to.

If you happen to be needing an MSP you can trust, do schedule a free consultation with us today to find out what we can do for you.

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