What does IT do for your organization? Said a different way, what does it not do? Are the dollars
and hours spent on technology at your organization moving the business forward?
IT for businesses and organizations has dramatically changed in the past decade. But in this
time, markets crashed, businesses closed, jobs were lost and those left intact just tried to
hang on. Growing, much less innovating, was a dream deferred. Now, several years out of the
recession, those dreams and goals are back for the business. While IT spend is on the rise, the IT
department’s ability to meet the demands on the business is still struggling to get off the ground.
So what is there to do? What solutions are
there that leave the IT department intact but
dramatically improve it’s capabilities to be
strategic and meet the accelerating needs of the
What Do We Spend on IT?
Mid-way through 2013, Forrester Research
released its annual look at global IT spend
(excluding consumer numbers). The projection
was $2.06 trillion invested in software, hardware and IT services in enterprises and governments.1
While $2.06 trillion seems like a lot, it is far less than Gartner’s—a technology industry research
firm—projection of $3.7 trillion, released weeks before Foresters estimate.
IT spend from small and mid-sized businesses (defined as organizations with revenues less than
$1 billion), represents 44 percent of total IT spend. In late 2012, Gartner estimated that in 2013,
SMBs will spend approximately $920 billion worldwide. By 2015 that number is expected to reach
Summary: A lot of money is being spent on IT in 2013. Even more will be spent in the future.
IT Budget Effectiveness
With numbers that start with a “t” and end with a “rillion,” it’s natural to jump right to what all
those dollars are being spent on. How much is spent on virtualization vs. cloud-based services vs.
mobile? There is ample data available to answer those questions in another paper. First we should
take a step back and ask: What is the ultimate end goal for those dollars?
Do More Than Keep the Lights On:
Why Co-Sourcing Your Technology Delivers Results
the IT department's
capabilities to be
For SMBs with less than $500 million in revenue, the top business priorities for CIOs are increasing
enterprise growth and reducing enterprise costs. Improving efficiency and profitability were also
on the list, although further down.2
How likely are these CIOs to achieve their goals for 2013? When asked what their barriers or
challenges were in achieving these goals, the top challenges were lack of staff and skills, as
well as reducing and containing IT costs. Other reports confirm this reality. According to a 2013
Nemertes Research report, 70 percent of organizations surveyed reported flat or declining IT staff
What’s more, when it comes to having input in how IT dollars will be spent, only 31 percent of IT
professionals responding to a late 2012 SpiceWorks survey even create their own budgets.4
seems to indicate the business may not see internal IT departments as strategic enough to build
their own budgets.
If many IT leaders are not building their own budgets and if
the CIO’s goals don’t line up with the reality of staffing levels
and capabilities, the result is clear. The vast majority of dollars
spent in an internal IT department are just to keep things
running. The vast majority of dollars are being spent just to
keep the lights on.
The Trap of Keeping the Lights On
According to a 2012 Forester report, 70 percent of IT funds go
to things other than innovation.5
In 2012, a Gartner analyst
stated that only 14 percent of IT budgets go to “genuine
transformational IT.” Approximately 67 percent of the IT budget
is spent “keeping the lights on.”6
Anyone in IT understands how it happens. Almost two-thirds
of IT organizations (regardless of size) are judged primarily on service goals.7
Adhering to these
metrics is completely justifiable from a business perspective. The “trap” of keeping the lights
on is that every year just hitting those service goals gets increasingly complicated, particularly
for small to mid-sized organizations. User needs and expectations rise, but as previously noted,
staffing stagnates or declines. Managing the same number of employees is more complex
in today’s IT world than it was five or 10 years ago. Mobile devices, dramatic changes in the
security landscape, remote employees, etc. add layers of complexity. To maintain the basics of
accessibility, security and service levels more time and energy is required.
3 Nemertese Research 2013 “Increase Use of Managed, Hosted and Cloud Services to Boost Business Success”
4 Spiceworks Voice of IT Report, " SMB IT Spending: How IT Pros are Creating and Managing 2013 Budgets"
5 Forester Reports, 2012 “Converged infrastructure: attitudes and acceptance”
7 Nemertese Research 2013 “Increase Use of Managed, Hosted and Cloud Services to Boost Business Success”
Hidden Effects of a "Keeping the Lights On" IT Department
It’s clear that when an IT department spends 70 percent of its dollars and likely even a greater
percentage of its time just keeping the business afloat, innovation suffers. New and exciting
changes don’t happen, efficiency stalls and IT is not aligned with overall business goals. But there
are other, more hidden effects.
