How much does Outsourced IT Support Cost?

No question from a prospective client elicits more fear in an IT Support provider than the question of price.

It's not that we (providers of IT support services) collectively don't know how to price and deliver services, nor are we trying to be evasive - in simple terms we could quote ANY number and it would be in equal parts correct and incorrect!

Asking how much does IT support cost is like asking how much does a car cost - the answer very much depends on whether you are looking for a people mover, sports car, your first car and are standing in a used car lot or a luxury car "studio" - the outcome will be the same (you'll get a car), but the experience, benefits and overall "fit" will be very different.

So lets get down and dirty on how pricing for IT support services is put together and how you can be armed with the right information and questions to get an answer that moves your business IT forward!

The Rule of 3

The three main factors influencing IT support costs across any organisation can broadly be categorised as follows:

1. Organisational IT Maturity;
2. Alignment of stakeholder (and Organisational) expectations; and
3. Breadth and depth of service requirements.

Organisations with a high level of IT maturity, clear alignment of expectations and a focussed set of service requirements will generally achieve a per unit support cost substantially lower than that of a comparable organisation with little understanding of what IT services are required and poor to no stakeholder alignment.

The difference from a Service provider perspective is not in the technical work required to deliver said support services, but in the level of management effort required to effectively communicate the specifics of service delivery, account and risk management for each activity. In essence, a maturity tax will be applied, either implicitly or explicitly.

Understanding IT Maturity and Its Implications

IT Maturity is not the age of equipment! IT maturity is a measure of the completeness and appropriateness of key aspects of Information Technology deployment, management and policy.

Organisations categorised as having low IT maturity will struggle with inconsistent processes,  multiple bespoke systems, inadequate documentation and records, a lack of formal procedures and few if any IT related governance policies.

According to recent research by TeamDynamix, nearly half of organizations rate their IT operations at the lower end of the maturity scale, with only about 8% achieving a high level of maturity where IT service management (ITSM) is fully optimised through the use of a framework such as ITIL.

Low IT maturity will generally lead to inefficient IT service delivery and is highly indicative of Organisations with above average operational costs, and poor alignment of IT plans with business objectives.

Expectation Misalignment Among Stakeholders

Misalignment of stakeholder expectations is a buzz kill for effective IT service delivery. At the most basic level, key stakeholders, including IT staff, management, and end-users, are likely to have vastly differing views and understandings on what IT support should provide. The Executive team may expect rapid service delivery and high availability 24x7, while operational staff may be focussed on simplicity of access and the Finance team on minimum cost and ease of reporting. The more sites and departments, the more likely and impactful the mismatch!

Bridging these gaps is essential to establishing clear communication channels to involve stakeholders in the assessment of current capabilities and deficiencies as well as future needs. Using an "all-in" collaborative approach can help align expectations and foster a shared understanding of IT support's role in achieving organisational goals.

Scope of IT Support Services

Often termed the breadth and depth, the scope of IT support services will vary widely, between Organisations. Terms such as Level 1, 2 and 3 technical support are used to define the "depth" of expertise, while areas such as the following define the width, or range of services required:

• Service Desk: Central point of reporting and addressing of immediate technical issues.
• Technical Support: Specialist skills to resolve more complex issues in areas such as networking, server management, Desktop/Laptop/Mobile devices, Cloud Services, Security and Telephony.  These are the basis of the range of services required.
• License Management: Management of licenses purchased or subscribed to including acquisition, return and reconciliation reporting.
• Procurement, Asset and Lifecycle Management: Specification and ordering of new IT assets according to defined need, recording + updating of asset lists and management of asset lifecycle expectation, disposal and replacement schedules.
• Change Management: Managing updates and changes to systems in a manner that provides tracing, testing and a recourse if things don't work to plan.
• Self-Service Portals: Providing a secure online facility enabling users to resolve common issues independently, lookup documentation and access key system artefacts 24x7.
• Automation and Workflow Management: Streamlining processes to reduce manual intervention, minimise handling of information and deliver outcomes in a more time efficient manner.

