The Cost of Outsourcing IT in Singapore: Which Model Is Best for You?

Loss of intellectual property and data are among the top ten risks that Singapore SMEs face. But with cash flow issues also ranking fourth on the list, most SMEs can’t afford to hire dedicated personnel to manage their IT.

Enter outsourced IT support packages. These have become more popular as of late, with 37% of all accounting and IT tasks getting outsourced.

But there are so many outsourced IT support packages and providers on the market. How do you find the right fit at the right price?

First, we’ll dive into the four levels of outsourced IT support models, breaking them down:

• Costs
• Pros/cons
• Commitment required
• Type of company it’s best for

Then we’ll go through the factors to consider so you can settle on a specific type for your company.

Let’s get right to it.

The Four Levels of Outsourced IT Support

Level 1: Ad Hoc IT Support

Like an electrician on speed dial, this type of outsourced IT support requires you to call whenever you encounter issues. This gives you access to a range of more specialized expertise without the burden of full-time IT personnel on your payroll.

Cost:

Pros:

• No need to pay a lump sum upfront
• No contract required
• Access to more specialized technical expertise

Cons:

• IT provider may not respond promptly as they have not allocated time for ad hoc clients
• Higher per hour rate, especially if you urgently need help
• Support is reactive — you already have downtime.

Level of Commitment: No commitment is required from either party.

Best for: SMEs with tech-savvy in-house staff who can take care of routine or common IT matters. You would only call for a technician’s help for more complex problems.

Level 2: Bundled Hours IT Support Package

As with ad hoc support, you’ll have to call your IT support provider when problems arise. The difference is that with a bundled hours package, their technicians must respond promptly.

Cost:

Pros:

• You get the assurance of an SLA (Service Level Agreement), which guarantees response times
• You can also choose to use hours for regular maintenance or upcoming projects if you know you’ll need IT support in advance

Cons:

• Must pay a lump sum upfront
• Like the ad hoc model, support is mostly reactive
• The SLA for response times is usually the best effort or next business day, even if issues are severe

Level of Commitment:  You can purchase a certain number of hours that remain valid for a set period (usually one year).

Best for SMEs that have a clear idea of their IT needs, tasks, and the number of man-hours required per year. They’re cost-conscious but need the assurance of relatively prompt help during emergencies.

Level 3: Fixed Fee Managed IT Support

This type of outsourced IT support strikes a balance between fast issue resolution and cost-efficiency. The managed IT support provider acts as your very own IT department. Under this model, service providers do not count hours: their goal is to do whatever it takes to make sure your IT systems run smoothly.

Cost: 

Pros:

• Proactive monitoring of networks to clear issues before they cause downtime
• Advance planning to ensure your IT infrastructure can support your business goals
• Higher level of support included: procurement, advisory, planning, vendor management
• Greater engineering expertise available due to shared managed services model
• Guaranteed levels of response times under SLA. Emergencies will take the highest priority, but non-emergencies will still have quick response times.

Cons:

• Higher commitment and cost compared with ad hoc or bundled hours models

Level of Commitment:  Fixed fee per month. Contracts typically run for a year.

Best for: SMEs in which secure, smooth-running IT systems are mission-critical (e.g. firms handling highly sensitive data, e-commerce startups, companies heavily reliant on cloud-based servers for employees on the go)

Level 4: Outsourced IT Support Placement

Outsourced placements are when you engage an IT support provider to “park” a dedicated technician at your office. From the outside, it appears no different from hiring in-house staff to manage your IT. The price depends on your needs: the higher the skill level of the engineer, the higher the costs.

Cost:

Pros:

• On-site engineers can respond to issues immediately
• Proactive support to clear issues before they cause downtime
• HR matters — recruitment, training, sick leave, replacements, etc — are handled by the IT services provider
• Engineers are part of the team and have a higher level of trust with your team members

Cons:

• Sometimes depends on the technician to take the initiative to provide proactive support
• If the technician does not take the initiative, it’s up to you to assign tasks — which means you need adequate knowledge of IT
• Cost is the highest of all the models

Level of Commitment: You can request that the engineer be on-site once a week or every working day. Contracts run for at least a year.

