IT Outsourcing Cost Calculation

There is no doubt about the fact that no such business owner is a great supporter of outsourcing. There are a lot of organizations that are not very comfortable with terms like outsourcing. However, taking a look at the same term in a wider way, there is not every other business that is interested in including the third parties in the business modules. Or, even authorized for the usage of the business information. Everyone out there is not comfortable with the assignment of work with a third party. For most people, it is rather a feeling of discomfort and stress. This is a general experience, if one is outsourcing information technology work for the very first time, however, what can be more frightening than this could be to compromise with the results of the business and work efficiently. A lot of times, such concerns are raised from inexperience and uncertain feelings with the term outsourcing. Plus, if you have a small business, you might not be liable to afford an entire in house IT department. This is specifically true for the business that is static in the early stages of a business venture.

Let us know how to undertake the calculation of IT outsourcing cost

Well, it can be quite difficult for the recognition of beginning the managed IT. 

  • Is there a requirement for managed IT for the completion of a project?
  • Is there a requirement for outsourcing projects for freeing up time for the existing staff of IT?
  • Is there a requirement for making the scaling procedure simpler?

Well, if any of the above questions apply to you, or there is a requirement for superior quality IT support with great turnaround time, then it is definitely the right time for outsourcing. However, once we decide to take up the managed IT, make sure to do it in the right way. 

The advantages of outsourcing IT

1. Lowered Monthly Cost of IT 

By outsourcing IT, one can attain more consistent monthly costs. No matter the amount of support required, one will always pay the same amount. Through internal IT, if there is a requirement for more support than the usual one, then because of an issue, one might even end up paying for overtime. This turns it simpler for the owner to budget as there is never any need to spend more until the decision of getting more service is undertaken. 

2. Reduction of Upfront IT Costs

The finest financial benefit of outsourcing towards a managed service provider is that one can automatically save for the upfront costs which are in association with the buying hardware and software. Managed IT service firms can offer a monthly plan which is suitable for the business requirements instead of buying a great range of costly equipment. 

3. Simply Scale IT services along with Real-Time capacity needs

With the help of a managed IT service company, one can simply scale up or down with the evolution in business. One does not need to be concerned with the hiring of new staff and training systems. Also, the owners feel completely versatile with the software used by the provider. In case you do not think that the business needs a particular piece of software, feel free to remove it. It gives an implication that when we are growing a business, then there is no need to make payment for unnecessary costs.

4. Superior Productivity

IT issues can give rise to tons of dollars in damage. Rather than struggling with the IT issues, the managed IT service provider can instantly fix the issue for saving time and money. 

Calculation of ROI of Outsourcing IT

We must know that outsourcing IT can lower down costs, however, management and investors need a clear image of the advantages that the alteration can bring. By the calculation of ROI, we can simply demonstrate the value of outsourcing IT. 

But the calculation of ROI is not completely a straightforward procedure. 

  • Firstly, there are certain situations where ROI cannot measure IT projects. The following are some of the instances where the calculation of ROI might not be apt. 
  • Expenditure on IT consumables and compulsory activities like a replacement for broken computer systems or repairing of the same. 
  • Little maintenance of projects that can be completed just in one month 
  • Projects that do not undertake the production of inherent cost revenue or savings. 
  • Projects that are needed for compliance and regulatory reasons. 
  • Projects that include life and death, for example, healthcare solutions
  • Projects that just have benefits that are intangible and there are no measurable financial benefits. 

For such projects that are outside the limitations, the Rate of Interest can be calculated with the formula below:

ROI% – Return – Investment / Investment Cost * 100 

But, still, if the project considered by us has clear ROI calculation, then there are still a lot of perils to be alerted with. 

The instances of issues that must be concerned about involves:

  • Calculation of ROI which can be manipulated by incorrect evaluation of project benefits.
  • Costs, savings, and income of the project must be both realistic and measurable. But, accuracy is not guaranteed for the same. 
  • The utility of a project is not always individually attributed to a single improvement. Hence, we must take care whenever the measurement is taking place, for avoiding the problem of double counting. 
  • It is not completely possible to assume accurately the benefits and costs in association with the project. 
  • Besides, there are a lot of elements to be undertaken that are not in account with the ROI calculation. 
  • For example, there are so many non-financial benefits that a project can bring by outweighing the direct costs like the satisfaction of customers. 
  • The same thing cannot be concentrated in the ROI of a project, however, it is still a crucial piece of information when undertaking the implementation of the new business. 

Outsourcing benefits in the utilization of in house professional experts who add on value to the business by being relaxed from the duties that can be easily handled by a devoted team of experts. In recent times, the business industry is farming out the business function which completely makes sense!

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