One such effect is unengaged employees and/or difficulty retaining qualified employees. When
the job becomes just about staying afloat, there is little opportunity for a rising star to learn new
skills, technologies or areas of the business. The
IT industry is, as a whole, in an upswing and
talented IT staff are in high demand. Demand for
some roles, like web developers and database
administrators, is growing by double digits through
A good employee, in any field, is not going
to last long in an environment where innovation is
Another effect is the concept of “shadow IT. ”9
That is, not all IT dollars are actually spent in the
IT department. Forty-seven percent of surveyed
IT professionals know that IT purchases are happening outside of the IT department.10
In order to
meet goals that the IT department cannot get to, other departments take IT into their own hands
and purchase equipment, applications and devices outside of the control of the IT department.
As these applications require integration or customization they eventually find their way to the IT
department, adding to the complexity of keeping the lights on.
What Can Be Done?
To this point, it seems hopeless. IT has goals of increasing profitability and
efficiency but largely spends its time and money doing the basics to meet
required service levels. Innovation is rare, and if it does happen it is often
outside of the IT department.
In the past decade, the IT managed service provider industry has grown
tremendously, offering outsourced IT options that allow organizations to be
free of their internal employees, should they choose. Many of these providers
offer truly excellent alternatives to an internal IT staff. But the truth is, for
many organizations, their internal IT staff is not negotiable, regardless of what
makes bottom-line sense. Many organizations, particularly larger small or more mid-sized ones,
like to have an internal IT team. This is especially true if their IT team offers specialized expertise
about the business or a specific application. They like their familiar faces; people who know the
organization and can tend to the needs of their end users and applications in a different way than
an outsourced provider can. So an outside IT provider might be utilized for an implementation or
8 Robert Half Technology 2013 Salary Guide
9 Why IT Struggles to Innovate, Outsystems report
10 Spiceworks Voice of IT Report, " SMB IT Spending: How IT Pros are Creating and Managing 2013 Budgets"
Impact of Shadow IT:
Not all IT dollars are
actually spent in the
isolated projects but is not allowed into the daily operations of the IT department.
This could be a missed opportunity to do more than just keep the lights on.
Do More: Co-Sourcing IT
Traditional managed service providers are often associated with outsourcing—a scary word to
anyone earning their living in an IT department. While a traditional managed service arrangement
is the right solution for many businesses, others should embrace a co-sourcing model for their IT.
IT co-sourcing is a growing trend. The concept of IT co-sourcing is essentially to augment or
layer in outside IT expertise to relieve the pressure on current IT staff.11
Co-sourcing is a more flexible and collaborative approach, with the
goal to generally support and enhance the services of a current internal
department. Co-sourcing or managed services relationships can be at the
hardware, infrastructure or operating system level (or all three). Contracts
are generally straight-forward and clearly outline the responsibilities of
the internal staff vs. the outside provider. Depending on the competency
of the internal staff, the outside firm may escalate issues internally or
the internal staff may escalate issues to the outside firm. There is great
flexibility and opportunity to design a co-sourcing relationship that fits the
needs of the client.
Co-sourcing allows current IT staff to do more interesting or valuable things, because the daily
monitoring, management and maintenance can be automated by an outside company that
generally has far superior tools and personnel to accomplish this. Often, once a co-sourcing
arrangement has matured, internal IT staff can take on more strategic tasks and projects, resulting
in both keeping the lights on and improved innovation. In a particularly successful co-sourcing
arrangement, the outside company may even be able to provide additional insight or expertise in
these strategic projects.
Why Could Co-Sourcing Work?
The remainder of this paper will address specific ways a co-sourcing relationship can benefit the
growing small or mid-sized business. While there are numerous potential benefits, five stand out
as particular motivators.
1. Breadth and depth of knowledge
Even the most talented, certified, experienced IT professional has a limit to his or her knowledge.
