To outsource or not to outsource… that is the question

We recently learned that one of our partner schools is proposing to hire full time staff for their IT, finance, maintenance, and other services, which had previously been contracted out. Okay, at first glance this seems like a legitimate management decision, but is it?

While I cannot speak to other types of services, we experienced this exact scenario once before with respect to IT services at a K-6 charter school and it was disastrous.

Several years ago in Texas, a Vice-Principal was hired at one of our partner schools. He quickly determined that his expertise was sufficient to supplant ours and within a few months found a way to eliminate our contract to provide IT support on one day each week. This was a school that we had built from the ground up and was operating with a high degree of efficiency.

I will spare you the details, but by the following year the Vice-Principal was fired, the school was in financial distress (which led to the dismissal of the business manager), and the technology had pretty much been re-outsourced to the Regional Service Center (the state). And the terminated Vice Principal had so maligned our service model in the process of making the case for our contract termination, that we were not considered in rebuilding the infrastructure.

The whole process diminished efficiency, caused significant service disruptions, cost significant sums of money, and accomplished nothing of value.

So are there times when it is a good idea to hire a full time IT administrator for your school? Maybe, but in the dozen years or so we have been doing this we have found very few. For starters, the numbers (as in cost) just don’t add up. Furthermore, the administrative oversight of personnel is not significantly better. And the level of expertise is greatly diminished.

Restated, these are three reasons why outsourcing IT is normally a better idea than hiring full-time: Cost, Control, and Expertise.

Cost

According to a January 2011 survey by PayScale, the average high school principal in the United States earned a total salary package between $68,167 and $101,560. The Bureau of Labor Statistics validates those numbers, finding that administrators at elementary and high school receive an average annual salary of $85,220.

On the other hand, a similar study by the BLS for computer administrators employed in the highest-paying industries, computer equipment manufacturing and securities exchanges, salaries averaged $89,840 and $89,340, respectively. The number was less in the academic world, but not by a large margin. Granted there is a wide range of qualifications for Information Workers, but even non-degreed, yet certified Network Engineers earned up to $56,000 on average.

When competent Information Workers can earn nearly as much as School Administrators, it is difficult to understand the justification to hire a full-time Technology Director at most Charter Schools. This is particularly true when very few schools need full-time IT administrators. They rarely even need full-time technical support.

Our standard management model provides 1 day per week of onsite Network Administration, supplemented by the daily support required for the particulars of a school, either by a less qualified support engineer or a faculty member assigned to technology. The best scenario is having a faculty member assigned to support technology and serve as the point person in IT matters.

Let’s do the math, assuming a 50 week annual contract. A network engineer charging $65.00/hr. at 8 hours per week would cost $26,000. A desktop support technician charging $15.00/hr. for 20 hours per week would cost $15,000.  The total cost is $41,000. And this provides the full range of technical services required for most freestanding Charter Schools.

This is about half of the cost of hiring one competent Computer Administrator. I emphasize competent, because like in the experience described above, hiring to the level of your budget may in fact cause you to hire an incompetent Computer Administrator. The unintended costs of doing so can be enormous.

Control

Not long ago we had to let one of our desktop support engineers go. We were informed that he was not a good fit for one of our schools and our coaching him on his work ethic was not going well.  We reluctantly terminated this employee, only to find that the school had decided to rehire him as their employee instead of ours.

The situation went from bad to worse. Now, not only did we have the same HR problem as before, but now we had less supervisory oversight.

You will in all probability always need to have entry level desktop administration support. This is where competent Computer Administrators get started. Managing desktops, while getting training on network administration and specific line of business applications is the common pathway for information workers. And there is always an abundance of desktop administration to be done in a school.

But having administrative control of information workers is a tricky business. It is crucial that those so employed are extremely trustworthy and able to work well with others. After all, they control all of the access to information resources in the school and can without much difficulty view sensitive documents and even your email communication in many cases.

Having an outside entity manage your Information Systems can provide an important element of integrity into your infrastructure.

Expertise

You don’t hire a doctor full time to evaluate a medical condition and treat it. Nor do you typically hire a CPA full time to do your bookkeeping. And most schools only retain legal counsel for specific compliance or legal matters where specialized knowledge is required.

There are reasons, both economic and practical why outsourcing Information Technology is wise. Obtaining the requisite technical expertise is the most important reason. Some technical expertise is only required once, as in the design of your network or major system implementations. Other technical specialization may be required only intermittently when upgrading servers or network infrastructure. And much technical expertise is only required infrequently, such as network administration.

So why would you hire full-time to the highest level of expertise for those rare occasions when needed if the bulk of your technical support requirements exist at the entry level? This is a classic misallocation of resources.

Summary

At the risk of self-serving, it seems that outsourcing Technology Management is a pretty common sense approach. It costs less, provides more control, and delivers a higher level of expertise. And these are all good things.

But alas, a wise individual once told me “Common sense is not so common”. 

Please call if you would like to discuss the right mix of Information Management and Technical Support resources.