15 min read
Adrian Ghira
:
Sep 15, 2020 2:14:33 PM
Insourcing and outsourcing represent two fundamentally different approaches to managing your company's technology infrastructure. Insourcing means building and maintaining an internal IT department with full-time employees who work exclusively for your organization. Outsourcing means contracting external IT service providers to handle some or all of your technology needs.
Neither approach is universally superior. Insourcing gives you complete control and dedicated attention but requires significant investment in salaries, benefits, training, and infrastructure. Outsourcing offers access to specialized expertise and economies of scale but means relying on external vendors for critical business functions.
Most Canadian businesses find that their ideal strategy falls somewhere between these extremes, working with managed IT services providers to combine internal oversight with external expertise for specific functions.
Insourcing IT services means employing an internal team of IT professionals who manage your technology infrastructure, provide support, and handle projects as full-time staff members. Outsourcing IT services means hiring external providers, such as managed service providers (MSPs), to deliver technology support and solutions under a contract or service agreement.
The core difference lies in employment structure and control. With insourcing, IT staff are your employees, they work from your location or remotely as part of your team, and they focus exclusively on your organization's needs. With outsourcing, IT professionals work for a service provider, they support multiple clients, and they deliver services according to defined service level agreements (SLAs).
Here's how they compare across key factors:
| Factor | Insourcing | Outsourcing |
|---|---|---|
| Control | Direct management and oversight | Service agreement terms |
| Cost Structure | Fixed salaries, benefits, overhead | Variable service fees |
| Expertise Access | Limited to hired staff skills | Broad team with specialized knowledge |
| Scalability | Requires hiring/firing | Flexible service adjustments |
| Response Time | Immediate availability | SLA-defined response |
| Cultural Fit | Full organizational integration | External partnership |
Both approaches can deliver effective IT support. The right choice depends on your company size, budget, technical complexity, and strategic priorities.
Insourcing IT services provides complete control, immediate availability, and deep organizational knowledge. The primary benefits include:
Direct Control and Oversight
You maintain full authority over IT decisions, priorities, and processes. Your internal team reports directly to company leadership, allowing you to adjust strategies immediately without contract negotiations or vendor approval. This control extends to security protocols, technology choices, and project timelines.
Deep Organizational Knowledge
Internal IT staff develop intimate understanding of your business operations, culture, and specific technology needs. They know your systems inside and out, understand your workflows, and can anticipate problems before they occur. This institutional knowledge becomes a strategic asset over time.
Immediate Availability
Your IT team is present and accessible during your business hours, or whatever schedule you establish. There's no waiting for external vendors to prioritize your support tickets. Your staff can respond instantly to urgent issues and provide face-to-face assistance when needed.
Cultural Alignment
Internal employees fully integrate into your company culture and values. They participate in team meetings, understand company goals, and collaborate naturally with other departments. This alignment often leads to better communication and more effective technology solutions that support business objectives.
Intellectual Property Protection
Keeping IT operations internal can provide greater protection for proprietary systems, sensitive data, and competitive advantages. You maintain complete control over who accesses your systems and how information is handled, without concerns about third-party data exposure.
Customization Freedom
Internal teams can build highly customized solutions tailored precisely to your unique needs without the constraints of standardized service packages. They can experiment, iterate, and develop specialized tools that provide competitive advantages.
Outsourcing IT services delivers cost efficiency, specialized expertise, and operational flexibility. The key advantages include:
Cost Efficiency
Outsourcing typically costs significantly less than maintaining a full internal IT department. You avoid salaries, benefits, payroll taxes, training expenses, and overhead costs for multiple full-time employees. Instead, you pay predictable monthly fees based on the services you actually need.
Access to Specialized Expertise
Managed service providers employ teams with diverse, specialized skills across cybersecurity, cloud infrastructure, compliance, networking, and emerging technologies. You gain access to expertise that would be impossible to hire and retain as a small or mid-sized business. When you need specialized knowledge, it's already available within your provider's team.
Scalability and Flexibility
Outsourced IT services scale up or down based on your changing needs without the complications of hiring or layoffs. As your business grows, your provider can immediately expand support. During slower periods, you can reduce services without affecting employment relationships.
24/7 Coverage and Monitoring
Professional MSPs provide round-the-clock monitoring, support, and incident response. Your systems receive continuous oversight even outside business hours, on weekends, and during holidays. This constant vigilance helps prevent problems and minimizes downtime.