Most IT professionals are either generalists (know a little bit about everything) or specialists (know
a lot about one, or a few, things). Some organizations may be large enough to warrant hiring a few
generalists and specialists. But very few SMBs can justify a robust enough staff to have an expert
in all their regularly used technologies, that is, if they could even hire them. When CIOs were asked
if the IT labor market even had the ability to supply them with the skill sets they needed, only one
11 McGladrey Bulletin: “How IT co-sourcing and managed services can help your business succeed”
in four said yes, Gartner reported.12
While some managed service providers may be using outsourced services of their own, many
have large teams with a breadth and depth of knowledge few SMBs can match. When looking for
a co-sourcing or managed services provider, ask what specialists are on staff, what certifications
they have and what their programs are for continual learning. Make sure the provider has the right
skill sets to complement your internal team. At the heart, that is what co-sourcing is all
about—building upon and extending the strength of the corporate IT department.
2. Superior tools for maintenance and monitoring
Tools cost money. As we have reviewed, most IT dollars are not spent on new tools that will make
the business more efficient and effective.
Managed services organizations have made incredible strides in the past few years. Remote
monitoring and maintenance tools exist that can minimize the work required for daily operations. A
co-sourcing partner could set up a remote agent to monitor and generate alerts when issues arise
with things like:
• Hard drives
• Performance issues (such as slowness)
• Disk space
• Temperature/cooling for server rooms
Many of the activities involved in “keeping the lights on” for
your organization could possibly be automated, freeing up time
for your internal team. Leverage the tools a third- party provider
has invested in to add value to your IT operations.
3. Strategic planning support
Although many organizations will utilize a co-sourcing arrangement to offload the day- to- day
operations, some organizations may wish to include an outside provider in their strategic planning.
This is completely up to the client organization. However, an outside perspective can bring real
value to planning and budgeting discussions. Because of the breadth and depth of knowledge and
experience a provider has, they often have a better and broader awareness of what technologies
are new, what competitors or similar organizations might be doing, what technologies are now
4. Avoid the IT knot
As internal IT departments struggle to maintain service levels and support the technologies
12 Gartner CIO Agenda Insights, 2013
“shadow IT” has adopted, often an IT knot emerges. This is when tools and technologies are put
together and wrapped around each other so tightly that no one can figure out how to unravel
them. Thus, it perpetuates itself. Bringing in outside eyes who look at other IT environments
on a daily basis can provide a crucial function of accountability to the IT team – who internally
might not answer to anyone (since few may understand their world). Creating an atmosphere of
collaboration with internal and external resources can bring simplicity and order to the internal IT
5. Improved continuity of business services
One of the major reasons to consider moving to a managed services model for your IT is to ensure
that someone besides the “IT guy” knows what is required to keep the lights on. Particularly
in organizations where an “IT knot” has formed, there is a significant reliance on one or few
individuals. If this person or persons were to win the lottery, get sick, quit or give a reason to be
terminated, the impact on the rest of the business could be catastrophic. Utilizing an outside
provider to document things like network design, network passwords, etc. can save enormous
headaches if your IT support is for some reason unavailable. Outside providers may also be able
to automate and monitor crucial functions like backups, security patches and reporting that will
make any internal transitions much less risky.
In today's world, the internal IT department has a tough job. Managing constant change, high
expectations and ever growing security risks all add to the challenge. It's not a huge surprise
that most IT departments never find the time, manpower or budget to innovate and improve the
business. But accepting the keeping the lights on trap is a poor option to any business that sees
IT as integral to its daily operations.
For businesses that have rejected traditional managed services relationships that feel more like
displacing or outsourcing, co-sourcing IT is a growing trend worth considering.
Sikich LLP, a leading accounting, advisory, investment banking, technology and managed services
firm, has more than 450 employees throughout the country. Founded in 1982, Sikich now ranks
as one of the country’s Top 40 Certified Public Accounting firms and is among the top 1% of all
enterprise resource planning solution partners in the world. From corporations and non-profits to
state and local governments, Sikich clients can use a broad spectrum of services and products that
help them reach long-term, strategic goals. Visit www.sikich.com to discover how you can elevate
performance in your organization.
Securities are offered through Sikich Corporate Finance LLC, a registered broker dealer with the
Securities Exchange Commission and a member of FINRA/SIPC.
At the heart,
this is what
co-sourcing your IT
is all about:
Building upon and
strength of the IT