Best for SMEs that need to quickly put in place new technologies and need an engineer to be part of the team’s planning process. They also need minimal downtime for business operations, so having an engineer on site all the time is critical.

How to Choose the Right Outsourced IT Support Model

Every company has different needs and constraints, so there’s no “one-size-fits-all” model. To land on the right model for your company, here are five major criteria to evaluate:

1. Budget
2. Reliance on Technologies
3. Sensitivity to Downtime
4. Reactive or Proactive Support
5. Current Staff Competencies and Responsibilities

We’ll go into each of these in detail.

1. Budget

IT support budgets vary from company to company. An early-stage startup may have limited funds for IT compared with a late stage startup, for instance.

If you’ve been in business for at least a year, tabulate the amount you spent on IT support last year. This includes software upgrades, extended warranties, server leasing, professional support, and so on. Then, add a slight buffer (for future growth) to form your estimate for next year’s IT budget.

If you’re a new business owner and don’t have a budget set aside for IT, then ad hoc support might be the best option at this point. However, you’ll want to keep an eye on those IT costs–including the time you currently spend on fixing tech issues–so that you can make more accurate projections for the future.

2. Reliance on Technologies

A prop tech startup might rely more heavily on A.I., cloud servers, and engineers than an accounting firm.

An e-commerce store would also stand to lose more revenue from downtime than, say, if the POS system went down at a brick-and-mortar retailer.

The question to ask here is: what’s your core business, and how dependent on technology is it?

If you’d stand to lose a significant amount of revenue from prolonged downtime, then consider fixed-fee managed IT services or outsourced placements instead. These two options provide proactive support and SLAs for fast issue resolution to minimize downtime.

3. Sensitivity to Downtime

While breakdowns are frustrating for anyone, there are certain business models that can operate even in the case of downtime.

If your staff has workarounds to employ in the event that a machine breaks down, then ad hoc IT support or a bundled hours package might be viable options.

But if your business can’t afford to wait for days for the problem to be fixed, then you might want to go with fixed-fee managed IT services instead.

And if technology is mission-critical for your business, then it might be best to get an outsourced IT placement stationed at your office 5 days a week.

4. Reactive or Proactive Support

Similar to #2 and #3, the fourth factor has to do with your tolerance level for technical problems.

Reactive support means solving issues as they come up. That means that you already have downtime and your business might be unable to operate.

Proactive support, on the other hand, conducts regular checks and updates to make sure your systems are running in tip-top shape. This eliminates issues before they result in downtime.

It’s a lot like doing a yearly health check-up. Yes, you could go to the doctor when you’re already suffering from a disease–but by then it might be too late. Having regular checks not only catches problems early but also surfaces other lifestyle adjustments you could make to have a better quality of life.

5. Staff Competencies and Responsibilities

The last factor to consider is whether your staff have the know-how to fix tech issues – and how much time it takes them. If your company can make do with just having tech-savvy staff on board, then that would help save some money.

But there’s a trade-off here. At first glance, the ad hoc support model may seem like an inexpensive solution if you’re cash-strapped. But what happens when you take into account the opportunity costs?

In many SMEs, staff members typically have to help out with everything they can. You might have your marketing guy taking care of tech issues, for example. But if these tech issues often happen, it could eat into your marketing guy’s time for his core responsibilities–meaning in the long run, your sales pipeline will suffer.

These hidden opportunity costs are harder to compute but are important for the longevity of your operations.

Conclusion

Good IT support can never be understated. Beyond the frustration a downed network causes, a 2019 study found that cyberattacks cost small businesses $200,000 on average.

Having the right IT support provider can not only give you peace of mind but also empower your company to better serve your target market.