Midmarket IT team : How to create one!

24 October 2017

Within the consulting aspects of Embedded’s world we are often invited into clients to review the performance of their technology in its mission of supporting the business processes. For our smaller clients, this is usually a big decision to take but is driven by a combination of real technology problems and a lack of any internal skilled resource to support / drive their technology agenda.

The conclusion is usually to get the skills needed to understand, represent and manage technology into the company. These skills need to be broad and experienced, and cost money, however without them technology sits out of focus of the business and ends up being under invested and unmaintained, which will just lead to problems in the long term. Being out of license compliance, having unsupported versions of hardware or software, suffering performance problems; all of which can hinder your business processes on which technology sits. The case for IT resources is stronger now than it ever has been in history as technology is an enabler to competitive edge within every industry.

There is a reason why larger corporates have large IT teams. They usually see technology as a critical part of their business, and skill up accordingly to drive the right plans. Critical roles within a corporate IT team, that somehow need to be replicated within a Midmarket function, are simplistically described as:

- Chief Information Officer – generally understands the business information flows within a company and ensures they are efficient, secure and aligned to the business direction strategically.

- Chief Technology Officer – understands current technology deployed throughout a company and what the technology market is doing, then creates and manages a plan to ensure the company is leveraging latest technologies whilst ensuring current technology is never obsolete.

- IT Director / Manager – sometimes merged with CIO, looks after the IT department day to day and ultimately oversees the smooth running of the IT function. Escalation point for problems, and manages key relationships with other teams within the company.

- Infrastructure Manager – ensures hardware and core software components are working, supported, can be configured and maintained to support smooth running of the technical components within a company.

- Applications Manager – ensures development and changes or all business applications (software that supports the company business processes) are made on time, and do not adversely effect any other business processes when being implemented.

- IT Supplier Manager – manages critical relationships with key suppliers, such as those delivering services as if they are an extension of the IT team. This sometimes sits within Procurement, but should not just be a contract administrator – takes an active role in driving service performance with the supplier.

Dependent on size of IT estate (users, sites, applications), these roles can demand significant salary levels.

So in a midmarket company, without £1mpa to spend on salaries, how can you replicate these functions cost effectively? There are a number of approaches:

- Rely on the goodwill internal staff who have an interest in technology – the cheapest option, but fraught with risk, especially if that person leaves / does not document anything / decides its not their role anymore. Clearly having a “part time” IT person also blurs responsibilities and make it difficult to drive appropriate behaviours.

- Hire an IT manager / team to take responsibility for technology – dependent on size, a good decision however if your business is not big enough to justify interesting projects and sufficient workload staff are likely to get bored and leave. Similarly, asking a single individual to act in all of the functions above can be very stressful and drive retention issues.

- Work with a trusted third party to manage IT on your behalf – in my view, the best value for money approach BUT comes with risks such as too much reliance on a key supplier and lack of independence. Buying in IT Services as a Managed Service works brilliantly all the time that the third party involved has an aligned agenda to yours, but as soon as you want to go in a direction they can’t support it becomes enormously difficult to manage / unpick.

- Buy in an independent third party to manage IT as a “virtual resource” – at a day rate level, this is more costly than buying from a supplier. However, if you want to maintain flexibility and independence, and get access to consultants who have a real breadth of industry experience, then this is the best solution.

Mapping back on to the corporate IT departmental structure, an interesting approach is to create a blend of these methods to create a virtual team (indicative costings for a typical midmarket client included):

- Virtual CIO (£3kpm) – third party independent consulting operating on a day a week to maintain contact with the business and drive appropriate change. Fulfilling the role of CIO, CTO and IT Director and IT Supplier Manager.

- Infrastructure Managed Service (£1.5-2kpm) – fully proactively managed IT infrastructure to provide 24x7 support of hardware / core software related problems, delivered by a trusted third party on a contract managed by the Virtual CIO..

- Applications Managed Service (£2-3kpm) – full proactive 24x7 management wrap around each business application purchased, delivered by the developer / vendor of each business application provided, managed by the Virtual CIO.

In this example, total cost of £6.5k - £8kpm, but with no employment cost and access to all of the skills needed to support technology properly. When you consider employment costs (Tax, NI, Pension, etc), this equates to a £60kpa employee, or two £30kpa employees. By virtualising the IT team, you gain access to more than 2 heads of resource, on a 24x7 basis.

Admittedly, £100kpa of additional cost is a significant overhead for most midmarket businesses, but in today’s technology lead environment, can you afford to not manage your IT properly? How much does it cost you when your website is down, your emails aren’t working, you’re consultant booking application is broken etc? How much would it cost you to respond to a license compliance issue?

If you are a midmarket business, and would like to discuss how to improve your technology engagement, please reach out.

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