Outsourcing Your Information Technology Support – Why or Why Not?

Companies hire law firms to outsource the general council role, payroll services and human resource consultants to outsource the H/R function, and accounting firms to outsource the CFO or controller position.  Today you can outsource anything from customer service to pesky telemarketers.  We don’t even make reservations for a night out anymore; we “outsource dinner”.

So in this day and age, why not outsource your IT function?  If you aren’t doing it now, you have probably thought about it.  Information Technology moves rapidly, too rapidly in fact for accountants and other business professionals to keep up with, so outsourcing just seems to make sense.  According to Thomas Friedman, The World is Flat, but what we need to know is how flat is my office? 

There are a number of positive and negative concerns that should be considered before any company decides to move the IT function to a third party.  Moving from an in-house function to a hired group may prove cost effective, and it may help expand company resources allowing attention to be focused on other priorities; however, the transition to outsourced IT must include strong continuity in the support role to combat an inherent reduction of the centralized knowledge base, and potential frustration among the users of IT resources.

Let’s start with the cost.  Information technology is ever changing, and the associated costs of an IT program reflect the pace of change.  The technical resources including systems to manage servers and report problems are often cost prohibitive for small businesses.  The human capital is also often too much to bear.   Some studies show that an office should maintain one IT professional for every 20 employees, but other studies increase that ratio to 1:30 or 1:40.  Since the marketplace for good technology professionals continues to be tight, the cost of human capital is rising.  Many firms measure the decision to outsource based on these costs.  By leveraging third party technical and human resources, companies can often incorporate systems that they otherwise could not afford.  Additionally, with plenty of IT support a mouse click or phone call away that’s ready to troubleshoot problems, resolutions may come quickly, which translates to more efficient use of staff time and more billable hours.

Have you ever experienced network downtime?  How about a glitch that keeps you from running certain software?  What about even a single workstation down for some unknown reason?  If your IT is outsourced, are you in any better condition?  The answer may be yes if your provider can supply the experience necessary to fix the problem, or has seen the issue before, or has a particular expert on staff, or simply understands the complexities of how one software package may affect another.  Your in-house professionals may not have that expertise, but suddenly you need it.  What do you do?  During busy season from January to April accounting firms traditionally earn 50-60 percent of their annual revenue, so any downtime at all must be avoided.  Outsourced IT may just be part of the answer to a smooth tax season.  Of course, it takes time to learn any technology environment, so you won’t want to begin that relationship in January.  As a rule prepare yourself with two to three months lead time for everyone to get comfortable with the new operations.

If you could reduce your time spent on non-revenue generating areas and better manage your marketing, business development, or client service time—would you do it?   Most of us would say yes.  Increasing revenues is key, and it is often left to partners who can be bogged down with internal business issues.  By outsourcing the IT function, you may eliminate the headache of making sure your technology is stable.  Not only is this a load off of your mind, but it also frees up time for other critical areas.  Some firms take the approach of outsourcing end user support only.  These issues, while often not the most complex, can be very time consuming.  Building efficiencies and finding new opportunities in technology will never happen if your IT director can’t even walk down the hall without a slew of user questions.  By outsourcing this piece of the puzzle, the internal professional can focus his or her efforts on new enhancements and not old problems.  

Not every aspect of IT outsourcing works quite so well.  When problems occur or issues arise, a quick fix is required, but in a pinch you may not be able to reach the particular consultant who has become intimately familiar with your structure.  It may even be that the continuity of consultants is lacking, and no one has enough familiarity.  There is no time to reinvent the wheel, but you may have no choice.  The continuity factor is very important.  In technology, the online leg bone is connected to the virtual knee bone.  Understanding the skeleton takes time and effort, and without support from a consistent person, each operation becomes difficult to complete.  Compound that with the fact that accounting softwares are very complex – so complicated in fact that it can take months to understand the intricacies of how they interact with the operating system and each other.  Insist on continuity and 24/7 (or as close as you can get) access to the lead consultant.

With an in-house professional, pattern recognition is much easier.  If Joe and Mary are having the same computer problem, an in-house professional will often recognize that fact and respond with an answer that can ward off the same problem for other staff.  If nothing else, solving Jane’s issue today is easy when it is understood to be the same problem that Joe and Mary had yesterday.  With an outsourced IT department you may be giving up something that is very important, and that is a centralized knowledge base.  If staff people are going online or are calling a support hotline to report hardware or software problems, it may be difficult for the third party provider to recognize like issues. Even though each call may be recorded as a unique work order, problem descriptions, understandings, and responses are inherently different.  The call center may assign each problem to a different consultant, and all could be working on the same issue unknowingly.  The problem is not only the excess hourly rates to correct the problem, but the fact that this epidemic has not been recognized, communicated within the office, and solved globally.

Finally, there is nothing like the human touch.  Let’s be honest; if you had to choose communicating via phone, Internet, or face to face, which would you choose?  Now what if you had to explain a concept that was so confounding that travel to Mars may seem easier?  The human “interface” should not be minimized. 

One sure way to frustrate staff members is to not hear or understand their concerns.  If your staff is not ready to have their IT problems resolved remotely with no one physically present at their desks to see the problems, then beware.  Do not underestimate the power of an IT person to make a staff person more comfortable by simply seeing and listening to the problem.  When a staff member has a two second question (code for an IT question that sounds easy but never is), that person finds satisfaction in being able to run down the hall to ask a real, live person or have that person come to his or her desk.  Having your screen overridden by a remote user just isn’t a warm and fuzzy feeling.  Additionally, just like with every business, customer service is ultimately important.  What your outsource partners should clearly understand is that their customers are the end users.  Your staff must be treated like valued customers, not just an IT problem to be solved.  The service component can make or break the outsource relationship.  How fast does the company respond?  How do they solve a difficult problem that requires research?  How do they communicate with your staff?  Keeping staff happy and billable leads to profits, and that makes everyone smile.

There is a potential shining light that could make an outsourced IT relationship very beneficial.  With the outsource option comes the opportunity to try before you buy.  You may be lucky enough to have as your representative a strong, motivated, energetic and knowledgeable IT manager assigned to your account.  (If not, don’t hesitate to ask for a new manager.) If so, your consultant may become your next in-house IT director.  Be sure that you address this potential with your service provider at the beginning of your relationship.  You may be able to negotiate a finder’s fee with the provider that would be less than a true head hunter’s fee.  With three or four months of on the job training, you couldn’t have hoped for a better educated professional.  In the end, allow your new IT director to run the department without constraint.  Continue to use outside consultants as necessary and focus your new in-house professional on firm growth through information technology.  Then get ready to outsource your IT stress!

About Randy S. Gold

As Principal and Chief Operating Officer of Aarons Grant and Habif, LLC Randy brings talent and experience to the firm’s real estate and construction practice.  Randy has an extensive background representing commercial and multifamily real estate developers and investors through purchase/sale transactions, deal structuring, consulting, and reporting.  

In his role as Chief Operating Officer of one of the leading accounting firms in the Southeast, Randy is responsible for helping to create the strategy and tactics to support AGH’s long term vision.  Focused on business development, Randy helps the firm continue its history of significant growth in each of its practice areas.

Randy is active in his community serving on the boards of Jewish Family and Career Services, Atlanta Scholars Kollel, and American Jewish Committee.  In addition to other philanthropic activities, Randy is a participant in the Wexner Heritage Foundation Program which strengthens leaders across North America.  Randy is also a member of American Institute of Certified Public Accountants and Georgia Society of Certified Public Accountants.

A graduate of the University of Georgia, Randy, his wife Caroline, and newborn son Nathaniel live in Atlanta.