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Hiring vs. Outsourcing IT Department

Hiring vs. Outsourcing IT Department. Team 2 Chad Hargrove Gene Neeley III Ian Reyes Audrey Robbins. Project Goal. Decide Whether to Hire a Fulltime Network Administrator or Outsource. Project Scenario. Small engineering consulting firm (<50 employees)

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Hiring vs. Outsourcing IT Department

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  1. Hiring vs. Outsourcing IT Department Team 2 Chad Hargrove Gene Neeley III Ian Reyes Audrey Robbins

  2. Project Goal • Decide Whether to Hire a Fulltime Network Administrator or Outsource

  3. Project Scenario • Small engineering consulting firm (<50 employees) • IS/IT department is not a core aspect of the company • Should we hire a network administrator or outsource?

  4. Fulltime Employee • Network Administrator that maintains our internal computer network • Two Fulltime employees • Offered salary, health/life insurance, paid vacation and sick time

  5. IT Outsourcing • Outsourcing is an agreement by which an organization contracts for the provision of IT/IS services from another firm • Data center management • Network and communications infrastructure management • User Support

  6. Assumptions

  7. Fulltime Employee • Salary - $60,000 per year • Bonus - $2,000 per year • Insurance Benefits • Office Space - 250 sq.ft./person @ $20/sq.ft. • Equipment • Desktop Computer with software

  8. Fulltime Employee Cont. • Equipment cont. • PDA • Cell Phone • Payroll Taxes • Recruiting Costs • Training Costs • Administrative Costs

  9. Outsourcing • 5-year contract • Includes: • Technical expertise in network administration • Network storage • Data backup • Unlimited technical support

  10. Analysis Details • Present worth of 5-year cash flow • To compare the cost (in today’s dollars) with future cost, taking time value of money into consideration • Fixed output situation, goal is to minimize present worth of cost • 5 year analysis period

  11. Present Worth Analysis • Hired Employee

  12. Present Worth Analysis cont. • Outsourcing

  13. Employees Outsourcing Comparative Results NPV = $781,745 NPV = $546,589

  14. Sensitivity Analysis Employees Outsourcing

  15. Sensitivity Analysis Cont. • Special Projects

  16. Employees Eliminates delay of calling external company Can create/maintain a more specialized network Outsourcing Lowers Cost Access all of your applications and data from any computer on web Innovation without the risk Advantages

  17. Employees More costly Less technical expertise Outsourcing Depends on internet connection Technical support hours may vary from the company outsourcing Disadvantages

  18. Final Recommendation Our recommendation is to select the outsourcing alternative in this case.

  19. Resources • www.monster.com • www.provaliant.com/whitepapers/wp_cost_employee.html • www.externalit.com

  20. Questions?

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