In-house IT: Small firms might consider a divorce

If they had to do IT all over again, some companies might decide not to do it themselves.

It’s a result of assessing what’s core to your business, explains Sebastien Ruest, the vice-president of services research for IDC Canada in Toronto.

“You might ask, ‘if I start from scratch today, would I build these specific competencies internally?’ Knowing what you know now, would you make the same decision? If you think you’d do it differently, then it becomes a good candidate for outsourcing,” he says.

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It’s one thing to know what you do best as a company and to recognize IT probably isn’t one of those things. It’s quite another matter to feel comfortable enough in handing off processes that, while they may not be considered a core skill, are nonetheless an essential part of your company’s successful operation.

How does a business know when it doesn’t do IT particularly well? Consider the GEO Group, a Toronto-based vacation and travel company that looked at what it did best.

According to Chris Ashton, the IT manager, his company undertook a sort of business soul searching and determined it needed to focus on sales, marketing and customer service.

“IT is there to facilitate these three goals,” he says.

But when it came to IT, GEO was resource-thin and wasn’t able to respond quickly enough to IT problems that often cropped up. Business hours were seven days a week, 24-hours a day, but the IT operation was “nine to five” and staffed with a meagre team of two technicians who needed to support more than 150 users.

GEO analyzed the time spent resolving IT issues and from where problems were originating. It was determined that most were as a result of poorly managed systems and applications, as well as network communication services that weren’t delivering good enough performance.

In addition, GEO assessed its information system risks and recognized that its disaster recovery and business continuity plans weren’t prepared for the worst. “It was an eye-opening experience,” recalls Mr. Ashton.

Realizing that sales, marketing and customer service rather than IT was primary, GEO looked to outsource its Sun Unix and Windows operating environments as well as the virtual private network (VPN) communication services that linked all of its branch offices – a total of seven, including four offices in the Greater Toronto Area, plus a call centre in Ottawa, a location in Haliburton, Ont., and a sales office in the U.S. The company also needed to undertake a data conversion project in migrating to a new enterprise resource planning (ERP) system and also needed help in understanding its security issues – specifically how to refine its policies and put proper business continuity and disaster recovery procedures in place.

“We did the analysis of considering going in-house,” Mr. Ashton says. GEO hired an outside consultant to assess which in-house skilled professionals were required.

Besides a range of consulting and integration expertise, GEO would have needed to hire full-time systems and database administrators – with skills that probably would have been both difficult and expensive to acquire. “At the end of the day, outsourcing in terms of our resources and budget requirements was actually a more attractive solution for us,” he says.

The next step was likewise no small undertaking: to feel good about handing off IT. Mr. Ashton says it wasn’t easy to hook up with an outsourcer with whom they felt comfortable and who specialized in servicing smaller companies.

“Some of the other companies we looked at were focused on large enterprise customers. We didn’t want to have that feeling that we’d get lost in the shuffle.”

GEO’s plan was to start small and expand the scope of the services engagement. They settled on Magma Communications of Ottawa. “There was an upfront contact that could deal with anything sales- or marketing-related,” Mr. Ashton says. “We didn’t want to deal with a sales agent that would have to go to someone else to get the answers.”

GEO’s senior executives were sceptical at first, he admits. They had to be personally introduced to the service provider’s key managers and even took a tour of the operational facilities.

“It is a risk. It is a leap of faith,” Mr. Ashton admits, explaining that a good solid relationship with your outsourcing vendor is essential. You have to know their strengths and weaknesses and get to know the people who make the decisions within that company, he says.

Their fears were allayed.

“As I got closer to the senior people within that company it made me feel more at ease. Speaking with their existing clients – that was a very strong thing for us as well.” Risk is no small consideration, particularly for a smaller business.

According to IDC’s Mr. Ruest, in a smaller company there are “a lot less layers” and the link to the company president from the IT organization is much closer. Particularly for smaller businesses, outsourcing is often perceived as being riskier.

“The traditional model of outsourcing hasn’t really caught on with small companies,” says Mr. Ruest. “Small companies want the one-stop shop, but that doesn’t exist as readily for smaller businesses as it does for larger businesses.”

Hank Summy, the general manager for Sapient – an IT services company that offers consulting, integration and management services – insists there are a lot of options out there for small Canadian businesses that need IT outsourcing. They simply need to take a good look.

“All they have to do is send an RFP (request for proposal) out,” he says. “It costs them nothing to go out and test the waters. They absolutely will get a lot of responses from that.”

There’s not a whole lot of leeway when it comes to the efficiency and effectiveness of IT for small business, Mr. Summy adds. They can’t afford second-best when it comes to computing.

“It’s more critical for a smaller business because they don’t have the luxury of a buffer that allows them to be less efficient,” he says. “They have to be ultra-efficient because they don’t have the excess – in staff and resources – to bury or hide things. There’s zero tolerance for inefficiencies or capacity problems.”

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