Advanced Technology Access
Outsourcing providers invest heavily in enterprise-grade tools, security platforms, and monitoring systems that individual companies often cannot justify purchasing. You benefit from sophisticated technology infrastructure without capital expenditure.
Reduced Recruitment Burden
IT talent is notoriously difficult to recruit and retain. Outsourcing eliminates the challenges of finding qualified candidates, managing turnover, and maintaining continuity when key employees leave.
Proactive Maintenance
Professional IT providers follow structured maintenance schedules, patch management protocols, and preventive care routines that reduce emergencies. This proactive approach often delivers better reliability than reactive internal teams stretched across multiple responsibilities.
Compliance Support
MSPs stay current with evolving regulations like PIPEDA, GDPR, and industry-specific requirements. They implement compliant systems and provide documentation that simplifies audits and reduces legal risk.
Insourcing IT services creates substantial costs and operational challenges. The main drawbacks include:
High Fixed Costs
Building an internal IT department requires significant financial commitment. Beyond salaries, you must pay benefits, payroll taxes, workers' compensation, and overhead. For Canadian businesses, a single mid-level IT professional represents a substantial annual investment in salary alone, plus 20-30% in additional expenses. A proper IT team typically requires at least three to five people to cover essential functions, creating considerable ongoing costs.
Limited Expertise Breadth
Small internal teams cannot match the specialized knowledge available from larger providers. Your employees will be generalists who handle everything reasonably well but lack deep expertise in specialized areas like advanced cybersecurity, cloud architecture, or compliance frameworks. When complex problems arise, you may still need to hire external consultants.
Scalability Challenges
Growing or shrinking your internal IT team involves lengthy recruitment processes or difficult termination decisions. You cannot quickly adjust capacity to match project demands or business cycles. Hiring takes months, and you pay for full-time employees even during slow periods.
Recruitment and Retention Difficulties
Competition for qualified IT professionals is intense, particularly in major Canadian cities. Finding and keeping talented staff requires competitive salaries, attractive benefits, professional development opportunities, and career advancement paths. High turnover disrupts operations and creates knowledge gaps.
Limited Coverage Hours
Unless you employ multiple shifts, your internal team provides coverage only during business hours. After-hours support requires on-call arrangements that lead to employee burnout or additional costs for backup staff.
Training and Development Costs
Technology evolves rapidly. Keeping your internal team current requires ongoing training, certification programs, and conference attendance. These investments add substantial costs and take employees away from daily responsibilities.
Single Points of Failure
When key IT employees leave, go on vacation, or become ill, their unique knowledge and responsibilities create operational risks. Small teams lack the redundancy to maintain consistent service during absences.
Outsourcing IT services introduces dependency risks and control limitations. The primary concerns include:
Reduced Direct Control
You cannot directly manage outsourced IT staff or make immediate changes to their priorities and processes. Service modifications require communication with your provider and may involve contract amendments or service tier changes. This extra layer slows decision-making compared to directing internal employees.
Vendor Dependency
Relying on an external provider creates risk if they experience business problems, service quality declines, or the relationship deteriorates. Switching providers disrupts operations and requires knowledge transfer that may take weeks or months.
Potential Communication Challenges
Working with external teams sometimes creates communication gaps, particularly if your provider supports many clients or uses offshore staff. Response times depend on SLA terms rather than immediate availability, and remote support may feel less personal than face-to-face assistance.
Security and Privacy Concerns
Outsourcing requires granting external parties access to your systems and data. While reputable providers implement strong security measures, this access inherently creates additional risk compared to keeping everything internal. You must carefully vet providers and monitor their security practices.
Less Organizational Context
External IT staff will never know your business as intimately as internal employees. They may miss nuances about your workflows, culture, and specific needs that internal teams naturally understand. This knowledge gap can lead to less optimized solutions.
Contract Limitations
Service agreements define what's included and what costs extra. You may discover that changes you assumed were covered actually require additional fees. Contract terms, minimum commitments, and notice periods create inflexibility that internal teams don't have.
Shared Resources
Your outsourced IT provider supports multiple clients, meaning their attention and resources are divided. During major incidents or busy periods, you may not receive the immediate, exclusive focus that internal teams provide.
Outsourcing IT services typically costs 40-60% less than maintaining an equivalent internal IT department. The actual difference depends on your company size, technical complexity, and service requirements.
