Should You Outsource IT or Build Internal Capacity?

Technology is the backbone of every business today but how much of it should you keep in-house, and when is it smarter to outsource?

In this episode, we explore the trade-offs between outsourcing IT and building internal capacity. For most small and mid-sized businesses, outsourcing makes sense at the start. But as you grow, questions of cost, control, security, and scalability come into play. That’s when the decision gets more complex.

We cover:

• Why SaaS tools work well for startups and growing businesses, but have limits
• The hidden costs of building IT in-house, from maintenance to staffing
• How to calculate the total cost of ownership before making a decision
• When privacy, security, or client trust makes internal IT a necessity
• Hybrid solutions that give you the best of both worlds
• Why IT should support your business, unless it is your business, in which case internal capacity is non-negotiable

If you’re wondering whether to invest in internal IT or keep outsourcing, this conversation will help you weigh the costs, risks, and opportunities so you can make the right call for your stage of growth.

Not sure if outsourcing or building in-house is the right move for your business? Book a free strategy call with us here. We’ll help you assess your needs, clarify your options, and design a solution that fits your goals.

“Always calculate the total cost of ownership, not just the monthly subscription fee.” – Jores Minasvand

Transcript for “When to Outsource IT vs. Build Internal Capacity”

The transcript below was automatically generated. Please ignore any errors or inconsistencies in the text.

Anna Angelova   0:05
Happy Tuesday. This is more than just Task Management, your favorite daily podcast where we help you build a thriving business with me, Anna Angelova, business coach and consultant, and my fellow co-host, Joris Minosvan, business consultant. Hey, Joris, Happy Tuesday.
You are muted.

Jores Minasvand   0:27
I do this all the time. I just talk on mute. Happy Tuesday. Another beautiful Tuesday in August. I think it’s the last one, isn’t it? It is. Yeah. Summer is over. Our lives are over. No, I’m just kidding. It’s time to to move South and enjoy.
The continuous warm weather. But before we do that, we need to talk about our new subject of the day, which is do I build my own IT capacity or do I outsource my IT?
So you want me to get going Anna or you wanna kickstart it?

Anna Angelova   1:11
Keep going. All right.

Jores Minasvand   1:12
All right. So a few weeks back we had a session about technology and outsourcing technology. What technology should a startup or a thriving already started business that wants to scale? What should they adopt and all of that?
Of that and we gave some hints on that where she started processes and but I think what we’re talking about today is the next step. So for example, you can go out and get a CRM tool that’s online, it’s a SaaS based.
You don’t have to worry about anything. It’s just a subscription you pay. They care, take care of the licensing, the hosting, the scaling and all of that you just use and you just pay as you go. Same with your website, same with your e-mail. But these have limitations, right? And the one of the other biggest.
Issues with these is.
Privacy and security because you are at the at their mercy, especially if you’re now extending your CRM or whatever service you’re doing, IT service you have to your client. Now you have responsibility to your client.
So there’s a lot of aspects, their data, your data, scalability. So for those reasons, and if you are, if you see that that it can go somewhere, you can start building your own IT.
And how you do it like you mentioned Anna about website development, you can either outsource your entire website to a company that does the development, hosting and everything and you just pay as you go or you can hire a web developer.
And then even then you can have a choice of do I get this web developer to develop my website on WordPress or whatever the services there are out there, Bluehost or whatever. Or do I get my own server room, deploy my own server, my own DNS server? Then it becomes.
Such a basically you need to build your own infrastructure. The one way around this is that if you’re willing to pay the price and have that that security and scalability in your control, which that’s something that you can offer to your client and you’re making in your pricing is you can get that.
Infrastructure. Instead of getting a physical room or a physical data center or rent a section of a data center, you can get the virtual version of that from the providers, hyperscale providers like Microsoft, Amazon, Google. So basically you get virtual servers. They carve out a section based on.
And what you want, how much capacity, how many servers then you have. And the good thing is that. So for example, if you want to get your own web server and host your own website on your own, you don’t need to worry about the DNS because those hyperscalers, they’ll take care of the DNS because that gets too complicated.
So there are different flavors of what you can do. The question is how much time and money do you want to put into this and what is the ROI?
Call Sana.

