Does it pay to outsource? According to some, it does. Vendors and others who make their living by outsourcing claim that internal IT is dead. After all, you can outsource your help desk, site hosting, applications, and even your network and data center itself. What's more, it may be simpler and cheaper to do so.

But the past few months have seen a decline in talk of outsourcing. Why? In part it's because people are getting used to the concept, and even tired of hearing its hype. In fact, according to Michael Doane, an expert on outsourcing with Meta Group, "Right now it's very much a market push and not a market pull. The vendors are pushing outsourcing, not the clients."

But, according to Doane and others, a large part of the decline is due to the fact that outsourcing, for better or worse, is beginning to show its wrinkles. Although it undeniably has benefits to offer the beleaguered firm in search of top IT talent, it has its drawbacks, as well, and they're starting to come into view.



Counting Pennies Counts

Why outsource? For most it's a question of savings. Some claim it's simply cheaper to let a specialist run your IT functions.

But Richard Matlus, vice president of research for Gartner, cautions firms to question the cost savings of outsourcing. "A lot of people are going into outsourcing to save money," he says, "but they probably won't save money." Doane claims that some firms are so adept at running their network, help desk, and data center that farming them outven to experts who claim perfect efficiencyon't trim the budget.

"You need to look at how cost-efficient and quality-effective you are at distributing those services," he says. "I find organizations that do both of these well, so for them, outsourcing won't make much sense."

Of course, there are other reasons to outsource. If you're having trouble running the network or you can't hold on to good staff or find staff with the right skills, then you may want to consider outsourcing. Matlus does warn though, "It could make sense to outsource. But most people are driven on quality or cost, and before you outsource, you really have to examine those issues."



The Network & Help Desk

One of the first things an SME (small to medium-sized enterprise) looks to outsource is the network, its largest and often most costly asset.

"The larger the shop," says Matlus, "the better the chance that you'll get the savings to justify it." How many admins do you have? How much does it cost to keep them? If you're burdened with high overhead, then letting another firm manage your network could pay off for you.

Not so with the help desk. Says Matlus, "It usually costs more to outsource than to keep it in-house. The average cost for a help desk ranges around $20 per call. When you outsource, it runs from $17 to $22."

But outsourcing does have it benefits. Although it won't save you money, it will improve efficiency. "We typically find that an internal help desk only resolves 50% to 60% of calls, but the external desk is close to 70% or 80%," says Matlus.

If you haven't built the right self-help tools, knowledge base, and problem tracking system, then an outsourced help desk could be a boon.



The Data Center

Some firms take the (rather extreme) route of putting their data center in the hands of an outsourcer. As with the network and help desk, it won't save you dollars. But it still offers gains.

Matlus says, "I have clients who outsource their mainframe data centers because all the mainframe people are about to retire, and the younger people want Linux and other platforms."

These firms don't outsource for cost. Instead, outsourcing helps them find the talent they can't get elsewhere but desperately need. And there are other benefits, too. If you're changing platformsay, moving from Windows to Linuxou can outsource the Windows network and use the time you'll save to train your staff on Linux.


Application Management

Doane notes that farming out your applications (such as CRM and ERP) brings a host of pros and cons to the table. On the side of the good, Doane finds that decision makers often like to outsource to reduce their jobs' complexity. "They're saying, ook, this has gotten too complex. I've got SAP. We're doing Web stuff. Then we put in CRM. We want to run the business processes, not the software,' " he says.

And although outsourcing your systems can make your life simpler, it has its downside, too. Says Doane, "If you give up the baton in terms of your evolution of business processes, if you give up your ability to effect changes to business processes because you don't control the configuration of the software, you've got a problem."

His point is well taken: Although outsourcing can take problems off your plate and free you up for more important tasks, it can also lessen your control over how your business runs. In the end, that could be its greatest weakness, one that you'll have to weigh when choosing to outsource your IT.