The Unexpected Costs of In-House IT Management

Navigating the financial complexities of in-house IT management is a critical challenge for multi-location enterprises.

Understanding the true costs of maintaining an internal IT team goes beyond basic salary expenses. It encompasses a range of hidden expenses, including hiring and training, software licensing, infrastructure scalability, and downtime.

Let’s explore the hidden costs and how businesses cope.

1. Hiring and turnover costs

In IT departments, the ongoing shortage of skilled staff poses a significant challenge for in-house IT management, impacting efficiency and strategic focus.

While employee turnover incurs substantial costs, the deeper issue lies in the scarcity of qualified IT professionals, making hiring and retaining senior talent seemingly impossible.

This labor shortage increases reliance on existing team members, who must juggle their core responsibilities with time-consuming administrative tasks like recruiting, interviewing, and onboarding new staff.

Consequently, these additional duties can detract from focusing on key strategic initiatives. 

Augmenting smaller teams with ongoing managed support can alleviate the burden on internal teams, enabling them to concentrate on more critical, growth-driven activities.

2. Forgetting to cancel contracts before renewals

Neglecting to read the fine print in IT service contracts leads to unexpected costs due to auto-renewals. For example, an IT department might overlook a renewal deadline, unintentionally committing the company to another 6-12 month term of service.  They also may not notice automated increases in the contract fees.

Managing different contracts across multiple vendors and locations complicates things further, as each location has unique vendors and contract dates. Failing to track or understand varied terms of contracts leads to costly oversight.

Vigilance in contract management is essential to prevent expensive and unnecessary renewal costs.

3. Changes in software license requirements or needs

Keeping software up-to-date is costly for multi-location enterprises, especially when faced with unexpected changes in licensing requirements or vendor pricing.

When vendors alter their pricing models, it can significantly impact the budget, especially when critical software updates are necessary for operations.

Additionally, changes in a company's size, either growth or downsizing, lead to changes in billing for different software plans and user licenses.

The volatile nature of licenses and contract changes is complex to cover with an in-house team, which is why so many resort to professional telecom managed services.

Additionally, enterprises lack the negotiating leverage that an MSP or agent possesses, which can save 20 to 40 percent compared to retail costs.

4. Infrastructure scalability needs

Maintaining IT infrastructure in-house often leads to underestimating expenses, particularly for businesses experiencing sudden growth.

Statista forecasts global IT spending increasing to a record-setting 5.1 trillion dollars worldwide by 2024, driven mainly by hardware and maintenance.

A company going through rapid growth may feel pressure to scale up its existing equipment. However, rushing IT infrastructure grades often results in overlooking more cost-effective solutions like cloud-managed service providers.

5. Downtime issues from software problems

Software and network problems can significantly impact business productivity and revenue.

Issues like customer ticket backlogs, security breaches, unexpected repairs, bugs, and network glitches contribute to downtime and disrupt the normal flow of operations.

Server business downtime costs can range from $301,000 to $400,000 per hour, highlighting the severe financial implications of IT infrastructure inefficiency.

Downtime leads to lost revenue, data loss, delayed projects, a damaged reputation, and substantial recovery costs. All of which hampers business performance and growth​​​​.

Proactively addressing legacy infrastructure issues and enhancing capabilities is essential to mitigate downtime's costly impact on operations and financial health, separate from direct cybersecurity concerns.

6. Building communication processes

Developing effective communication processes within an organization incurs additional time and financial costs, often overlooked in in-house IT management.

This includes a significant investment in designing, implementing, and maintaining efficient communication channels and protocols.

For example, establishing a cross-departmental communication platform can require substantial resources and disrupt everyday workflows.

Third-party vendors leverage their expertise to alleviate these burdens by implementing ready-to-use streamlined communication solutions.

7. Lack of detail and segmented financial oversight

The lack of detailed and segmented financial oversight in in-house IT management leads to inefficient budget allocation and obscured spending patterns.

Many Senior IT professionals resort to cumbersome methods, like tracking accounts manually in spreadsheets. This approach is prone to errors and fails to offer a real-time look at spending across different regions, providers, and systems.

The absence of accurate and robust vendor oversight leads to missed opportunities for adjusting resources in response to changing needs.

Advantage’s Command Center consolidates fragmented billing

Advantage addresses this gap by offering a centralized insight portal.

The Command Center is a comprehensive portal that overlooks vendors, contracts, renewal dates, and billing information. It’s a landing page for all your services with automated bill payments, providing additional insights to help you make informed decisions.

Achieving complete visibility into spending across different regions, providers, and systems is crucial for accurate financial reporting and decision-making.

Senior IT staff miss opportunities to reallocate underused budgets without real-time detailed oversight.

Conclusion

In-house IT management often incurs unexpected and substantial costs, from hiring and turnover to software licensing and infrastructure scalability.

Advantage’s third-party IT management services offer potential cost savings and improved efficiency, addressing issues like contract renewals, downtime, and financial oversight. Multi-location enterprises should consider outside support for more cost-effective IT operations.

Request a demo to explore how Advantage’s Command Center enhances financial oversight and streamlines IT management processes.