A strange Lithuanian name for outsourcing is “veiklos ranga”, which is neither a contract (because the relationship is not like that between a client and a contractor) nor related to the core business. But maybe it doesn’t matter, because you probably know what we are talking about anyway. The transfer of secondary activities to other service providers is usually referred to as outsourcing.

šluotos, valymas

If you take care of everything yourself, you might get something cheaper, but will there be time for your primary activities?

It is expensive to have your own IT department and it is not always possible to communicate effectively with that department. So it’s not uncommon to simply outsource all the same services to some other company. Sometimes this is a successful solution. Sometimes nothing changes. And sometimes things get tragically worse. What does it depend on?

Imagine that we are not talking about IT services, but about cleaning services, for example – then it will be easier to analyze the logic behind the choices.

Ordering cleaning services

If your company is just an office with a few dozen people who do no mechanical work, no production, you are unlikely to want to think about where to hire a cleaner, which cleaning products to buy, and what to do when the cleaner wants to go on holiday or gets sick. It will be much easier to order such services from a company that provides just that. It may be more expensive than having your own cleaner, but you won’t have to worry. And maybe it will even be cheaper.

But what if you buy cleaning services as a hospital or restaurant, for example? In some operations, cleaning is one of the essential supporting processes, which means that a cleaner is hired full-time, full-day, and maybe even more than one. What happens then? Well, by hiring a cleaner in this way, you have to pay an extra fee to an external service company, but worst of all, the cleaner will have to be trained in the specifics of your company – e.g. increased safety, etc. – and since the cleaners will be rotating, they will perform less well.

So, if the cleaning process is one of the key supporting processes, the cleaning services charged by an external firm will be both more expensive and less adequate. And the more specific your process is, the less suitable and the more costly those external services will be.

If you get cleaning services from an external company for operating theatres or intensive care units, you will have major problems. And if you work in the biotech field, where biosafety is particularly high, hiring an external cleaning service will only disrupt the process and make your laboratories unproductive.

Imagine such hygiene requirements, where if you touch the wrong thing, you have to take off your gloves and put on other gloves after disinfecting. Cleaning a second table with a cloth you used to clean one table is out of the question. And training a cleaner to do it properly won’t be easy. There is no way that external companies can reliably provide such cleaning services. And if any such organization tries to outsource cleaning services, it ends up with the laboratory staff simply forbidding any cleaners to enter the laboratory premises at all, and then cleaning themselves. But what is the cost of a cleaner then? Several thousand euros a month?

So, it is not always possible to outsource cleaning services. It has to be done in a thoughtful way, taking into account how important the cleaning is to your business.

IT services – external or internal?

The same applies to IT services, where we can set simple criteria for making a choice. The most general criterion is simple: since the outsourcer and IT service provider benefits from the universality of the services (they provide the same services to everyone, so they can provide them cheaply, quickly and in large volumes), outsourcing works well when you buy exactly those universal services.

Here are a couple of key points that make it clear that you can buy IT services from external providers, cheaper and more efficiently:

  • Are there many or few job positions in your company? If you have up to a few dozen positions, it’s unlikely to be worthwhile to have an in-house IT specialist. The typical case is when a company can only have one IT specialist because two simply won’t have enough work.
    • Even if the external company costs a little more, there will be substitutability. And the cost may indeed be less than hiring an individual person.
  • Does your company use standard software or some specialized software? If all the applications you use are Word, Excel and other Microsoft Office applications (or Open Office, Libre Office, for example), if you use a standard mail application (Outlook or Thunderbird) and if you don’t have any specific, uncommon applications, then it is unlikely that you will need an employee who has specific knowledge of your company. Any IT professional will be able to help you just as well.
    • Where there are only standard applications, you don’t need specialists who are tailored to you – anyone will do. An external company will suit you very well.

If both questions give you a clear answer – buy from an IT service provider – then that’s obviously the way to go. For a small company using only standard IT tools, there is no reason to think about having its own IT department.

And it’s a different story if IT services are more important to your company than they are to ordinary businesses.

  • Do you have a lot of job positions in your company? Maybe you need 3-5 IT professionals to support you – then it’s worth considering that maybe your own IT department can be cheaper, faster and maybe even offer some better opportunities (e.g. it can come up with innovations for you, from remote working to workplace automation).
    • When you have a large number of IT specialists, the cost will be lower and their responsiveness will be higher than with an external company.
  • Does your company have less common software that is quite specifically configurable, tailored to your needs, e.g. CRM applications, GIS systems, remote management systems, which may be configured by another company, but will not be a standard IT service that any IT specialist can provide? In that case, it is worth thinking about having your own in-house specialist to help you with exactly this kind of software, exactly these kinds of systems.
    • In this case, even a single IT professional with a vested interest in your company’s success can make a big difference by offering you good advice and helping you make better choices.
  • Does your company have systems that are highly configured and tailored to your needs, or systems that are specifically programmed for you, or any highly specialized IT solutions that few other companies have? If a system vendor only provides software for you, it will either charge you as much money as possible, or it simply won’t take care of you.
    • In such cases, it’s a good idea to think about having your own IT department, with several specialists dedicated to your specific needs.
  • Does your business depend critically on a range of IT services for its operations, profitability, yield, and market success, even if these services are standard? If so, you need IT professionals who know your company’s business processes.
    • In this case, you can only get help from someone who understands both IT and your business – and it won’t be someone from an IT service provider.

The bigger and more complex your IT requirements are, the less benefit and more problems you will have with an external IT service provider. If most of the questions indicate that you need your own IT department – i.e. you are a large company, with hundreds of IT service points, with specialised systems, with a business that depends on IT – outsourcing will cause you more problems than benefits.

Of course, the biggest objection that stops many people from having their own IT department is that IT processes are not easy to manage and IT professionals are not always easy to talk to. But that’s a whole other topic – IT process management. We’ll be sure to write about it, because there are solutions, and they are often quite simple, but they produce miraculously good results.

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