Whether or not to outsource your IT department is a challenging proposition. For years, CIOs, CFOs, and CISOs have used outsourcing as a standard cost-cutting method, especially in regards to IT and security operations (SecOps) functions. Over time, however, leveraging third-party managed service providers (MSP) and managed security service providers (MSSP) has become increasingly more expensive and potentially less efficient than staffing an entire in-house IT department in certain use cases.

When does outsourcing make the most sense? Would a hybrid model be ideal? What are the potential benefits?

Let's dive into these questions.

What Makes Up an Outsourced IT Service Offering?

Outsourced IT services simply leverage a third party to replace existing in-house resources for IT-related issues and services.

“Research shows that the successful deployment of Managed Services will help reduce IT cost by 25%-45%and increase operational efficiency by 45%-65%.”

More to the point; migrating operations, network monitoring, and security operations to a third-party team of professionals has numerous benefits. Things like moving internal human capital, benefits, and training costs to a fixed monthly expense can help rein in spending. In fact, the cost savings in managing human capital resources, recruiting expenses, and overhead costs of employee lawsuits also become reduced when moving to cost-effective solutions from managed providers.

Check out our 2024 Guide To Managed IT Services for Small Business

What is the Difference Between In-House Versus Outsourced IT Versus C-Managed IT?

CIOs and CISOs considering an outsourcing model have to decide which model aligns best with their business requirements. The options are—

• In-House IT: The entire IT department comprises 100% of all badged employees.
• Outsourced IT: This engagement focuses on an all-in or a portion of all IT and SecOps operations becoming contracted to a third-party service provider.
• Co-Managed IT: This model combines outsourced and in-house IT staffing. This model is relatively standard when CIOs and CISOs want to keep in-house architecture, design, and IT project management; while simultaneously leveraging third-party providers for 24/7 operations, help desk services, and add/move/change functions.

What are the Pros of In-House IT Department?

Having the entire IT department as badged employees has many advantages, including—

• Camaraderie among the various team members helps CIOs and CISOs develop a cohesive culture across the entire department.
• Badged IT employees feel they are delivering an essential service to the company.
• IT Employees who feel vested with their company may work longer hours and on weekends.
• Often, IT operations, security operations, and application development resources are valuable assets to an organization. As their organization develops efficient ways to leverage the cloud, reduce costs on patching and updating their systems, and have lower cybersecurity incidents, these become part of the overall organization's competitive edge.

What are the Cons of In-House IT Department?

An internal IT department comprised of all badged employees comes with its own set of challenges, like—

• High employee turnover and job burnout is an enormous problem for many organizations.
• The cost of full-time salaries to keep experienced IT, SecOps, and application development engineers continues to rise.
• The cost of training and vendor-specific certifications continues to become more expensive.
• The cost for organizations to manage various maintenance agreements requires time and additional staff resources to manage these contracts.
• Organizations facing internal employee conflicts affect the entire organization. Personal disputes between employees, between employees and their managers, and between the managers and their respective leaders will cause delays. This could ultimately affect things like IT projects, change control, meeting compliance mandates, and reporting requirements.

What are the Pros of Outsourcing All of Your IT?

Outsourcing your IT department delivers considerable labor costs and benefits, including phasing out internal full-time employee positions. Indeed, shifting costs to an outsourced provider helps organizations develop a near-fixed expense model for budgeting. Consequently, outsourcing IT functions, roles, responsibilities, and infrastructure shifts these costs from a capital expenditure (CapEx) to an operational expense (OPEX). There are also several value benefits to outsourcing IT to a third-party provider, including—

• The MSP and MSSP often have access to more experienced IT and SecOps personnel. Many of these providers have access to a global talent pool.
• MSPs and MSSPs support several clients and bring more experience deploying next-generation solutions for IT operations, SecOps, and proven business practices.
• The MSP and MSSP's contract focuses on delivering services, including meeting SLAs. Most of these providers leverage their external experts to help meet these SLAs.

What are the Cons of Outsourcing All of Your IT?

Similar to having an in-house IT, outsourcing your IT comes with many benefits, along with several affecting challenges CIOs and CISOs will have to navigate, including—

• MSPs and MSSPs need help to meet contract service level agreements(SLA). Most outsourcing agreements detail specific penalties against the MSP and MSSP for failure to meet SLAs.
• A serious challenge with outsourcing is the slowness to make changes outside the scope of the contract. If the CIO and CISO want to implement a new cybersecurity protection solution or redesign a current hybrid cloud architecture and these changes do not exist in the outsourced agreement, this causes an extended delay.
• Outsourced IT-managed companies will often replace their resources to meet their client obligations. The time to spin up to these resources causes unforeseen delays.
• One of the challenging components of an outsourced agreement is the cost overruns. Ideally, the CIO and CISO know the monthly, quarterly, or yearly expenditures as soon as a contract becomes implemented. However, even with these costs defined in the agreement, any work outside the perimeters of the deal becomes an additional cost above the contracted dollar amount. This event often leads to the early termination of the outsourcing agreement.

