Most of today’s managed services offerings are designed to save money for the IT provider, at the tradeoff of their client’s time.
For many small businesses, this model works as their hourly labor costs are low and time spent working through IT issues is offset by the lower cost for their IT services. Unfortunately, this model incentivizes the transfer of labor from the IT provider to the client. For example, if you have ever tried to wade through a phone menu or talked to multiple people to get your issue solved, you have experienced steps to lower provider cost. Those extra steps use the Client’s time to make the PROVIDER more efficient.
However, for a Professional Services business, the cost of their staff’s time can be quite high, and spending that time wading through phone menus can be costly.
IT businesses model how their operations run. These models decide everything from ticket workflows, client communications, service requests, issues escalation, and even how clients get billed. Changing the service model of a modern Managed Service Provider is an extensive and expensive process. There are excellent IT providers out there that deliver a low-cost model, but those same providers struggle to deliver a higher level of service. Not because they are not smart or savvy operators, but because their model cannot function well for those clients.
The tradeoffs that come with a low-cost model do not just affect a client’s ability to get someone on the phone, they run deep within how a Managed Service Provider works.
For example, if your company works non-standard hours (maybe you service clients in a different time zone), but your IT provider uses those same hours as their time to run “updates”, it is going to be a problem. Their ingrained schedule will conflict with the way you run your business. The provider’s staff that specializes in performing updates only operates at certain times; this is how they lower costs. In this case, you would need to submit to their schedule, and live with the downtime during your working hours.
Another example of rigid procedures that affect your business is when you call for support and get a lower-level technician that services a lot of clients. That technician likely knows little about your specific business and worse is usually at the least skilled level for technicians. Again, this lowers costs for the IT provider, but can significantly lengthen the issue resolution time (or the time your staff spends on the phone). This is fine for some businesses but if the caller is a busy professional, this can be frustrating and costly.
Offshoring IT can complicate security. IT staff have the keys to the kingdom, offshore resources can save money but increase risk.
Offshoring of IT work is not a new method of lowering costs. It may come as a surprise, but many IT providers outsource work that would be considered regular parts of their trade (like software updates or monitoring). Although there may not be anything inherently wrong in offshoring, there are additional risks that need to be managed, particularly around staff accountability.
If an offshore staff member ever went rogue, the options for recourse are not the same as a USA-based staff member. If my USA-based staff do something outside of our contractual agreement, or worse something illegal, I have the US court system to handle grievances. The US court system is quite a deterrent and motivation to stay inside the lines. If there were a legal issue with offshore staff, the options are very different.
I prefer to have every tool available to keep all actors honest, which is why all DataStew staff are USA-based. IT staff have access to the most sensitive areas of a company and that is a unique risk. There are times when we need to use outsourced talent for specialized tasks, but we take the extra step of keeping those resources under the direct supervision of our DataStew staff. Although there are many talented offshore resources available, IT staff have unique responsibilities in a business and security protocols should reflect that.
Be aware of providers that Sub-outsourcing their IT duties. For very low-cost providers, sub-outsourcing is a very popular option. In fact, there are IT providers that just resell white-labeled outsourcing services. These arrangements have very different security and legal consequences. If security is a concern, I would avoid these arrangements entirely. In addition, these services can be quite poor, and it can be frustrating to get assistance.
Automation can both be useful and frustrating.
Automation in the IT industry is a significant factor in increasing efficiency and lowering costs. At DataStew we definitely are not Luddites, and we use automation and A.I. extensively to make our operations as efficient as possible. But what we do differently is to optimize our service for client efficiency and automate areas that do not affect client service. We are here to make our clients more efficient, and we believe a higher level of customer service is fundamental to that goal. Our operations are optimized to maximize the CLIENT’s time, even when it is more expensive for us.
Key Take Away’s & Summary
- Low-cost providers have an important place in the industry, but they are not right for everyone.
- Before evaluating IT Providers, assess what your business needs for success. A good place to start is finding out the average cost of labor in your organization.
- IT Providers’ business models are designed to service a specific type of client. Their desire to add you as a client may not equal their ability to service your needs.
- Offshoring can save money but increase risk.
- Automation is an integral part of lowering costs when used properly.
About DataStew Managed Services
Our managed services are geared toward businesses with between twenty and one hundred staff whose makeup skews toward degreed professionals. We pride ourselves in helping professionals stay efficient. If this sounds like your business, we would appreciate the opportunity to present our solution to you.