Calculating Internal IT Support Costs

Methods that marketing and sales can use to get a more accurate view of the true costs associated with using internal resources for their technology implementation, integration and support.

Implementing and supporting a new technology isn’t something a marketing or sales organization can – or should – do on its own. In some cases, outside consultants and systems integrators are a viable option. In other cases, implementation, service and support can be outsourced to the vendor. Prior to making a decision – and as a part of due diligence – organizations also should compare the relative costs of using internal IT resources for implementation, integration and support instead of external resources.

A good place to start is to find out if your internal IT department uses a system of chargeback in other areas of the business. For example, do they “charge” finance for installing, supporting and maintaining financial systems? Do they charge other business units for using the financial systems?

Next, find out the rates that IT “charges.” When IT wholly owns a project, chargeback can include software, hardware and services (implementation, migration, integration, support, time and people). For systems used by multiple business units, chargeback might also factor in the number of users or amount of data consumed. Typically, an IT organization using chargeback establishes standard rates for all of these factors. Hardware and software costs are easier to compare, but to get the best comparison, factor in the time and specific resources (people) that will be internally sourced to migrate all existing data and content, get the systems up and running, and provide ongoing maintenance and support.

If IT does not use a chargeback system, work with the department to determine which internal resources will be needed for the project and what their hourly rate is. For salaried employees, divide their yearly salary by the number of hours worked per year. Alternatively, you can get third-party cost estimates (high and low) for the required resources (e.g. Web architect) in your locale. Whether the costs ultimately come out of IT’s budget or your own, it’s important to know them in order to more accurately compare internal costs to outsourcing.

IT costs are generated during the planning, execution and post-launch phases of a project. Work with IT to determine the amount of time and number of full-time employees (FTEs) that will be needed for each phase. Planning and execution are generally frontloaded with internal IT costs, which taper off post-launch. The table below shows a simple example of how to estimate some of the internal IT costs associated with a project.

If there are different rates for different resources, factor those differences into the cost per hour. Should IT require certifications for the technology, note these – and any other costs – in the “additional costs” column. If additional time to learn and understand the new system is required, add it to the “hours IT needed (weekly)” column.

When comparing an outsourced model to an internally sourced model, you must also consider that internally sourced projects take IT resources away from other projects they could be working on. While this is hard to quantify monetarily, it is typically easy to determine in terms of time and delays for other projects. For example, if two FTEs are being used for a WCM/MAP integration, an ERP project might be pushed back six weeks, because the employees’ expertise is required there as well.

When using IT resources, establish, agree upon and enforce service-level agreements based on time and project milestones (with minimum criteria met) and other key metrics (e.g. turnaround time for approved changes). In the example above, if chargeback is being used and IT fails to meet a project milestone (e.g. Web site beta version not operational by the specified deadline), the SLA might state that no additional money from marketing will be used over and above the projected cost. In other words, IT would incur the cost of achieving the milestone. Harsher penalties might include monetary “fines” (e.g. paying IT only $22,000 for the project rather than $28,000 because a milestone was not met).

By using the method described above, marketing and sales can obtain a more accurate view of the true costs associated with using internal resources for their technology implementation, integration and support, compared to the costs of outsourcing the project.