Will Outsourcing Your IT Save Time and Money?

At the intersection of business and technology, the rationale known as “we’ve always done it that way” seems downright antiquated. Still, it’s a surprisingly resilient dogma — particularly in the area of IT. A lot of small business owners struggle with the idea of letting a third-party manage and maintain the infrastructure on which the business depends.

Hosted IT infrastructure? A brief definition: instead of buying, installing, managing and supporting the various servers, data backup systems, virus protection and e-mail platforms (for example) on your premises, you pay a monthly fee for these services from a company that maintains and protects all of the infrastructure in its secure data centers – and thus avoid an up-front cash investment.

The Planet, a company that provides on-demand IT infrastructure solutions and thus very interested in promoting the benefits of hosted IT infrastructure, did a little outsourcing of its own. It commissioned BizTechReports.Com to survey small business owners to see what, if any, benefits hosted IT provides over the traditional do-it-yourself approach. The report, The Small Business Transition to Hosted Technology: Costs vs. Benefits, was published last month. Let’s take a look at the results.

BizTechReports surveyed 326 small business decision-makers from 19 different industries. These respondents fell into two groups: The first consisted of 164 people in companies (all randomly selected customers of The Planet) that outsource at least one major component of their IT infrastructure. The remaining 162 people (also randomly selected) came from companies that manage all major IT infrastructure components on their own.

The respondents were members of senior management, with 96 percent listing their titles as manager, director or higher. The majority of them — 97 percent — work at companies with fewer than 100 employees.

The study found that small businesses that use a hosted IT infrastructure are more likely to spend a smaller percentage of their annual revenue on technology than are their counterparts who manage IT internally. SMBs that outsource are also two times more open to and likely to use new technologies such as software as a service (SaaS) applications like Salesforce.com

The study also revealed that businesses that rely on hosted IT don’t have as many security issues or technical failures, which reduces downtime and its associated cost. Another factor: The rate at which hardware becomes faster and more powerful. The study noted the rapidly shrinking shelf life of hardware makes investing in the technology a lot less appealing for SMBs

Steve Kahan, The Planet’s vice president of marketing and product management noted the study’s finding that a hosted infrastructure makes it easy for a company to expand or contact their IT operations as needed. “Customers pay a monthly fee, which makes predicting costs a snap,” he said. “Plus, being able to buy what they need and scale up or down quickly is a real advantage, particularly when dealing with seasonal business.”

Another notable finding relates to e-commerce. Specifically, outsourcing SMBs add e-commence applications to their business “to generate top-line revenue” twice as often as do companies that manage their own infrastructure. The study also noted that e-commerce apps “require a much higher degree of infrastructure reliability and availability to be successful.”

Kahan said that a hosted infrastructure provides small businesses with the technological backbone necessary to be competitive in the e-commerce arena. “SMBs face behemoth competition when it comes to e-commerce. A hosted infrastructure gives them world-class resources at an affordable price.”

Earlier in the year, The Planet commissioned Stratecast, a division of Frost and Sullivan, to compare the costs involved in a both hosted and a nonhosted IT infrastructure scenario. In its total cost analysis, Stratecast found that a small business owning and maintaining its own IT infrastructure would spend $104,600 over a three-year period where as a company with a hosted IT infrastructure would pay $24,100 for the same infrastructure over the same period of time.

If you’re willing to submit your name, address, company name and e-mail address, you can take a look at both studies, which are available in PDF format through The Planet’s Web site. For the BizTechReports study, click here. For the Stratecast report, click here.

Lauren Simonds is the managing editor of SmallBusinessComputing.com

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!

Must Read

Get the Free Newsletter!

Subscribe to Daily Tech Insider for top news, trends, and analysis.