Insourcing Cost Breakdown
For a Canadian business with 25-50 employees, a minimal internal IT team includes:
Base salaries: Significant annual investment required
Additional costs:
Total annual cost: Substantial six-figure investment for minimal coverage
This covers only basic functions. Specialized needs like cybersecurity, cloud management, or compliance require additional staff or external consultants at premium hourly rates.
Hidden insourcing costs:
Outsourcing Cost Breakdown
For the same 25-50 employee Canadian business, managed IT services typically cost significantly less than internal teams:
Comprehensive packages typically include:
Additional outsourcing costs:
Total Cost of Ownership Comparison
For a 50-person Canadian company over three years:
Insourcing:
Outsourcing:
Cost advantage with outsourcing: Most businesses save between 40-60% over three years compared to maintaining equivalent internal teams
The cost advantage of outsourcing increases for smaller businesses and decreases for larger enterprises that can achieve economies of scale with internal teams.
Different IT functions suit either insourcing or outsourcing based on their strategic importance, required expertise, and operational characteristics.
Help Desk and End-User Support
Outsourcing help desk services provides cost-effective, scalable support without maintaining full-time staff for fluctuating ticket volumes. External providers offer extended hours and consistent service levels that small internal teams struggle to match.
Cybersecurity
Cybersecurity requires specialized, constantly updated expertise across threat detection, incident response, vulnerability management, and compliance. Most businesses cannot hire and retain the breadth of security talent available through specialized providers who monitor threats across hundreds of clients.
Network Infrastructure Management
Managing routers, switches, firewalls, and network optimization demands specialized knowledge and 24/7 monitoring. Outsourcing this complex function ensures expert oversight and proactive maintenance.
Backup and Disaster Recovery
Reliable backup systems require consistent monitoring, regular testing, and off-site storage. External providers implement enterprise-grade backup solutions and disaster recovery procedures that most internal teams lack resources to maintain properly.
Cloud Services Management
Managing AWS, Azure, or Google Cloud platforms effectively requires specialized certifications and experience. Outsourcing cloud management provides access to certified professionals who optimize costs and architecture.
Compliance Management
Meeting PIPEDA, PCI-DSS, HIPAA, or industry-specific regulations requires detailed knowledge of evolving requirements. Compliance-focused providers maintain current expertise and documentation processes that simplify audits.
Server and Infrastructure Monitoring
Round-the-clock monitoring prevents problems before they cause downtime. Outsourcing this function provides continuous oversight without requiring shift work from internal staff.
Strategic IT Planning
Long-term technology strategy should align closely with business goals. Having internal leadership who deeply understands your company ensures technology decisions support your competitive positioning and growth plans.
Custom Application Development
Proprietary software that provides competitive advantages often benefits from internal development by teams who thoroughly understand your unique requirements and can iterate rapidly based on user feedback.
Vendor Management
Even when outsourcing technical functions, maintaining internal oversight of provider relationships ensures accountability and alignment with business objectives.
IT Policy Development
Internal staff should establish acceptable use policies, security protocols, and governance frameworks that reflect your specific risk tolerance and culture.
Business-Critical System Oversight
Systems that directly generate revenue or provide competitive advantages may warrant internal management to maintain control and protect intellectual property.
Most successful IT strategies combine both approaches:
This hybrid model balances control with expertise and cost efficiency.
The right choice depends on evaluating six critical factors against your specific business situation.
1. Budget and Cost Structure
Calculate your total cost of ownership for both approaches using realistic figures for your region and industry. Consider whether you prefer predictable monthly expenses (outsourcing) or fixed overhead with variable project costs (insourcing).
If your IT budget is limited or you need cost certainty, outsourcing typically provides better value. If you have substantial capital available and want to build long-term internal capability, insourcing may make sense.
2. Company Size and Growth Trajectory
Businesses with fewer than 50 employees rarely justify full internal IT departments. The fixed costs overwhelm smaller budgets, and limited staff cannot provide adequate coverage or expertise breadth.
Companies with 50-200 employees often benefit from hybrid models with internal IT leadership managing outsourced service providers.
Organizations with 200+ employees may achieve cost efficiency with full internal departments, though many still outsource specialized functions like cybersecurity.
Rapidly growing companies need scalability that outsourcing delivers more easily than continuous hiring.
3. Technical Complexity
Simple IT environments running standard business applications suit either approach. Complex environments with custom applications, multiple locations, regulatory requirements, or advanced security needs often require the specialized expertise available through outsourcing.
