IT Growing Pains: An SMB Outsourcing Dilemma

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It's no secret that many small and midsize businesses (SMBs) outsource some or all of their IT needs. But what happens when that SMB grows into a larger enterprise?

That's a question that C&J Energy Services is in the midst of answering right now. The Houston-based firm has experienced explosive growth fueled in part by its recent IPO. At this time last year, C&J had 750 employees; today its headcount is around 1,200 and rising by roughly 100 new employees per month.

Its IT department has felt the growing pains especially keenly--in part because it didn't really exist until the start of the year. C&J used to outsource 100% of its IT needs to a managed services provider (MSP). In January, the company brought on Bill McCown as director of IT to help deal with, among other things, its first year of Sarbanes-Oxley (SOX) compliance.

[ Where are SMBs spending their IT dollars? See State Of SMB IT: Spending, Priorities. ]

McCown quickly realized that regulatory compliance wasn't C&J's only technical challenge. The company had clearly outgrown its MSP, evidenced by slipping service levels, uncontrolled costs, and a general disconnect between business strategy and technology. That was underscored when McCown ran a satisfaction survey of his internal user base. It turned out that IT was about as popular as poison ivy: About 85% of users had a poor to extremely poor view of the IT function.

"The perception of the IT function was so low among the employee base because of not having the ability to put a hand on someone and deal directly with someone," McCown said in an interview. The phone support process with the MSP had become too faceless and slow. "People started just not even calling them--they [got] to the point where they just dealt with problems. There become cascading issues like, 'Well, I can't print, but I'll just have to deal with that and go on and maybe ask someone else to do it for me.'"

So McCown launched the complex process of in-sourcing IT while simultaneously sending certain areas back offsite to new vendors. The current focus is to bring both the help desk and engineering--which at C&J means work on internal systems that employees use to do their work--in-house.

The choice to bring in the help desk function became a no-brainer when McCown realized the problem of perception within the organization. On the engineering side, it was a matter of scale. "It became a situation where the provider was not able to deal with the rapid rate of growth," McCown said. "They weren't in tune with the business because they had lots of different types of businesses they were dealing with."

McCown also chose to move certain other functions to new vendors. These include entrusting security to Alert Logic and backup and disaster recovery to EVault.

The overall IT transformation is no easy feat--McCown said it's likely to take at least another six months to complete--but it's already paying off. "The support times have improved greatly," McCown said. The average help desk ticket resolution time had been somewhere between four and eight hours; bringing support in-house has already reduced that to somewhere between 30 and 90 minutes. "While there's not a definite impact cost-wise from that, the satisfaction of users has gone way up." That 85% disapproval rate has already dropped to 30%, and not all user groups have been pulled in to the new internal support system.

Still, it makes sense to keep some areas off-site; in fact, internal IT staff will remain relatively modest so there's a pick-and-choose process when it comes to in-sourcing. For C&J, those outsourced functions currently include security, backup, and disaster recovery. Compliance pains are one reason for this. Geography is another. The company has a number of satellite locations beyond its Houston headquarters, and the previously disparate mix of backup processes and storage media had become untenable.

The company's operations also sit squarely in the path of hurricanes. In many cases, McCown said, a company's multiple locations enable in-house backup and redundancy with no problem. Not so in hurricane territory. "When you're talking about Houston and Corpus [Christi, Texas], if a hurricane comes in and decides to skip up the coast, it could take out one of the offices," he explained. Add cost-efficient options among vendors, and outsourcing was a relatively simple choice.

A parting bit of wisdom from McCown for CIOs and other execs undergoing a similar evolution to internalize IT: "You certainly don't want to approach the outsourced provider in an adversarial fashion." Doing so could complicate a process that's already plenty complex, especially if you're a significant piece of the provider's business. "Treating them as a business partner along the way is something that has been very important."

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