Anna Angelova   4:34
OK.
Very good question and this is what I was thinking as well. At some point it can come cost. Cost actually plays a role and and it can come to to like you might need to get to a decision where it’s like, OK, do I continue?
The way things are or or do I build internal capacity and where what I mean by this is that with a lot of those SaaS products that are out there and SaaS it’s the software as a service like you know like the the your CRM might be something like the.
Is your productivity tool might be something like this. A lot of the a lot of the things you do might might be fall into that category. And one thing though is that a lot of these like they have for example personal use and then they have some kind of like a small business, right? They have a tier for small business and.
Because we are talking about websites for example, and then depending on what kind of website you have, what kind of business, at some point the solutions that they offer, like all these different providers offer, they get to a level where.
It’s not even listed for you to be able to opt in for this upgrade to that next plan. It’s not even available. They say book a call with us and this is where price can be a huge factor because suddenly you need more capacity like you need, let’s say like you have a website that.
Get visited by like hundreds of thousands of if not million of millions of people every day, right? You need probably dedicated servers for for just specifically for your website. No not shared servers because Bluehole, Squarespace, a lot of these as we are starting as small businesses.
The shared servers are OK because those virtual things that they offer, a lot of these things are OK. But as the business grows and as your needs grow with the business, there comes a time where you might face this decision and definitely price and cost is one thing.
The thing that you always say, Joris, which I want to bring up as well, is that a lot of times when we work with clients and when you work with the some of your even contracting clients, a lot of times like what we see is that our clients they look at.
The cost from a very narrow perspective, they’re saying, oh, it will cost me $50.00 per user and I have 50 users a month, so it’s like 2500 a month for for this this one thing. No, I I should bring it inside and inside.
Inside it will cost me to build it. It would cost me 100,000, so I’ll in in not 100, let’s say 10,000. So in four months I’ll I’ll get my things right. For example, I don’t know like forget about the numbers, but something along these lines.
Where like ultimately they forget that thing, Joris, that you mentioned so many times, total cost of ownership. It’s not just about building something. It’s not just about the initial transfer of creating something within your company, building that internal capability and capacity within your company.
But then after that, it’s maintenance, it’s upgrades and updates. It’s having people. You didn’t need to have certain people who take care of IT before. Now suddenly you need to have this. You don’t need to hire or get outsource contractors to monitor this for you and make.

Jores Minasvand   8:14
Yes.

Anna Angelova   8:20
Make sure these things keep on working, they get updated, that things are running smoothly. So and we don’t think that one is correct or incorrect, right? And that’s why we’re talking like when, when do you outsource your IT versus when do you build internal capacity?

Jores Minasvand   8:21
E.

Anna Angelova   8:40
I would say for most of us because business, small business owners, even medium sized businesses, outsourcing your IT is probably the the better decision and one caveat is.
Something that we’ve mentioned before in general about outsourcing and having internal capacity is of course.
When it comes to core business, your core business, if your core business, like if you are actually a tech company, a tech startup where you build, you build some kind of a software or application, yes, in the beginning you might be able to.
Manage things and set up things with outsourced IT, but at some point you will need to have the dedicated servers. You need to have the dedicated people to take care of this and and and run your business because it is, as I was saying, it is your core business.

Jores Minasvand   9:33
Thank you.

Anna Angelova   9:40
So I will let you speak. I think you unmuted yourself.

Jores Minasvand   9:40
Mm.

Anna Angelova   9:45
Yeah.

Jores Minasvand   9:45
Yeah. And about that part that you mentioned, there are different flavors even of of the outsourcing. So for example, there are a few philosophies. Some companies, they keep all of their lights on, operational IT internal.
Because it’s cheaper to find people to manage those those services and then they outsource all of their projects. So they get a company, the company comes in, builds a new framework, builds a new platform, and then they write the runbook, they pass it on to your local people.
And then off they go and the your own people continue managing it. The other philosophy is the opposite. You take the mundane and I think this one is grows with size. If you’re really, really, really, really big or you know if you think you’re big or or it all depends on the dollars.
It makes sense to take your entire operations outsources to a company that specializes like a call center.
They take over and then you get your own people who have all the intellectual property, the domain knowledge, the business knowledge to do the projects and as they build the projects then they pass it on to this company to maintain. So there are different you can also do hybrid so.
It all depends on and and I love this thing. They all talk about money, but nobody does total cost of ownership. And there have been a couple of places I walked in and after the meeting when we walk out, a few managers come to me and say.
Can you help us? How do you calculate total cost of ownership? So there are formulas, there are ways of doing it. And like like you said, Anna, you you have something outsourced, you bring it in and you say, oh, I’m not paying.
2500 for 50 licenses. I’m gonna build this for $10,000 myself, but 10,000 is probably just the tools and the licenses. If you calculate six months of a full time FTE at $100,000, that’s $50,000.
Plus if you calculate quarter of their time, which is 25,000 to maintain it, that’s 75,000 right there. You went from 2500 to 75,000, which one makes more sense. So don’t look at the just the numbers that are on the table, look at the entire end to end of it.
And plus the other thing is that can my people do it fast enough or good enough than the other company that the other one that’s doing. Because if if the product is subpar and you build something subpar, talk, talk about 20-30 people’s loss of productivity, loss of data.
Backups, reverts. I mean, if you look at all of this, something that you would have paid 2500, now it cost you $200,000 and more.