Assess whether your needs fall within the skill range of generalist IT staff or require specialist knowledge.
4. Regulatory and Compliance Requirements
Industries with strict compliance obligations (healthcare, finance, legal) benefit from providers who specialize in relevant regulations and maintain current expertise. Building equivalent internal compliance capability requires significant investment.
5. Control Requirements
Organizations handling extremely sensitive intellectual property or operating in highly competitive markets may prioritize the control and confidentiality that insourcing provides. Most businesses find that properly vetted outsourcing partners provide adequate security without sacrificing competitive advantages.
6. Strategic Importance of IT
If technology is core to your competitive positioning, internal capability may warrant the investment. If IT primarily supports operations without differentiating your business, outsourcing allows you to focus resources on your actual competitive advantages.
Small Business (10-50 employees): Outsource most or all IT functions. Limited budgets and simple needs make full outsourcing most cost-effective.
Growing Mid-Size (50-150 employees): Hybrid approach. Hire an internal IT manager to provide strategic direction and oversight while outsourcing technical execution.
Established Mid-Size (150-500 employees): Strong hybrid model. Build small internal team for critical functions and strategic projects while outsourcing specialized and support functions.
Enterprise (500+ employees): Primarily insource with selective outsourcing. Internal departments handle most functions but outsource specialized expertise and scale-up capacity.
Technology Companies: Primarily insource technical roles central to the product but outsource commodity IT functions like help desk and infrastructure monitoring.
Ask yourself:
Your answers will clarify whether insourcing, outsourcing, or a hybrid approach best fits your situation.
Yes, hybrid models combining insourcing and outsourcing provide the most effective IT strategy for many Canadian businesses. This approach balances control with expertise and cost efficiency.
A hybrid IT model typically involves maintaining a small internal team for strategic oversight and core functions while outsourcing specialized, high-volume, or after-hours services to external providers. This structure captures the benefits of both approaches while minimizing their respective drawbacks.
Configuration 1: Strategic Internal + Operational External
Maintain an internal IT director or manager who owns technology strategy, vendor relationships, and business alignment. Outsource day-to-day operations, help desk support, infrastructure management, and technical execution to an MSP.
This configuration suits businesses with 50-200 employees who need strategic IT leadership without the cost of a full technical team.
Configuration 2: Core Internal + Specialized External
Build an internal team handling routine support, standard maintenance, and core systems. Outsource specialized functions requiring advanced expertise: cybersecurity, cloud architecture, compliance management, or specific technology platforms.
This works well for larger organizations (200+ employees) with significant IT needs but gaps in specialized knowledge.
Configuration 3: Development Internal + Infrastructure External
Keep software development and custom application work internal to protect intellectual property and maintain agility. Outsource commodity infrastructure services like network management, server hosting, backup, and monitoring.
Technology companies and software-driven businesses often use this model.
Clearly Define Responsibilities
Document exactly which functions internal staff handle and which the external provider manages. Establish clear escalation paths and communication protocols to avoid confusion when issues arise.
Designate an Internal IT Lead
Even with extensive outsourcing, maintain at least one internal person who understands your technology environment, coordinates with external providers, and represents IT needs to business leadership.
Choose Compatible Partners
Select outsourcing providers willing to collaborate with internal teams rather than insisting on full control. The best MSPs understand hybrid models and work cooperatively with client IT staff.
Establish Regular Communication
Schedule weekly or monthly meetings between internal teams and external providers to review performance, plan projects, and maintain alignment.
Maintain Documentation
Ensure both internal and external teams contribute to shared documentation covering systems, procedures, and configurations. This prevents knowledge silos and enables smooth collaboration.
Hybrid Model Benefits
Combining insourcing and outsourcing delivers:
Most successful mid-sized Canadian businesses eventually adopt some form of hybrid IT model as they grow and their needs become more sophisticated.
Neither insourcing nor outsourcing IT services is universally better. The right choice depends on your budget, company size, technical complexity, and strategic priorities.
Outsourcing typically provides the best value for small to mid-sized Canadian businesses, delivering professional IT management at 40-60% lower cost than building internal teams. You gain access to specialized expertise, 24/7 monitoring, and scalable support that would be impossible to match internally with limited resources.
Insourcing makes sense for larger organizations (200+ employees) that can justify full IT departments or for businesses where technology provides direct competitive advantages requiring complete internal control.
Most Canadian businesses find that hybrid models combining internal strategic oversight with outsourced technical execution deliver optimal results. This approach balances control with cost efficiency and expertise access.
