Tag: Strategic Planning
There be more ways to the wood than one and the methods for managing your organization’s Information Technology needs run the gamut from 100% contracted services to a full-service, in-house IT shop with help desk, software developers, and and other support including network and security engineering. All of the variations between these two extremes can work if they are strategically planned. Which one is best for your organization? That depends on your business requirements, goals and objectives, industry, organizational culture, and budget. Key elements that will contribute to whether or not the model you choose is successful include a Strategic Plan and and highly specific contracts and service level agreements.
Cost Vs. Value
Before we perform a summary examination of some specific models, let’s stipulate that this is a business project. Cost is important, but so is value. In order to determine which model will best suit your needs, you will have to make your own calculation of the Cost vs. Value equation for your organization.
How Much Does IT Cost?
How much does your operation cost now? And what value is being provided right now? Surprisingly, very few organizations can concisely and immediately answer these questions. IT costs are often buried in departmental budgets and sometimes linked to inappropriate budget accounts. Shadow IT Staff, staff members not technically part of IT but performing IT functions under a different title, are often unaccounted for in a summary of IT costs. Moreover, the cost of IT equipment has gotten so low that much of it is expensed under office supplies or something similar, so it doesn’t show up as a fixed asset or an IT line item. Unless you have very strict accounting rules, it is possible that accurately calculating the cost of IT may be difficult or impossible. This entire discussion might bring up another question: What exactly is an IT cost? Sometimes, the simplest questions are the hardest to answer.
Before we look at specific models, let’s talk about one more thing. What do you want? What are your business goals and objectives? Do you want a Help Desk to answer the phone and provide assistance with applications like Microsoft Office? Does it make sense to pay for that service? Do you require in-house server and network support to get immediate response? Or is a contracted service with a 1 or 4 hour service level agreement good enough? Are you looking for the development of institutional knowledge in-house or can a long term contract provide that security?
The secret to an efficient operation is good management that focuses on quality of service regardless of the model. A Service Level Agreement (SLA) is always required to define the scope and services to be provided by both in-house staff and contractors.
100% Contracted Services
This model is commonly used in small organizations but it can easily scale to relatively large operations. If you choose this model, I would recommend that you separate duties so that the vendor who sells and installs “stuff” is different from the vendor or consultant who is providing direction, design and planning services. In this way, you can eliminate the conflict of interest that may encourage a vendor to oversell or over spec. Consultative selling is big in the IT market and many vendors who sell solutions will provide honest advice on the best direction to take, but why risk it? Moreover, the sales people and techs whose job it is to sell products and services may not understand the minutiae of your business operations, goals, and objectives especially if you have highly specialized lines of business.
Contracts in a fully outsourced model may have some combination of a fixed rate for fixed services as well as an hourly rate for additional, incidental services. As with all contracts, close monitoring is required to keep costs in check.
The Technology Coordinator Model
One popular model is the use of a single Technology Coordinator. The position might have different names, but the general idea is that a single employee manages the strategic plan, coordinates services and manages all the contracts.When using this model, it is important to avoid the scope creep that can result from using the Coordinator as a front line fix-it person.
Most medium to large entities use some sort of hybrid model that includes a combination of in-house staff and contractors. Again, service level agreements are essential and the in-house staff can easily grow to gigantic proportions without careful management. I have seen medium sized operations with 20 or more IT FTE’s where a few staff members and strategic contracts would have been a more economical and efficient solution. In some industry sectors, a large staff may justified. However, in something like a typical medium sized municipal operation, a hybrid model with a bias toward contractors makes a great deal of sense. If your contracts are well-written, it is easy to get rid of an under-performing contractor, but eliminating or replacing employees can often be a nightmare.
Full Service Models
If Information Technology is a core business function for you, a full-service, self contained IT operation may be appropriate, but this scenario is rare if you are truly basing your decision on objective business criteria. Even the largest organizations strategically contract some services. If you are currently responsible for a large, full-service IT operation maybe it is time to do a cost-benefit analysis of other options.
In a medium to large manufacturing operation with a dynamic network, network and security engineers may be required. In a static operation of a similar size, it might make more sense to contract these services since they will rarely be required. In-house software development is similar. Some organizations might require full-time software developers, but for more static organizations, purchasing Commercial-off-the-shelf software is far more efficient and cost effective than custom software development.
If you require assistance evaluating staffing models for your organization, send me an e-mail at email@example.com. If you would like to read more about IT Governance, check out http://blog.e-volvellc.com.
Copyright © Jeffrey Morgan 2016