Should your small business outsource IT?

Depends on how small a business it is.

To outsource or not to outsource, that is the question many small businesses struggle with.

For certain support tasks, like payroll, outsourcing is universally considered the small business protein shake: without it there's no way to compete with the big guys. But for other business functions, outsourcing is more like the candy bar: it's tasty at first, but in the end, there's little real benefit.

IT was once considered a no-brainer for small business to outsource. After all, good IT is expensive and hard to find. Why further stress a fragile revenue stream with another salary?

But in more recent years, IT evolved from a purely supportive department to an integrated revenue driver. For companies who rely on their IT for innovation, outsourcing IT is not a no-brainer; it's unthinkable.

So what is right for small business: outsourced IT or an internal department? Let's examine what they need to consider.

Real or perceived savings

It's easy math: the more employees a company has, the higher its fixed costs. But fixed costs don't always carry fixed benefit: staff salary, payroll taxes and healthcare premiums must be paid regardless of their contribution to the business.

Outsourcing turns this fixed cost into a variable cost: small businesses only have to pay for what they "use." And though the hourly rate of a contractor may not be "cheap" (unless they are off-shore), the pay-only-when-needed model gives small businesses a cost-control flexibility that often leads to greater overall savings.

On paper, outsourcing almost always looks tantalizing, especially for revenue-strapped small businesses. But outsourcing has costs too, often hidden, that may outweigh these on paper savings.

"What are the overall savings?" then is the question small businesses need to ask when considering outsourced IT.

If you're very small, outsource

Many startups and very small businesses view IT like they view their electric bill – something required for the business to exist, no more and no less. While the merits of that attitude are open to debate, nonetheless for those businesses IT just needs to set up the computers, keep them running, and if there's an issue, fix them as fast as possible.

Thanks to its low headcount, the very small business will probably not generate enough helpdesk instances to warrant the hiring of full-time internal staff.

Furthermore, the very small business's server needs (data backup, email hosting, remote access) are already so commoditized that a third party data center can handle them far cheaper than internal staff and maintenance hungry in-house servers.

Outsourcing does have its costs (as we'll discuss below) in terms of speed and efficiency, but a VSB's relatively minimal IT needs ensures those costs will rarely outweigh the potential savings on payroll.