IT Support Blog for Small Business Owners

IT Support Graduates From The Traditional Time and Materials Approach

Posted by David S. Mulvey on Fri, Jun 21, 2013

Time and Materials Contract for ITThere's new way for CEOs and business owners to purchase IT support that's faster, better and less expensive than the old time and materials approach.

It’s called Selective IT Outsourcing, or sometimes referred to as managed services, where you negotiate a fixed fee per month based upon the number of workstations, servers and printers that you have in your company.  For this fixed fee you get a specific set of written IT recurring deliverables that insures your IT infrastructure becomes reliable. 

Instead of the reactive time and materials approach, now your IT service provider proactively works on everything in your IT network to ensure nothing ever breaks! 

Imagine an IT company where you never have to tell them to fix anything, they just go and do it, and they do it faster than trying to do it yourself. Your employees are happier (and more productive) and you never have to deal with the financial and technical uncertainty from the time and materials approach.

If we look at this from the business owner or CEO's perspective Selective IT Outsourcing allows you and your IT provider to both be working on the same team. Now the support your IT services firm provides becomes so proactive that neither you never have to worry about any service issues or any increases in expenses related to supporting your business.

Both you as the owner and the IT outsourcer are working together in tandem for the same result: your company has an excellent IT infrastructure that requires virtually no unplanned support. Your employees are happy and they are highly productive because all of your IT assets are working. Best of all you are enjoying a fixed fee engagement that is far less than hiring and doing IT yourself! 

While we know you only care about the business owner's perspective, it might be interesting to see how this fixed fee approach benefits firms like ANP and how in the end, that benefit actually comes back to helping you and your business.  

So let’s look at this new approach of Selective IT Outsourcing from the IT company's perspective: There is no longer wild revenue variation every month because all of their billing is fixed fee and recurring. 

Now they hire the most talented and expensive engineers they can find—why? Because they are incented on a fixed fee basis to get your IT infrastructure to run at its absolute best and that only happens with the best engineers working on it.

As a business owner, CEO or decision maker you want to look for IT services firms who offer this fixed fee model not because they hire the best people, but because by hiring the best people you get the best level of service for your business.

As a way to compare the old and the new model, let me pull back the curtain and show the inner workings of an IT services firm. In the old Break/Fix IT model your IT support vendor was actually incented to ONLY deal with the surface issues. If they went deeper the expenses could become significant from a time and materials perspective, so most of the time, support teams simple made the problem go away, instead of fixing it for good.

In the new model, your IT team is incented to keep all your laptops, networks, systems software and hardware running at peak performance! Since you don't incur additional costs if issues crop up, its in their best interest to proactively keep issues to a minimum. The IT provider is more profitable if they are able to keep your network running so well they don’t have to invest in additional unforeseen labor.

While most IT providers probably don't want you to know or even understand the behind the scenes at their firms. ANP is different. Our goals are your goals. To have your business run smoothly and for us to working, every day, to ensure your network, equipment and software are constantly running predictably and smoothly.

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Topics: IT Support, Break Fix, IT Outsourcing, IT Services, Outsourced IT, Managed Services, Managed IT

Small Business IT Support Approaches And ROI For The Business Owner

Posted by David S. Mulvey on Fri, Jun 07, 2013

IT SupportToday I wanted to introduce our readers to the different methods of managing your small business IT infrastructure. For the purpose of comparison, we look at three different options in which you can manage your IT infrastructure- manage it yourself (Self-managed), manage through an IT support vendor charging you on a “Time and Material” basis or you can rely on an outsourced IT support contract.

This post discusses various facts related to achievable real IT expense savings and soft ROI benefits for each option. For illustration purposes, I considered a case study of a typical small or medium business having 40 user desktops, three servers (one Mail server, one Line-of-Business server and one File/print server), one firewall, one router, two LAN switches and one network printer.

Here is a detailed analysis of the options available to you based on industry standard cost models.

Self-managed IT support:

Consider a case in which you decide to manage your IT network by hiring your own full-time staff which comprise a network or IT administrator. Around Philadelphia that will cost you between $60,000 and $70,000 depending on your location and the employees experience. For this illustration, we will fix this cost at an average of $65,000.

Additional costs for staff including benefits, sick and vacation leaves plus 7.5% payroll tax is about $18,850, so your first fully burdened IT employee will cost $83,850 a year. Furthermore, you will need to purchase IT management system and required hardware; we assume its one-time cost $10,000. You staff training on the management software would cost you $2,500 more. In sum, you end up spending $83,850 per year and approximately $10,000 as a onetime expense.

