IT Outsourcing Considerations

As an SME entrepreneur, you face an important strategic choice: how do you organize IT for your business? IT is now essential for virtually every business operation, but it's probably not your core business. In this whitepaper, we objectively analyze the pros and cons of the different options, so you can make an informed decision that fits your situation.

The IT challenge for SMEs

The IT challenge for SMEs has only grown in recent years. IT is no longer a supporting function you do on the side - it's woven into virtually every aspect of modern business operations. From email and document management to customer relationship management and financial administration: without working IT systems, your business comes to a standstill. At the same time, the IT landscape is becoming increasingly complex, with cloud solutions, cybersecurity requirements, and a growing number of devices and applications that need to be managed.

Additionally, the requirements are getting higher. Employees expect modern tools they also use at home: fast, intuitive, and available on any device. Customers expect your systems to be reliable and their data secure. And legislators expect you to comply with increasingly strict regulations, from GDPR to the new NIS2 directive. For many SME entrepreneurs, this is a challenge that's difficult to combine with daily business operations and focus on their actual profession.

Option 1: Do IT yourself

The first option is to organize IT entirely internally with your own IT employee or even a small IT department. This is the traditional model that especially larger organizations use. It has clear advantages, but also significant disadvantages you should be aware of before making this choice.

The main advantage of an internal IT function is proximity and availability. A colleague who sits one floor down can come by immediately to solve a problem. This person knows the company, the colleagues, and the specific ways of working. There's no waiting time for an external party, no tickets ending up in a queue. For some organizations, this weighs heavily, especially when IT disruptions have a direct impact on customer service.

Advantages of doing it yourself

Disadvantages of doing it yourself

Option 2: Outsource IT

The second option is to outsource IT entirely or largely to an external IT partner. This model is often called managed services: you pay a fixed monthly amount per workstation and in return get a complete package of IT services. The IT partner takes over daily management, solves problems, and ensures your systems stay up-to-date and secure.

The main advantage of outsourcing is access to a team of specialists instead of a generalist. No IT employee can be an expert in all areas: networking, security, cloud solutions, Microsoft 365, servers, and workplace management. An IT partner typically has specialists for each of these domains, giving you always access to the right expertise. Moreover, you have no issues with vacation or illness - someone is always available to help you.

Advantages of outsourcing

Disadvantages of outsourcing

Option 3: Hybrid model

The third option is a hybrid model that combines the best of both worlds. In this model, you have an internal IT coordinator who serves as the first point of contact for colleagues and handles simple tasks, while an external IT partner handles more complex matters, specialist knowledge, and strategic support. This model is especially interesting for companies in the range of 25 to 100 employees.

The hybrid model offers an attractive balance. Your colleagues have a familiar face in the office for daily questions and small problems, while you still have access to the broad expertise of an IT partner when needed. The internal IT coordinator knows the company inside out and can act as an interpreter between business and technology. The external partner brings specialist knowledge and ensures continuity when the internal person is absent.

Advantages of the hybrid model

Cost analysis: TCO calculation

When making the choice between doing it yourself and outsourcing, it's essential to make an honest cost analysis. Many entrepreneurs simply compare the salary of an IT employee with the quote from an IT partner, but this gives a distorted picture. The actual costs of an internal employee are significantly higher than just the gross salary, while the costs of an IT partner are often more transparent and predictable.

Total Cost of Ownership, abbreviated TCO, is the method to compare the actual costs of both options. This calculation includes all direct and indirect costs, including things you might initially overlook. Below we make an example calculation for a company with 25 employees, a typical situation in SMEs.

Doing it yourself (1 FTE)

Outsourcing (Managed Services)

Hidden costs of doing it yourself

The real costs of internal IT are often higher than they appear. In addition to salary, there are many hidden costs.

When outsourcing makes sense

The cost analysis is an important part of the decision, but not the only one. There are situations where outsourcing is the logical choice, and situations where it's wiser to organize IT internally. The right choice depends on factors such as your company size, the role of IT in your service delivery, your growth ambitions, and your risk tolerance.

Use the criteria below as a guide in making your choice. If multiple criteria in the outsourcing category apply to your situation, there's a good chance an external IT partner is the better choice. Conversely, if you recognize yourself in the criteria for doing it yourself, you're probably better off with an internal IT function or the previously described hybrid model.

Outsourcing is probably smart if:

Doing it yourself may be better if:

What to look for in an IT partner?

If you decide to outsource IT or use a hybrid model, choosing the right IT partner is crucial. A good IT partner is more than a supplier - it's a strategic relationship that will support your business for years. A wrong choice can lead to frustration, unnecessary costs, and in the worst case, business continuity problems. Therefore, take the time to carefully evaluate potential partners.

There are many IT companies on the market, from large national players to small local parties. Each has its own strengths and weaknesses. The point is not to choose the largest or cheapest, but the one that best fits your company, your needs, and your way of working. The following criteria help you assess this match and ask the right questions in your exploratory conversations.

Questions to ask an IT provider

Understanding SLAs and contracts

A Service Level Agreement (SLA) captures the agreements. Pay attention to these components:

The transition: switching to an IT partner

Once you've made the choice to work with an IT partner, the transition process begins. This is a critical phase that must be carefully planned and executed. A poorly managed transition can lead to disruptions in your business operations, frustrated employees, and a bad start to the collaboration. A well-managed transition, on the other hand, lays the foundation for a successful long-term relationship.

The good news is that experienced IT partners have gone through this process many times and know where the pitfalls are. They typically take the lead in the transition and ensure a structured approach. Still, it's important to know what to expect so you can make the right internal preparations and set realistic expectations with your colleagues about the duration and possible impact of the transition.