Key Takeaways
Start by calculating realistic total costs for both approaches in your specific situation. Include salaries, benefits, recruitment, training, overhead, and all hidden costs for insourcing. Compare this to comprehensive managed service pricing that includes all necessary functions.
Assess your technical complexity honestly. Simple environments suit either approach, while complex needs requiring specialized knowledge favor outsourcing or hybrid models.
Consider your growth trajectory. Rapidly expanding companies need the scalability that outsourcing provides more readily than continuous hiring and onboarding.
Evaluate your control requirements. Most businesses find that professional MSPs provide adequate security and service quality without requiring complete internal management.
Choose partners carefully if outsourcing. Research providers thoroughly, verify their expertise in your industry, and ensure their service offerings align with your specific needs. Canadian businesses should prioritize providers with Canadian data centers and understanding of Canadian compliance requirements.
Making Your Decision
If your company has fewer than 50 employees, outsourcing most or all IT functions typically provides the best return on investment.
If you have 50-200 employees, consider a hybrid model with internal IT leadership managing external service providers.
If you employ 200+ people, evaluate whether full internal departments or strong hybrid models better serve your specific situation.
Whatever you choose, remain flexible. Your optimal IT strategy will likely evolve as your business grows and technology needs become more sophisticated.
If you're considering outsourcing or implementing a hybrid IT strategy, GAMTech can help you evaluate your options and find the right solution for your Canadian business. Our managed IT services provide the expertise, security, and support you need without the overhead of building an internal department.
Contact us today for a free consultation to discuss your IT needs and discover how we can help your business thrive.
Outsourcing IT is more cost-effective than hiring an internal team for most small to mid-sized businesses. Managed IT services typically cost 40-60% less than maintaining an equivalent internal department when you account for all expenses including salaries, benefits, recruitment, training, overhead, and technology. The cost advantage decreases for larger enterprises that can achieve economies of scale with bigger internal teams, but small and mid-sized companies almost always save substantially by outsourcing.
You maintain security when outsourcing IT services by carefully vetting providers, establishing clear security requirements in service agreements, and maintaining oversight of their practices. Choose MSPs with relevant security certifications (SOC 2, ISO 27001), ask for references from similar clients, and verify they follow industry best practices for access control, data encryption, and incident response. Reputable managed service providers often deliver better security than small internal teams because they invest in enterprise-grade tools and employ specialized security expertise.
You can switch from insourcing to outsourcing without major disruption by planning a phased transition over 60 to 90 days. Begin by documenting your current IT environment, systems, procedures, and pain points, then select an MSP with experience in transition management. Most successful transitions follow this sequence: first monitoring and backup services, then help desk support, followed by infrastructure management, and finally specialized functions.
If your outsourced IT provider goes out of business or you want to switch providers, you'll need to transition to a new provider or build internal capability, which requires 30 to 90 days depending on complexity. Protect yourself by including specific terms in your service agreement: require detailed documentation of your environment that you receive quarterly, maintain copies of all system credentials and configurations, and specify reasonable notice periods and transition assistance requirements. Choose providers with strong financial stability and track records to minimize this risk.
You don't strictly need internal IT staff if you fully outsource, but most businesses with 50+ employees benefit from at least one internal IT-savvy person who coordinates with the external provider and represents technology needs to leadership. This internal liaison understands your business operations, communicates requirements to the MSP, evaluates whether services meet expectations, and makes strategic technology decisions aligned with business goals. Very small businesses (under 25 employees) with simple needs often successfully outsource everything and rely on business leadership to interface with their provider.
Outsourced IT providers typically respond to emergencies within 15 minutes to 2 hours depending on the severity level defined in your service level agreement, which can be slower than internal staff who may respond immediately. However, MSPs provide 24/7 availability including nights, weekends, and holidays when internal teams are often unavailable. The practical difference matters less than you might expect because outsourced providers monitor systems continuously and often prevent emergencies before they occur through proactive maintenance.
You can absolutely outsource some IT functions while keeping others internal, and this hybrid approach often works best for growing businesses. Common configurations include maintaining an internal IT manager who handles strategic planning and business alignment while outsourcing technical execution like help desk support, infrastructure monitoring, and cybersecurity. The key to successful hybrid models is clearly defining which team handles each responsibility, establishing good communication between internal and external teams, and choosing an MSP willing to collaborate rather than insisting on complete control.
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