Anna Angelova   12:48
Absolutely. It’s when you look about building that internal capacity, definitely consider the whole thing. Like consider how everything changes like the people you need to to have the new in a way if you don’t have an IT department now suddenly you.
You need to have an IT department and things change, things change. And again sometimes you need this and of course so cost is 1 consideration, core business. As I said, this is another consideration if you’re actually offering something that really depends like your your core product.
Or service is actually a software or something that depends on that infrastructure and technology. And as your business grows, it makes sense to consider bringing this thing internally. So you have the control, right? I can’t think about control.
You have the control of the environment, you have control of what gets updated and how it gets updated. Now one thing for example that the bigger companies have that we we we don’t have right now like we we don’t have as a small business, we don’t have this like one thing that big companies do is.
So for example, when Microsoft pushes updates to Windows, we get these updates in the small in our small business. We get these updates right now, right? Like we get these updates immediately whenever they Microsoft pushes them.
What bigger corporations do is they don’t like they actually have their own IT department.
Push updates like they they they don’t allow for for Microsoft to push they they have also a a a next filter and we have all experienced issues and once in a while like every every few months there is that oh Microsoft was an update that you know.
I’ve got something. So there are things about control, like whenever you need the control of the environment, whenever you need to have even more dedicated capacity, you might need to look at what can you do in terms of internal.
Capacity even even bringing an IT person, right? Even even if this is one of the things where George, you were talking about hybrid solution, you don’t have to think like or nothing kind of thinking.
Either or it’s an end. So the way you might think about it is OK, as you’re starting your business in the beginning, you don’t really, even if it’s not, let’s say your business is not a SaaS business, you don’t really care about these kind of things. But as it grows, as more people start coming to your.
Website. Suddenly your needs change. Like your website needs to be faster. If it starts crashing because it doesn’t have capacity, your some of your other infrastructure might not be able to handle the things so.
Your your solution might actually be to internally bring someone who understands all these systems, how they work technologically and like it’s it behind the scenes and manages the relationship with the different vendors. So whenever you need a new plan.
They know what plan to go to. They know that, oh, now we need to move to the next level where we need to double our capacity or triple our capacity, right? So even if the infrastructure, the software you’re using itself is outsourced, you can still have internal capacity in terms of a person who.
Manages this thing. You can still start your own internal IT department in a way. And this is if you think about it, this is how most things start actually that you need someone like a competent person and once you have like this kind of person within your team who specifically focuses on.
I T then this person will be able to help you in terms of all these different decisions at different points of whether, OK, do we keep the same thing? Do we outsource? Do we bring some things in house?
So anyway, I know we’ve talked quite a bit now and I know Joris could share a lot on this topic, so I just wanted to hear your final thoughts.

Jores Minasvand   17:27
Yeah, I’ve seen quite a few different flavors of this in the past and you’re I used to be actually that person you just mentioned that companies bring in to look at their systems and say outsource this part, keep this part, virtualize that part, so.
I used to be that consultant and I’ve seen all aspects of it from a 5 to $10 million company to multi billion dollar corporations. I’ve worked them all and This is why I’m I’m saying I need to understand the total cost of ownership before you make any decisions and I’ve seen this mistake.
Being made over and over and.
Yeah, at the end of the day, contact us. Happy to help and share our experience.

Anna Angelova   18:18
Yeah, I’ll add the link for the strategy call. If you want to jump on a call with us and talk IT, we’re always happy to talk about it and talk servers and geeky stuff. So definitely here for you.
And tomorrow we will be coming back with a completely different topic, and it’s one of my favorite topics. It’s all about culture and how you build a strong company culture from day one.
So if you’re just starting or actually whatever phase that could whatever age your business is, culture eats strategy for breakfast. So while you’re enjoying your breakfast tomorrow, make sure you listen to.
The next episode of Morgan’s Task Management, the daily podcast that helps you build a thriving business, a business that not only is profitable but also great fulfillment for you and allows you to live the life you want to live.
So.
We’ll be back tomorrow. Make sure you come back. And again, if you want to talk IT, see the link in the description, click it, book a call, call with us and we will happily jump on in a call and.
Understand what’s going on with your IT and what your next steps are.
Thank you, Anna. Thanks, Jaris. Bye.

Jores Minasvand   19:48
Thank you, Anna. Bye.