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Flaws in Business Plans of Remote IT Department?
Anonymous Tech Support asks: "I work for a small technical support company that is hired by local companies to manage networks, fix computers, and be the IT department in general. Last week I was working on a small network of 25+ computers. After a week of emotion and annoyances (long story), I have to ask the Slashdot community: How many of you are employees of small 'outsourced IT departments?' How much does your company charge per hour and how much do you make per hour? What sort of agreements do you have with your employer (non-compete etc.)?"
The company charges $65 per hour to regular clients and I make very little of that. It seems like the business model is faulty, pushing us low-level yet skilled employees to start a company and go-it alone. It also seems like outsourced IT departments cannot have employees that will not leave or be disgruntled unless they are either a) paid enough or b) given a stake in the company. Do any of you have experience in this? What sort of business models exist out there for the remote IT department?"
We acquired a company recently who had an outsourced arrangement ... and related to that I have since met a few other outsourcing companies. They all seem to have the same standard model ... monthly retainer with dubious stated hours with an unwritten promise that they will do "whatever it takes."
... not that there is anything wrong with that.
... although I have heard rumors of folks who do it for $75-100/hr in their retainer.
In practice, these folks try as hard as possible to stay to a fixed amount of hours and charge for change requests
We have seen $130-$150/hr
Ideally, someone would give a tiered labor rate based on the skillset (desktop, server, network, security, etc.)
This happens to be a great business plan if you own the company. However, at the billing rates you're talking about, its unlikely that the regular worker in your company is benefitting much at all.
But the fact remains that this business plan has been used with varying degrees of success for many, many years. Some efforts are successful, some are flameouts...
I worked for many different companies like this in my early IT career. The last time I was did this for a job, my boss was paying me $13.25 and billing me at $90.00 or so. We were a fairly specialized provider of a particular field of IT support, and owned the market we were in. The owner needed myself and the other tech to justify her hardware sales, because she was selling commodity hardware at or above MSRP. (Go ahead, see if you can pull that off for a decade!) The engineers were good enough that clients payed more for hardware because they knew that when anything bad happened, it would get fixed and fast.
In fact, I left because one of the owners had just bought property on Nantucket after giving herself a $50,000 bonus (on top of salary and commission) and I got $2000 bucks and a drink. My leaving made them realize that they couldn't find people with my skillset and changed the company policy to reflect profit sharing and a host of other things.
However, your employer probably knows that he can (and undoubtedly will) be able to replace you with another adequate tech for the same amount (or less, as you get raises) and simply doesn't care.
Several of the companies I've worked for doing break-fix jobs had gobs of talent walk in and out of their shops, but simply didn't care. Guys I've worked with have ended up at important jobs running IT departments for huge companies or doing other similar things but started out building PC's or fixing them for $7.00 an hour in the nineties...
Remember that if you do your own consulting, if you pay taxes on that you'll lose a huge chunk of the hourly. Its tough to run your own business, especially finding new clients and getting enough clients to actually pay the rent *AND* food *AND* high speed internet. I did that for a year or so as well, and while it was fun for a while, it got old quick, especially during tax season when I had to fork a decent chunk of change for my accountant to get everything in order.
The good news is that your can likely learn as much as you want and actually start a career doing what you do now. Just don't plan on doing it where you are currently at...
Having been in the small time consulting bussiness myself (also on the East Coast, I live in PA) and I can say that it's not nearly as easy as it sounds...
Why you ask? See it's all in the contacts, and the fact that if he leaves now (when he now has contacts at client companies) he's screwed. The company he has worked for will do whatever it takes to bury him before he can gain any clients of theirs he's dealt with. And if (and is most likely the case) he had no client contacts before taking that job he has a 0.00001% chance of gaining clients.
During college I came back from a larger city to the area I'm from and tried to apply my work as a network consultant back there to get me new bussiness here. I ahd no contacts and at least 3 existing companies did much the same as the one he works for (from the sound of it). Major companies (200+ staff within the area and the ones with money to spend) have their own IT departments (however small those may be), so only the small fries need network consultants (aka the 'portable IT department'). The problem? Those companies can't even pay $100/hour. Most of the existing 'firms' charged $80, which was nearly the limit those places coudl afford (in fact I know several that would toss the consultants out when the reached whatever fixed limit they could afford whether the work was done or not).
I came in and found I knew no one... I couldn't even get my foot in the door with most places, so I ended up taking a retail job for five years... It's been a year since then and I have developed a few contacts that will get me work, but I have about half a dozen clients who can barely afford to pay me (I've had to take some assignments on very low flat fees, or even down work for free to get my foot in the door). It's been a very long and tough process. Even now I'm looking at a long term conttract that pays almost nothing compared to what I will do... The contract calls for me to create a computerized inventory system and client database and then set up an online store from scratch (which isn't even exactly within my normal range of skills)... All by myself. What am I being paid? ~$1800/month as a flat fee. At which I'm more expensive per month than their rent and only because they feel I can make at least that much a month for them through the web am I getting this job at all. It will be the most I've earned yet since I came back.
You make it sound so much easier than the reality is...
we are all invisible unless we choose otherwise
You don't say if your small part of the $65/hr is counting any benefits they may or may not be offering you. You also don't say how much you're billable, so you might want to take that into account. I've been following some small business "managed IT" shops talk bout being happy to get 75% billable out of their consultants, so you might think of that as a benchmark.
This will not endear me to the general Slashdot community, but if you search Yahoo!Groups for some of the MS Small Business Server communities, in particular the smallbizit or "managed services" group, you'll find small business owners discussing the ins and outs of making a business work - including profitability and if you do some archive searchs what they're offering for benefits. If you participate in the OS religious wars, you may want to skip it, but if you can look past that, there's some value. A lot of the discussion is in moving a business from "break/fix" pricing to "managed services." You might Google "The SBS Show" which is a podcast talking about a lot of these issues, interviewing different business owners.