When to outsource vs in-house

Every growing business reaches that crucial crossroad: should we hire an in-house IT person, build an internal team, or work with external IT support? It's a decision that can massively impact your budget, operational efficiency, and long-term growth potential.

The answer isn't always straightforward, and it's not the same for every business. In this article we'll break down the key factors that should influence your decision and provide you with a practical framework to make the right choice for your organisation.

Understanding your current position

Before diving into the outsource vs in-house debate, you need to honestly assess where your business stands today. Consider these questions:

Business size and growth trajectory

Are you a 10-person startup planning to double in size next year, or a stable 50-employee company with steady growth? Your current size and growth plans dramatically influence the economics of each option.

IT complexity

Do you run standard business applications like Microsoft 365 and a cloud-based CRM, or do you have custom software, manufacturing systems, or complex integrations? The more complex your environment, the more specialised knowledge you'll need.

Risk tolerance

How critical is IT uptime to your business operations? A law firm might survive a few hours of email downtime, but an e-commerce business could lose thousands in revenue.

Current pain points

Are you frequently frustrated with response times, lack of strategic guidance, or feeling like you're not getting value from your current IT arrangements?

The true cost of in-house IT

Many business owners focus solely on salary when considering in-house IT, but that's just the tip of the iceberg. A comprehensive view includes:

Direct costs

Beyond the base salary (typically £25,000-£60,000+ for various skill levels in the UK), make sure you factor in National Insurance contributions, pension contributions, holiday pay, sick leave, and other benefits. A £40,000 salary often costs the business closer to £50,000-£55,000 annually.

Indirect costs

Training and professional development, software licenses for IT management tools, potential recruitment fees, and the management time required to supervise and direct IT activities.

Hidden costs

Training and professional development, software licenses for IT management tools, potential recruitment fees, and the management time required to supervise and direct IT activities.

Skill limitations

One person, no matter how talented, can't be an expert in everything. Modern IT encompasses networking, security, cloud platforms, various software applications, hardware troubleshooting, and strategic planning. You're likely to encounter situations requiring expertise your in-house person doesn't possess.

When in-house makes sense

Despite the challenges, there are scenarios where hiring in-house IT staff is the right decision:

Constant IT needs

If you're generating multiple IT requests daily, need someone physically present for equipment management, or have users who benefit from face-to-face support, an in-house person might provide better service.

Highly specialised systems

Businesses with unique software, manufacturing equipment, or industry-specific applications often benefit from dedicated staff who can develop deep expertise in those particular systems.

Security and compliance requirements

Some industries or businesses with extremely sensitive data prefer having dedicated internal staff who are fully integrated into their security and compliance processes.

Company culture and control

Some organisations prefer the direct control and cultural integration that comes with internal staff. There's value in having someone who understands your business intimately and is available for informal conversations and quick questions.

The outsourcing advantage

Professional IT service providers offer a few compelling advantages that are difficult to replicate internally:

Breadth of expertise

Instead of one person's knowledge, you gain access to a team of specialists covering different areas of IT. When you encounter a complex networking issue, cloud migration challenge, or security incident, there's likely someone on the team with specific experience in that area.

Predictable costs

Most MSP arrangements offer fixed monthly fees, making budgeting straightforward and eliminating the surprise expenses that often come with internal IT management.

Scalability

As your business grows or your needs change, outsourced IT can scale with you without the challenge of hiring, training, or potentially laying off staff.

Proactive management

Professional IT providers typically offer monitoring, maintenance, and proactive problem-solving that prevents issues rather than just responding to them.

Business continuity

There's no single point of failure. If one team member is unavailable, others can step in to maintain service levels.

Making the decision: A practical framework

Here are some of the key decision factors you should take into account when making your decision:

Monthly IT budget

If you're currently spending less than £5,000 monthly on IT support and services, in-house probably doesn't make financial sense yet. Remember to include all IT-related costs, not just support, as you'll still need to purchase things like licenses.

Number of users

Businesses with fewer than 30-40 users often find outsourcing more cost-effective, while larger organisations might benefit from a hybrid approach, combining internal staff with external expertise.

Growth phase

Rapidly growing businesses often benefit from outsourcing because their IT needs are changing quickly, so it's difficult to predict what skills they'll need internally.

Internal capacity

Consider whether you have the management bandwidth to effectively oversee IT staff. Managing IT requires enough understanding about technology to set priorities, evaluate performance, and make strategic decisions.

The best of both worlds

A lot of successful businesses use a hybrid approach, mixing internal and external resources.

Internal coordinator with external expertise

You could look at hiring someone internally to handle day-to-day user support, who can also coordinate with external specialists for more complex projects and strategies.

Outsourced foundation with internal specialists

Use an MSP for core infrastructure management, and employ internal staff for business-specific applications or processes.

Project-based combinations

Maintain ongoing external support while bringing in internal resources for major projects, or during periods of significant change.

Current red flags

There are a few warning signs that your current approach isn't working. If you're frequently experiencing extended downtime, or finding that your IT person is overwhelmed and becoming a bottleneck, it might be time to reconsider your approach.

Similarly, if you're avoiding technology improvements because you're not sure how to implement them, or if you're worried about business continuity if your IT person becomes unavailable, these are strong indicators that a change could benefit your business.

The bottom line

The outsource vs in-house decision isn't permanent! Many successful businesses change their approach as they grow and their needs evolve. The key is making an informed decision based on your current situation, realistic ideas of your needs, and an honest assessment of your resources.

Focus on what arrangements best support your business objectives, rather than what seems the most cost-effective on paper. Sometimes, paying more for the right IT support structure allows business growth that far exceeds the additional investment.

IT should enable your business success, not restrict it. Choose the approach that gives you confidence in your technology foundation, while letting you focus on what you do best: running and growing your business.

If you need help evaluating your current IT situation, book in a call with our technology consultants to help understand your needs and explore your options.