Retain your tech talent or outsource? When doing both is your best strategy.

Recent research commissioned by BEST Technology Services into the state of the Australian service industry has revealed interesting insights into the business plans of enterprise and mid-market integrators and resellers for 2017.

For most of the last decade, integrators and resellers have been enjoying healthy profits from hardware sales. Today, however, with declining sales of their traditional products and services, many are planning to forge new business pathways.

Participants in the research reported that they are seeking to target recurring revenue streams in 2017. Respondents identified one of their major goals for the year as being the transition to offering managed services and XaaS.

Delivering these services requires integrators and resellers to utilise their most costly resource: their staff. However, the survey also revealed that many integrators and resellers are underestimating the true cost of retaining employed teams of technicians and engineers.

 

The real cost of employed technical teams

 

Survey participants indicated that they target a utilisation rate of 75–85% for their employed teams of technicians and engineers. More than 50% of the resellers and integrators surveyed achieve a higher rate, and outsource to external resources only for their lower level projects.

Whilst the utilisation rates are good news for the majority of the resellers and integrators surveyed, the research found that many are overlooking the expense of employed technical teams compared to the higher rates and higher margins that come from outsourcing to managed and deployed services.

If, for example, a hardware engineer enjoying a salary of $85,000 or so is working full time with a utilisation rate of 60–80%, the true cost of this engineer is somewhere between $110 and $147 per hour. Therefore, to make a 25% margin, the engineer needs to be charged out in the vicinity of $146 to $196 per hour.

But with the salaries of many higher level engineers approaching $100,000, the actual cost can be much greater.

Why are resellers and integrators not reaping the financial benefits of outsourcing?

 

Although deployment or installation services offer resellers and integrators sound financial benefits, the research showed that most are reluctant to outsource these services, being concerned about a deployment team’s perceived lack of knowledge and potentially poor presentation, which they fear will impact their reputations and brands or jeopardise good customer relationships.

Yet, carrying an employed team of technicians or engineers worries resellers and integrators too. Respondents identified growth, skills and productivity as areas of concern for 2017, particularly:

1) Adequate staff numbers

2) Adequate skills

3) Profitability of services

4) Consistency of work

5) Cost control on projects

 

 

When it’s time to outsource

 

The findings of the research point to steps that resellers and integrators can take to overcome concerns about growth, skills and productivity.

Firstly, measure the real cost of your engineering workforce. Working out who are your permanent, high cost employees and keeping them firmly focused on high value activities will give the best returns. Likewise, focusing efforts on increasing the number of projects in high value areas is a sound investment.

Thirdly, look to outsource lower level projects. This is especially relevant when you have more projects than your in-house team can manage. Outsourcing for skills and productivity will generate higher margins on those projects, with no impact on your team of technicians or engineers.

Importantly too, outsourcing leaves you free to focus on growth. But only when you partner with a company that is invested in your success or one that will share the risk.

Make sure your outsourcing partner’s processes accommodate a high level of understanding of your business. And more crucially, make sure they understand your clients’ businesses, as they will be representing you as your white label partner.

For more details of the research, contact John McVicker at BEST Technology Services on john.m@best-ts.com.au

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