Often, Organisations lack clarity on which services are essential versus which are nice to have, leading to a mismatch between what is offered and what is needed. This uncertainty will impact on long term cost efficiency as the organisation will be pay for unnecessary services or perhaps event fail to invest in critical areas like Cyber Security, HR automation and self-service, which significantly reduce operational expenses in areas outside of IT support!

Developing a Needs Matrix

To effectively develop a comprehensive cost for IT support, organisations should create a needs matrix that outlines current service consumption (use the 7 key areas listed above as a starting point), identify gaps, and prioritise known areas needing improvement. The following process can be employed to achieve this:

1. Conduct an IT Maturity Assessment: Utilise an IT maturity model (ITIL is more than adequate for smaller Organisations - COBIT can be used for a comprehensive analysis of medium to larger organisations) to evaluate current practices across people, processes, and technology. This assessment should involve key stakeholders to ensure comprehensive input.
2. Identify Current Services: Document all existing IT services, including support levels, response times, and user satisfaction. This service inventory will provide a baseline for understanding current service consumption and what expenditure is going where.
3. Engage Stakeholders: Facilitate workshops or interviews with stakeholders to gather insights on their needs, pain points, and expectations. This engagement will help clarify service requirements and identify critical areas for improvement.
4. Prioritise Needs: Based on the assessment and stakeholder feedback, prioritise needs according to their impact on business operations and user satisfaction. This process will guide resource allocation, budget planning and assist with planning of communications going forward.

Once a needs matrix has been established, the next stage is the development of a Cost Model. It's at this point that engaging with a Service Provider, IT consultant or even a virtual/fractional CIO may make sense - you have a good picture of what you need, how important each area of need is and your stakeholders have been involved and are (hopefully!) aligned - you now just need "numbers"!

Engaging a Service Provider

With a needs matrix established, effectively engaging a service provider can be best achieved following these steps:

• Define Requirements: Clearly outline the specific services needed based on the needs matrix, including specific performance metrics and service level agreements (SLAs).
• Research Providers: Investigate potential service providers that align with the organization's needs and maturity level. Consider their experience with similar organizations and their ability to deliver the required services.
• Request Expressions of Interest: From the above list of candidate providers, request a one-page Expression of Interest in working with your Organisation - focus on having each invited Organisation define the value that they bring to the relationship.  This will be a somewhat subjective exercise with the objective being to shortlist two providers.
• Request Proposals from a Shortlist: Solicit proposals from the shortlisted providers, ensuring they address the defined requirements and demonstrate an understanding of the organisation's context.
• Evaluate Proposals: Assess proposals based on criteria such as cost, service quality, and provider maturity. Engage stakeholders in the evaluation process to ensure alignment with organizational goals.
• Negotiate and Finalise Contracts: Once a provider is selected, negotiate terms that reflect your organisational needs and expectations. Ensure that SLAs are clearly defined to facilitate accountability and performance measurement. Keep in mind that longer tenured agreements will attract better pricing, however, they may restrict flexibility in service changes.

Benchmarks and Baselines

There are a number of published benchmarks that provide rules of thumb when it comes to the costs of IT support.  For many years Gartner Group have published league tables for a number of key industries. Most of the data is gathered from US based Organisations, so it can be somewhat skewed by the (generally) larger size of US organisations.

Not withstanding this, Flexera recently published a benchmark showing that the IT budget for MOST businesses will fall somewhere between 4 and 11% of an Organisations Revenue - for industries with high levels of compliance and regulation, or those with requirements for innovation and IT based R&D, it can be as high as 20%.

Next Steps

Developing an IT support cost model for any organisation is complex. Organisations with low IT maturity require a LOT of work to develop a structured approach encompassing assessment of current capabilities, stakeholder engagement and alignment, as well as prioritisation of needs to ensure that any IT support agreement delivers value.

If you've done the hard work and know what you need, how many you need and when you need it, then that call with your selected Service Provider will deliver value to both parties!