I recently posted a question on Linkedin regarding using managed service providers versus owning equipment and managing it in-house and received some interesting responses.  I had thought that most of the responders would be passionately sharing all the reasons why they felt it was better to own and manage equipment in-house but instead, it seems, many of them are more in favor of hosted solutions.  My question and the responses I receive are posted below. 

“What are the best reasons and benefits to managing your own equipment onsite versus using a hosted provider or managed service provider?”

Jeffrey Fisher                                

Systems Analysis Manager
GSK

First question to ask, does your staff have the talent to manage their own equipment? If your company generates 10 million in revenue, probably not. If you constantly have server crashes and your team scrambles to get organized to resolve the issue, you should consider outsourcing. If you are prototyping, outsourcing works well.
Conversely, if you have the talent and finances to manage really manage the complete set of associated technologies, then manage.

Kenneth Knowles

President
Knowles-McNiff

The biggest reason is control. However, a managed service provider can save you time and money over having an in-house staff managing your equipment. It depends on what your focus is. If you want to spend your time managing your equipment, do it yourself. Otherwise, get someone else that will do it for you. Your contract will spell out what you can expect, so you know beforehand what you are getting for your money.

Clive Whittaker

Sales & Business Development Manager – VAR Technology
Focus Technology Solutions

RPO & RTO unless you have redundant power and bandwidth Colo will help your uptime. Managed services will give you a 24/7 staff at a fraction of the cost. I like the idea of two different companies one for the colo and one for management, this will allow you to fire one of them.

I don’t think cost is a factor

RTO – Recovery Time objective – Cost per minute of downtime
RPO – Recovery point Objective – How much data can you lose
If you are a call center down time is very expensive.

Nigel Davey

Provider of business tools and connections
Managed Networks

There are a number of criteria that I think need to be taken into consideration when answering this question:

1.  What is the size of the business?

For smaller businesses it simply doesn’t make economic sense to employ IT staff until you need a team of at least three. If you decide you need one person, you actually need two so that you have cover for holidays, sickness and training. It also means that you cannot be “held to ransom” because only one person knows your systems and you have the benefits of two people’s knowledge that can be applied to your network and to problems within it.

If a service provider is therefore quoting you less than £75,000 per annum, why would you insource?

2.  How complex is the IT?

This means both the geographical distribution of staff and the number of applications and systems you use. The greater the complexity the more staff you are likely to need unless you are able to find people with a wide range of in-depth skills. These lovable geeks can be found at reasonable salary levels but they are few and far between.
A service provider is likely to have a wide range of skills within the business and can then partner with others to fill gaps.

3.  What are the employment laws like in your country?
If you recruit the wrong person but don’t identify this before the end of any probation period, it becomes very difficult and time consuming to get rid of them, especially in the UK and some European countries. If a service provider fails to deliver and is in breach of contract, you can walk away and go to another supplier.

Robert Woodlock

CEO

AVAINTCON Consulting

The only true reason these days to remain local is for customization, but that comes with a cost, for hardware, personnel, DR.

There are multiple reason to move towards hosted services:

* Core Value Add — Support and maintenance of software cannot be a core value add nor should it be for a market research firm or a company whose core business is not collecting data. All the market leaders in the industry know this and have adopted the simple model of keeping only their core business in house.
* Staying Competitive – If you decide to maintain the software in house, you will put yourself behind your competitors, as your company will incur an additional cost/risk associated with maintenance of software. Software is one of those things where the maintenance to capital ratio is very high. For example, if you compare this to the Auto business, you buy a car for about 30K, and you spend about 3K/Year (gas, oil changes, brake pads etc.) to keep the car running. If you buy a software (on-premise install) for about 30K, it’ll cost you about 10K to keep that running. 30% maintenance fees is very typical and minimum. In fact in many cases the operational costs actually surpass the capital expenditure via. costs like server installation fees, product upgrades, bandwidth provisioning etc.
* Quicker ROI — From an initial ROI perspective, hosted solutions shorten time-to-value by eliminating software implementation and cost issues. You focus on collecting your data, refining your processes, and defining your business goals. Not worrying about how Microsoft Vista SP1 patch will affect your installation, or how the next virus threat may affect your connectivity.
* Total-cost-of-ownership. Users of hosted software solutions need not ever implement software upgrades, pay for maintenance, or add hardware. The net effect is to keep total cost of ownership in check. More along the lines of “hidden” costs. If you spend $49/Month on Salesforce or $15/Month on QuestionPro you have a clear understanding on what the total cost is. In on-premise installations, the total costs can never be nailed down. Server hard drive failure can cause outages that may involve one of your engineers to go to the data-center to replace a failed hard drive. These costs are ad-hoc and can only be estimated at best.
* Security Team — Most SaaS vendors have infrastructure devoted entirely to staying up to date with the latest software/hardware security issues. It’s our job to keep your data secure – if it wasn’t we wouldn’t be in business. We can do this efficiently because our upgrades/changes affect all our customers — we are essentially distributing the costs across all our customers — Economies of scale.
* Data Portability — This is obviously a key issue. What if the company that you rely on for your core business stops servicing you, or goes out of business. In almost all SaaS solutions, there is usually ways of getting your data out of the system (locally) as a backup measure. Companies like Salesforce, QuestionPro, Netsuite, ConstantContact, etc. all offer up the ability to download data in a standard Excel/CSV /XML format. These output models serve as a good backup measure just in case things go south. There are however issues around system portability. For example, data from Salesforce cannot be simply taken out and put into Netsuite, or data from ConstantContact cannot be ported to VerticalResponse. This would involve setting data structure standards and everyone adhering to them.