External IT Providers vs. Internal IT Teams

Key Considerations for Multi-site Businesses

Large businesses that operate with multiple sites, like those in the automotive, retail, and franchise sectors, face the critical decision of whether to outsource IT needs to external providers or build solutions in-house. 

This choice can significantly impact a company’s efficiency, agility, and bottom line. In this guide, we’ll explore the key factors that you should consider when deciding between external IT providers and in-house IT teams.

In this guide, we’ll explore the challenges OEMs have faced when transitioning to direct sales, the role of retailers in a direct sales future, implications if the direct sales model succeeds, whether the future will be direct or retailer-led, and best practices for managing the transition.

The Pros and Cons of External IT Providers

Outsourcing IT to external providers can offer lots of benefits. These providers specialise in delivering specific software solutions and have dedicated teams with deep knowledge and experience in their area of expertise. 

This enables them to provide high-quality solutions to their clients which are based on working with similar businesses, rather than having to start from scratch.

Rapid Deployment and Cost-Effectiveness

One of the key advantages of working with external IT providers is their ability to deploy new systems and features rapidly. By leveraging their expertise and pre-built solutions, these providers can often implement changes much faster than internal IT teams. 

This allows businesses to quickly adapt to changing market conditions and customer needs. According to a recent study, 60% of UK businesses outsource their IT to improve efficiency and reduce costs (IT Outsourcing Statistics, 2021).

Cost-effectiveness is another significant benefit of outsourcing IT. Companies can avoid the high costs associated with hiring, training, and retaining IT staff, as well as the expenses of maintaining and upgrading hardware and software. 

Simon Porri, MD at Loop, points out, “External providers can often move faster as we’ve encountered similar challenges and issues before. We’re talking about a matter of weeks to implement solutions compared to years when kept in-house” 

Scalability, Flexibility, and Continuous Improvement

External providers also offer scalability and flexibility, allowing businesses to easily adjust their services based on changing needs. 

This enables companies to quickly respond to market demands without the burden of managing IT resources internally. The good external providers continuously invest in improving their products and services, gathering feedback from a wide pool of clients to ensure that their clients benefit from ongoing enhancements and best practices.

Potential Drawbacks of Outsourcing IT

However, outsourcing IT also comes with potential drawbacks:

Data security

Data security concerns can arise when entrusting sensitive company and customer data to a third-party provider. Nevertheless, reputable IT providers invest heavily in robust security measures and comply with stringent industry standards to mitigate these risks. Loop, for example, is ISO 27001 certified and undergoes regular third-party penetration testing to ensure the highest levels of data security.

Customisation

Customisation limitations can also be a concern when working with external providers. Some off-the-shelf solutions may not fully align with a company’s unique business processes. However, many providers, like Loop, offer a high degree of customisation to meet specific client requirements. As Tom from Loop states, “Every project always comes with its own set of complicated implementation challenges, but as we work with some of the largest multi-location brands in the world, we’ve never struggled to overcome them.” 

Dependency

Outsourcing critical IT functions can create a dependency on the external provider, which makes it crucial for companies to carefully select reliable partners and establish clear service level agreements (SLAs) to ensure consistent, high-quality service delivery.

The Case for Internal IT Teams

Maintaining an in-house IT team offers several advantages, including direct control over IT infrastructure, software development, and data security. 

This can be particularly important for businesses with highly sensitive data or unique security requirements. In-house teams can also work closely with other departments to ensure that IT initiatives align with the company’s overall business objectives, leading to more tailored solutions that directly support the company’s strategic goals.

Over time, internal IT staff develop a deep understanding of the company’s specific needs, processes, and culture. This institutional knowledge can be invaluable in developing and maintaining systems that seamlessly integrate with the company’s operations.

Challenges of Maintaining an Internal Team

However, building and maintaining an internal team comes with its own challenges.

The costs associated with hiring, training, and retaining skilled IT professionals can be substantial, and companies must also provide ongoing professional development to keep their skills current. A recent survey found that the average annual salary for an IT professional in the UK is £62,500, with additional costs for benefits, training, and infrastructure (IT Jobs Watch, 2022).

Internal IT teams may also lack the expertise required for certain projects or initiatives, leading to longer development times, suboptimal solutions, or the need to hire additional staff or consultants. 

Internal IT teams often juggle multiple projects and priorities, which can lead to delays or resource constraints, making it challenging to quickly respond to new business requirements or market opportunities.

Skilled IT professionals are in high demand, and companies may struggle to attract and retain top talent. Losing key team members can disrupt projects and leave knowledge gaps that are difficult to fill.

Factors to Consider When Choosing Between an External Provider and Internal Team

When deciding between external IT providers and in-house teams, companies should carefully evaluate several key factors:

  1. Clearly define short-term and long-term business goals and assess whether an external provider or in-house team is better positioned to support those objectives.
  2. Evaluate the costs associated with each option, including salaries, benefits, hardware, software, and ongoing maintenance, as well as the opportunity costs of allocating resources to IT initiatives versus other business priorities.
  3. Consider the complexity and specialisation of the project. Highly complex or specialised projects may require expertise that is more readily available through external providers.
  4. Assess time-to-market, especially in fast-paced industries where speed can be a significant competitive advantage. External providers may be able to deliver solutions more quickly than an in-house team.
  5. Evaluate data security and compliance requirements. Some companies may prefer the control and visibility provided by an in-house team, but reputable external providers can often meet or exceed industry security standards.
  6. Consider scalability and flexibility in light of a company’s future growth plans. External providers can often more easily scale services up or down as needed, while in-house teams may require additional hiring and training.

Best Practices for Working With External Providers

When outsourcing IT to an external provider, there are several best practices that can help ensure a successful partnership:

  1. Clearly define your business requirements, objectives, and success criteria before engaging with a provider.
  2. Conduct thorough due diligence when selecting a provider. Research potential partners and assess their expertise, track record, and customer satisfaction by requesting case studies, references, and proof of relevant certifications or compliance standards.
  3. Establish clear SLAs to ensure consistent, high-quality service delivery and provide a framework for addressing any issues that may arise.
  4. Involve your internal IT team early in the outsourcing process to help identify potential challenges, ensure smooth integration with existing systems, and foster a collaborative relationship between the provider and your in-house team.
  5. Maintain open communication with your external provider to ensure that the project stays on track, any issues are promptly addressed, and your provider remains aligned with your business goals.
  6. Develop a plan for knowledge transfer between the external provider and your internal team to ensure that your company retains critical institutional knowledge and can effectively manage and maintain the solution over time.

Conclusion

Choosing between external IT providers and in-house IT teams is a complex decision that requires careful consideration of multiple factors. 

Companies must weigh the benefits of specialised expertise, rapid deployment, and cost-effectiveness offered by external providers against the control, alignment, and institutional knowledge provided by in-house teams.

The right choice will depend on each company’s objectives, resources, and IT requirements. By thoroughly evaluating these factors and following best practices for outsourcing, companies can make informed decisions that support their long-term success. 

As Simon from Loop emphasises, “I’d say the more specialist it is, the more sense it makes to outsource it, and the higher the risk, the more they’re going to want to hold on to it.”

As businesses navigate the rapidly evolving technology landscape, the decision to outsource IT or maintain an in-house team will remain a critical strategic choice. 

By understanding the pros and cons of each approach and aligning their IT strategy with their overall business goals, companies can position themselves for success in an increasingly competitive and digital world.