What are the Pros of a Co-Managed IT Engagement?

A workable medium becomes achieved when an organization and outsourced MSP and MSSP develop a co-managed relationship regarding business priorities, acceptable level of service, and understanding cost containment.

Hence, these agreements have become very common, specifically for SecOps. As organizations face more compliance mandates, privacy regulations, and the need to cope with the constant challenge in the global threat landscape, leveraging outsourced providers for incident response, threat modeling, and remediation is becoming very common.

The truth is that hackers and global cybercriminals continue to adopt artificial and machine learning tools, and this has caused an increasing level of cyber attacks affecting organizations with varying complexity and velocity. This sheer number of cyber attacks compels CIOs and CISOs to develop an outsourced partnership for staff augment, overflow of incident response, or outsourcing all monitoring on a 2x7x365 basis. Outsourced IT organizations traditionally have flexible models to help support their clients. The idea of "one-size-fits-all" is a thing of the past. Many outsourced providers understand the need to be flexible yet ensure that every client engagement leverages its multi-tenant tools and capabilities to keep operational costs profitable.

What are the Cons of Co-Managed IT?

Both parties in a business relationship need to have ways to solve issues, and that's especially true when an organization and IT outsourcing firm disagree during the life of a contract. Disagreements tend to happen when two parties co-manage a critical component of the organization's IT infrastructure, application, or users.

These conflicts could include—

• Lack of accountability when a co-managed process or architecture suffers an outage, and neither party owns up to the root cause.
• Lack of responsibility occurs when both parties cannot meet their service level agreements because of an outage caused by a communication breakdown within the internal IT and outsourcing teams.
• The decision by one party to not complete their specific tasks while shifting the blame to the other party happens often. This conflict occurs as each group looks for others to fix the issue first.

What are the Differences in Cost Between In-House, Outsourced, and Co-Managed IT?

Cost is a significant factor in every IT decision. Simultaneously, the decision to move to the cloud, deploy several layers of email security encryption, and standardize on specific vendors all have cost implications. These cost implications are even more critical when an organization decides on which model of IT they want to handle the day-to-day operations.

Organizations opting to go with 100% in-house will need to budget for ongoing costs, including—

• Salary & benefits for each employee, supervisor, management, director, and VP.
• Rising costs of employees' training and certifications.
• The cost of constant turnover and recruitment.

For organizations that choose to go with 100% outsourcing, both parties will need to factor in—

• Salary of the provider's assigned resources to support a new or existing engagement.
• The client needs to be mindful of the markup percentage regarding the wages and expenses of the provider. This markup adds to the contract dollar amount.
• The cost of recruitment to replace internal resources as needed.
• Which party is covering the travel costs for the outsourced resources. This should be spelled out in the agreement.
• The cost of any penalties for failing to meet the various SLAs, which falls on the provider.

For organizations opting to go with a co-managed agreement, they will need to consider—

• What IT or SecOps functions should the organization consider using an outsourced provider for co-management?
• What is the cost of reducing my introducing a co-managed resource instead of maintaining 100% in-house?
• Will the co-managed contract cost more in the long term with unexpected additional costs and failures to meet compliance mandates?
• How long should the outsourced agreements should stay in effect?
• What is the expected cost if the organization brings everything back in-house later?

Key Takeaway: Should You Outsource Your IT Department?

For many businesses, leveraging outsourced engagement with an MSP and MSSP has substantial benefits that outweigh the risks. A co-managed relationship is ideal for organizations that must meet their business objectives while not creating additional unexpected expenses.

Working with Hypershift

MSPs and MSSPs are different regarding their technical skills, experience with innovative solutions, and managing operating expenses. Many providers have specific skill sets to help their clients meet compliance and business operations mandates. Organizations wanting to take the first step in the outsourcing journey should engage our experts to assess better when this type of engagement makes the most sense.

At Hypershift, we deliver IT services with decades of collective expertise, offering bespoke solutions tailored to your company's unique needs. Our passionate team is dedicated to creating real value, blending deep industry knowledge with the latest IT trends for cutting-edge, reliable solutions. While our innovative methods evolve with the industry, we're grounded in solid Enterprise IT principles.

Our expertise in managed services across several domains and our assessment engagements will help your organization have a better financial, operational, and management footing. Schedule a call today with our managed services specialists to discuss!