Three Starter Questions
Easy ones, simply Yes or No:
1) Does your company deliver its own mail and packages, instead of using postal and shipping services?
2) Does your company administer payroll internally, instead of engaging a third party payroll provider like ADP, Paychex, or Intuit?
3) Do you host and manage your own IT network?
If your answer to Question 1 is YES, then something is very wrong with your business.
If your answer to Question 2 is yes, then you are among the rapidly shrinking minority of companies that has not yet realized the cost savings and risk reduction that come with outsourcing payroll administration to the experts. They worked the kinks out of these services decades ago; if you think you can do it better, you’re wrong.
If your answer to Question 3 is yes, then I have good news for you: you are going to shed some major headaches in the next few years and be less distracted from your core business by bringing in a managed IT service provider.
The Next ADP?
In the 1970s, the idea of having an outside company responsible for paying your employees sounded outlandish to many. After all, what was more sensitive or critical than accessing your funds and paying your employees? How could you trust someone else to do that?
Of course, our systems and technology have advanced so far that what was seen as risky and irresponsible a generation ago is now safe and standard. In fact, bringing payroll in-house would raise eyebrows at most companies, leading to not only higher costs, but higher risk.
IT management has existed for a long time, though most of it has been mid-priced (or high-priced) consulting. The best path ten years ago for most companies was to hire a network administrator and team and make the capital investments in the equipment and software required to run their business. Things kept changing, and you needed expensive people to stay on top of it to keep you current.
That is changing. Major advances in bandwidth, security, and storage technology have created new economies for managed IT service providers. Configurations and platforms have settled enough that an outside provider can offer a per-user fee that is much less expensive than the total costs of doing it yourself. And at the same time, you can get better service levels and escape that nagging fear that someday your IT guy might decide to take down the company….
So, is it for you? How do you decide?
To quote Steve Jobs: “Strategy is about saying no.” Few things are more important than deciding what you build versus what you buy. Remember: whatever your people do, that is what business you are in. If everyone at your company spends four hours a week cleaning their office, then you are 10% in the office cleaning business. The same goes for IT management.
Great companies know what they do, and they know what they don’t do. Here’s some wording to try as your team evaluates where to bring in the right partner:
- “Does that fit into our strategic plan? I know your team could probably do this well, but I would hate to pull resources from our core efforts unless you see this as something that we are planning to take to market and sell in the next 18 months.”
- “Do you think that’s something we could take to market? Would we want to compete with the vendors who have the most market share? Is that a good business to be in?”
- “Would anyone pay us to do that? I wonder if there are some complexities that we aren’t seeing right now.”
- “I know your team could do this, and I don’t doubt they could do it well, but I don’t want to dilute their focus.”
Businesses make build-or-buy decisions every day, and a critical part (the most important part?) of business leadership is recognizing where your team’s effort should be channeled. The world continues to get smaller via communication technology, and that means that more narrow specialists can benefit from scale economies and present point solutions that are increasingly efficient.
This thinking is especially seductive for broad solution companies: if you’re in the business of making software, why would you buy someone else’s software? Or if you have smart management consultants, why would you hire an outside firm to help with your re-organization? The answer is focus and bandwidth.
Of course, for IT-related companies, there is always a techie nearby who wants to do it himself and has a strong vision for exactly what you need. But is that the best approach?
An old adage is that when the only tool you have is a hammer, sooner or later everything starts to look like a nail. You may have a few tools in your corporate capability toolbox, but you don’t have all of them. Be sure that when you are evaluating external solutions versus internal you are on a level playing field and have adjusted for empire building and ego.
When it’s a good thing…
In its less harmful forms, wanting to do things internally can indicate ambition, healthy levels of confidence, and a genuine concern for managing expenses and not paying for something that is easily done.
When you hear this Expensive Sentence® repeatedly from a mid-level leader, it probably means that ego is overpowering data and you may have an empire-builder on your hands. “Not-invented-here” syndrome – that is, refusing to acknowledge that other products may be better than your own – will blind a culture to reality and undermine its own products.
The bleeding edge of IT managed services is over. Now the concept is proven, and there are great providers that can deliver more efficiently – and probably more effectively – than you can.
The question is not whether you will ultimately decide that someone else should handle your IT… it is simply when.
A recovering perfectionist, Jack Quarles thinks in PowerPoint. In his mind every problem can be tidied up in three or four gray-scale slides. It often works in the real world, and Jack has delivered tens of millions of dollars in savings to internal and external clients working for over a decade in the expense management field.
Jack has been a highly-rated speaker at national conferences including ProcureCon and Synergy, and has led numerous training sessions in procurement, corporate vision, and strategy. He loves seeing companies improve their focus and performance, and gets to do that daily as a CEO coach with Convene and a principal with 3Q Strategies.
To learn more about Expensive Sentences® and discuss use of the articles, contact author Jack Quarles (jack@3QStrategies.com, 703.944.9676).