IT support on Time and Material basis:

Suppose you decide on a third-party vendor to manage your IT infrastructure on a Time & Material basis. They would charge you approximately $165 per hour with an average minimum call time of 2.0 hour per call and $75 towards travel charges.  Assuming one call logged per server per month, a total of eight calls for workstations per month and an additional two calls per month to attend to problems related to Fire-wall, Switches and Network Printers.

You end up spending $5,265 per month or $63,180 per year on this IT support approach. In this model, on an average 40% of the IT issues are managed by the vendor, the balance being handled by end users themselves.  Plus remember, this approach is completely reactive, you don’t dispatch until something is broken, so total time to repair can become problematic.  It’s less that doing IT yourself, but you do place a burden upon your employees to help support their own IT.

Outsourced Turnkey IT:

Outsourcing your IT services would include proactive monitoring and management of your servers and workstations and IT infrastructure equipment.  It carries out preventive maintenance on the servers as well as your workstations along with maintaining network devices for optimal performance.  

All the work is done on a proactive basis, (the outsourcer does not wait for something to break.)  Your end-users would call a toll-free number to inform the IT service provider of their day-to-day operational issues, which would be logged and resolved by an expert help-desk staff.  

Monthly charges vary from provider to provider depending on the service providers qualifications; like SSAE 16 approved (which is an audited standard for IT providers) and/or a fully staffed Network Operations Center 24 hours a day 365 days a year (your IT stuff doesn’t always break during business hours.)  

A Turnkey approach like this typically comes with a periodic visit from a Virtual CIO or an IT professional that holds an MBA and can sit down with you and your business leaders to discuss IT projects, business impacts and review the contracted work that has taken place. 

Annual budgets can be developed and IT can be viewed as a strategic business advancing opportunity versus a necessary cost.  A Turnkey IT approach like this would typically cost $95 per month per Workstation, $295 per month per Server, and $180 per month for network devices, bringing the total cost per to $5,585 per month or $67,020 per year.

Now that we have reviewed the three popular approaches to small business IT support, let’s compare them to one another:

 

Pricing

Self-Managed

T&M

IT Support

Outsourced

Turnkey IT

 

Annual

One-Time

Annual

One-Time

Annual

One-Time

IT Staff

$65,000

$0.00

$0.00

$0.00

$0.00

$0.00

Staff Benefits

$18,850

$0.00

$0.00

$0.00

$0.00

$0.00

Management

System

$0.00

$10,000

$0.00

$0.00

$0.00

$0.00

Staff Training

$0.00

$ 2,500

$0.00

$0.00

$0.00

$0.00

Outsourced IT Costs

$0.00

$0.00

$63,180

$0.00

$67,020

$0.00

Total Costs:

$83,850

$12,500

$63,180

$0.00

$67,020

$0.00

Time and Materials is the least expensive approach, and certainly the classical approach of a small business for their IT support.  This approach eliminates the headache and expense of hiring a fulltime IT employee, training them and purchasing a management system. 

But T&M is a reactive management approach; there is no 24 hour 365 day a year monitoring and management of the IT infrastructure.  You are paying T&M on systems that are “down,” and not operational.  Often you are delayed in getting support because there is a physical travel component to the process, and you are completely dependent on a third party.  Plus remember your employees are shouldering most of the IT work themselves which keeps them away from the work you hired them to accomplish!

Outsourcing your IT in a completely turnkey approach is less expensive than doing it yourself.  Yes, you are dependent on the service provider (ANP has been doing this since 1984) but it’s important you find a provider that can give you a written performance guarantee or you money back! Once the provider has some skin in the game you can lessen your risk in depending solely on a third party for your company’s support.  

This is not the least expensive solution, but it is much less expensive than doing IT yourself.  You get the benefits of 24 hour 365 days a year proactively monitoring the IT infrastructure. Your support is most likely being provided by a team of experts rather than one employee so you are no longer single threaded. 

Your workstations, servers and infrastructure equipment and software will be comprehensively managed to best practice levels.  System reporting, availability reports, and an Enterprise class IT systems management toolset and best practices will be applied in a highly automated process.  Plus the access to a Virtual CIO as needed completely rounds out an IT solution that your small business could not afford if you had to staff it yourself.

Would you like to learn more? Cilck on the button below to see how outsourcing your IT could enable your company to enjoy a more predictable IT solution less expensively than doing IT yourself.

Contact The IT Support Experts

Topics: IT Support, Outsourced IT, Managed Services, Small Business IT Support, ROI on IT

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