Small Business IT Outsourcing – don’t go too far

Outsourcing Small Business ITCan all of the information technology assets within a small business be outsourced?  Could we see the IT desks within small businesses be as empty as those in the photo? I hope not.

The question of outsourcing all IT functions within a small business was asked of me by an acquaintance after she read two of my Small Business CIO articles: Small Business CIO – Manager of Constraints and Outsourcing, Value & Capabilities – Priorities for Small Business CIO’s.

This person, who I’ll call Heather,  is the owner & CEO of a ~ 100 person firm. She’s thinking long and hard about dropping her entire IT team and starting from scratch.  As part of her thought process, she had been looking at outsourcing a good portion of her IT infrastructure and only keeping the core assets that she needs in-house.

Heather had already determined that she’d offload her email platform.   To her, that was an easy decision…they’ve had nothing but trouble with their in-house exchange server.  She’s also determined that her website hosting will go off-site to a managed services firm.  Both are pretty straightforward decisions and are easily supported by an cost/benefit analysis.

But…she’s now rethinking her entire plan. When she contacted me, she’d come to the conclusion that she should do away with 75% of her IT staff, outsource all IT platforms and save hundreds of thousands per year.

Outsourcing Small Business IT

While I’ve been a big proponent of outsourcing some information technology functions, especially within Small Business IT shops, I’m alarmed at the level of cuts Heather’s proposing.

Heather’s core business revolves around services.  Her company provides marketing services to real estate firms.  In talking through the issues with Heather, she doesn’t see her information technology team and assets as a core piece of her company’s competitive advantage.

During a few phone calls and email exchanges on the subject with Heather, I was able to convince her to take a step back and rethink her approach.

While she is still convinced that she can outsource most of her IT platforms, she’s realized that there are a few that would be nice to have some ownership on.

For one, her financial IT system(accounting, billing, etc).  She had thought she could easily outsource the entire technology platform but has come to realize that her livelihood is based around how her financial platform.

Another outcome of Heather’s rethinking her IT outsourcing initiative – the majority of her IT staff will keep their jobs.    Like many IT teams in the small business world, their focus will be changing from platform maintenance to technology initiatives that help the organization position themselves as a leader in their field.

Cutting Small Business IT to the bone

Heather is the second small business owner that I’ve talked to in the last month who’s been thinking about outsourcing their entire IT team.  In addition, many CIO’s and IT leader’s that I’ve talked with have said the same thing (you can read more on the subject in my post titled Outsourcing, Value & Capabilities – Priorities for Small Business CIO’s.

I’d caution everyone out there who’s looking at outsourcing part (or all) of their information technology function to be careful. Sure you can get away with going to the cloud for some IT platforms and you can easily outsource things like web and email hosting, but outsourcing to much IT can be deadly.  More on that in another post.

PS – While I wasn’t paid for my time by Heather and didn’t ask for payment…I offered my suggestions on her plans and, thankfully, she listened. That said, I may start up a consulting practice solely focus on Small Business IT…seems to be a lot of folks in the SMB space needing assistance.

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  • http://intensedebate.com/people/jgoldman jgoldman

    Eric —

    Great post! Lots of food for thought.

    As a cloud vendor ourselves (http://rypple.com is a SaaS platform), we get involved in a lot of conversations about outsourcing core IT competencies. I think your point about transitioning the role of your IT staff to technology initiatives should not be understated.

    Although you can definitely move your email to Google Apps, shift your invoicing and billing to Freshbooks, and move your team performance and management to Rypple, you won't become entirely free of the need to administer those various services (think onboarding, offboarding, upgrading capabilities, etc.). You'll also want to make sure that you keep a technically competent staff around to assess new tools as they emerge, deciding when and how they make sense to work into your IT mix.

    Check out Choose the Cloud, a great new resource from box.net, GetSatisfaction, SocialText, and others (Rypple will soon be listed too!) covering why you might choose to outsource IT to the cloud.

    Keep up the great work!

    • http://intensedebate.com/people/ericbrown Eric D. Brown

      Great points. I've definitely recommended people move to the cloud for things like email and web hosting and freshbooks is a great app in its own right..

      The cloud is great for many platforms but there are times where there are reasons to keep things in-house.

      Thanks for stopping by! I've now got another Cloud based tool to take a look at (Rypple of course).
      My recent post Small Business IT Outsourcing – don’t go too far

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  • http://intensedebate.com/people/ericbrown Eric D. Brown

    Elliot – great comment.

    You've got one thing correct..Heather doesn't communicate with her IT staff. I spoke with them recently and they rarely get any time with her.

    She does fully understrand her business but not her IT. I'm happy to say that one of the outcomes of my working with her and forcing her to get closer to her IT staff, she's realized that IT is much more important to her business than she expected.

    Things are looking good for Heather's team.

    Thanks again for stopping by. Great stuff.
    My recent post Links for May 30 2010

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  • http://www.seattleitedge.com James Murray

    Eric,

    Enjoyed the article and the comments. It was also easy to relate to Heather’s problem.

    Working with small business owners as a technologist, I often walk into environments where the technologist is over his/her head. Often because the expert is an expert in technology with little business understanding.

    In recomending maintaining the present IT staff I would worry that Heather might run into the same problems she’s having now with her IT. I would recomend finding an IT proffessional who has a formal background in business and in technology to help plan the strategy. Besides a strategist I would recomend a specialist in the particular applications the company uses.

    Maintaining staff that has an expertise in infrastructure support would seem counter productive if all services where either hosted on line or maintained by servers in the cloud.

    I agree with you that there is a definite niche for business/technology consulting for the small business niche. Thanks so much for the article it made me think.

    Thanks

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