Hire, Contract, or Outsource

Every business today faces the same dilemma for Information Technology (IT): hire an employee, short-term contractor, or managed service. There are specific scenarios for each choice.

While the common misconception is that hiring an IT employee is the safest and easiest to control, the reality is hiring an IT employee is generally the highest cost and risk. Consider that employers pay 22% on top of employee salary for taxes alone. Once you add benefits and management oversight, the up-charge is often more than salary + 30%. Due to the competitive nature of the industry, IT personnel generally change jobs every 2 years keeping employers in constant flux. Finally, even though IT employees have extraordinary access to business information, most employers haven’t begun to consider how to measure IT performance, motivate, or understand the IT role.

An IT department’s main charge is keeping systems running and responding to users. Implementation of new technology is often done by a contractor. Projects may be easily defined and corresponding spend/return readily measured. Project work is not for the faint of heart and using contractors has moderate cost and risk due to the inherent up and down nature of demand. Most one man shops have been decimated and the best approach is to contract with a company that regularly implements similar projects or a staffing firm to locate an individual.

Managed services are the best value for cost and low risk. As usual, you should avoid limited liability firms that are less than 10 years old identified by only offering some limited monitoring and no project implementation. Ideally, the managed service firm you pick should include business consulting, guaranteed response, and flat cost for support and projects. You should save a minimum of 30% – 40% versus an IT staff and 15% – 20% on projects. Most businesses keep one IT person to focus on higher end issues to move the company forward and as a liaison for users.

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