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?"

What I've seen

[caboosesw]

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."

In practice, these folks try as hard as possible to stay to a fixed amount of hours and charge for change requests ... not that there is anything wrong with that.

We have seen $130-$150/hr ... although I have heard rumors of folks who do it for $75-100/hr in their retainer.

Ideally, someone would give a tiered labor rate based on the skillset (desktop, server, network, security, etc.)

Re:

[helphand]

Ideally, someone would give a tiered labor rate based on the skillset (desktop, server, network, security, etc.)

I agree. I have a firm on retainer managing our IT infrastructure. The retainer covers remote monitoring and remote helpdesk support supposedly on an unlimited basis. That part I have no problem with, but it irks me to no end that I get charged $150/hour for any onsite work, regardless of the complexity. Installing a new hard drive on a workstation shouldn't require the level of expertise that d

Re:

[mewsenews]

i suspect they're deliberately pricing themselves out of the "sure, i'll plug in your monitor onsite" market. if it's easy enough that you could get an intern to do it, you probably should.

if the IT firm has a problem with you doing the simple stuff in house, that's another issue.

Re:

[helphand]

i suspect they're deliberately pricing themselves out of the "sure, i'll plug in your monitor onsite" market. if it's easy enough that you could get an intern to do it, you probably should.

But that flies in the face of the basic premise of outsourcing the IT infrastructure. I want the infrastructure managed, completely. I don't want to have any IT staff at all. If what you're saying is true, then basically the vendor I've chosen is not truly offering a fully managed solution. Might be time to look for ano

Re:

[mewsenews]

yeah, you're absolutely right. a full-service IT firm should take care of that. i think i was just trying to say that the company you're dealing with probably has tech people working as managers and they don't want to deal with simple problems, or deal with hiring people to do it.

and you're probably right to look for another vendor. there's a point where any growing company has to get their act together and decide what exactly they're offering.

i dunno, good luck.

Re:

[giberti]

Additionally, the $150/hr to plug in a monitor is a sure thing, they know it's easy and so it's the bread and butter. When they need to outsource for professional services of a DBA or something, their profit margin goes way down. It's really just a matter of business!

Retail stores do the exact same thing. Consider electronics. A new television usually is within a small window of room for pricing. One store will have it for $499, another for $510. It'll probably cost just as much in gas and distance traveled

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[NoMaster]

... but it irks me to no end that I get charged $150/hour for any onsite work, regardless of the complexity. Installing a new hard drive on a workstation shouldn't ...

No, but that $150 for the first hour tries to cover the overheads - sourcing parts, organising the tech, getting to your site, etc. It also acts as a discouragement, to prevent you from calling them out to replace printer toner, paper, help people locate their "Any" key, etc.

(Don't laugh - I've seen people call out their IT contractors for 2

Re:

[helphand]

Well, my perspective is that they are recovering their overhead from the retainer and that they should be partnering with me for cost effective solutions to the routine matters that come up in IT, including the occassional need for a real onsite visit to solve a problem.

Now, I do agree that dispatching a tech for silly things like changing toner ought to be discouraged. We're not doing that and my expectation is that their remote helpdesk people would resolve all of the dumb end user issues remotely, witho

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[smithbp]

While the parent of this thread may not be calling for simple things such as toner replacements and finding the "any" key, this does not mean that other companies do not do this. While your situation may be one specific way, it can't be used as the rule. If the company has fifty clients and they all "promise" that they won't make stupid service calls like that, there are more than likely a few fibbers in there. So because the owner of the IT outsourcing firm took everyone's word for it, he/she is eating

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[Jonny do good]

I worked for a company in this boat and although I enjoyed the work, they pay was dismal, employee turnover was high, and eventually after my departure the shop closed its doors. The problem with this environment is that employees know that their skills are valuable once they have been in the field for a while. Pay at my company ranged from $10-$25/hour based on the arrangements. I actually went from a flat rate to commission to a combinataion and back through all of the cycles again. flat pay plus commissi

I see a pretty obvious flaw.

[supabeast!]

Unless this company is in some Midwestern backwater where the cost of living is many times below the national average, trying to turn a profit doing IT support for $65 an hour is just nuts. I can't imagine how anyone could turn a profit at that rate, unless it involves paying employees peanuts and promising a chunk of the business that might turn into something valuable on the off-chance the company is bought out in some future IT boom.

Do yourself a favor and read some books about running a small business.

So do you think that in a regular 9-5 job ...

[0racle]

... that you would get paid close to what you bring in to the company? That people never leave them with a bad taste in their mouth? That because you had a bad week the business model must be flawed?

The only real difference between working in an outsourcing IT company and working in a cube is guarenteed hours.

charges

[josepha48]

typically a company bills 2 to 3 times more. So if you are making $50/hour, then the company would bill $150/hour. This is to cover overhead, ( assuming you are an employee ), of paying you benifits, workmans comp, and all the other expenses that go along with running a business and having employees.

Re:

[Orestesx]

Don't forget profit! the goal, from the POV of the business, is to maximize the difference between revenue (bills) and expenses (your wages). Duh!

SoHo rates

[politrixter]

At 65.00 per hour, you're looking at 2600 per week (40 hour week (likely more hours)). If you're company is putting in 10 hours per week maximum at that rate per 52 weeks, the company is spending only 33,800.00 per year which is a lot cheaper than the client hiring a full time IT staff. Even JR. IT helpdesk retards make more than that (at least over here in the east coast). It makes practical sense for a client of yours to pay as little as they can. You on the other hand (and I don't mean this as an insult)

Re:SoHo rates

[Shadow99_1]

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...

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[DDLKermit007]

I hear you completely on what your saying. I've been starting up my own little consulting buisness and mostly having to go through startup pains of, "damn it's a bitch to get clients." Mainly I stick to real-estate agents, old ladies, non-profits, and buisnesses that want an IT person on call, but not someone who hounds them is attempting to lock them into a contract. The best thing on Earth you can do imo is kiss some ass, network, do good work for people who are likely to tell others about you (hence non

Re:

[ckaminski]

My advice to you? Set something up around osCommerce [url:oscommerce.org]. Great UI for the customers, and you can hack something onto the backend to manage inventorying (which osCommerce can manage, albeit fairly poorly).

And there's a huge community of mods and forums to help you extend and enhance osCommerce based sites.

Re:

[juventasone]

do you bill out double when you list "analysis" twice?

Not really a flawed business plan...

[Gybrwe666]

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...

A few things to look at...

[DecoDragon]

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.

One way to adjust for it

[Wiseleo]

When I quit working for an employer to open my own firm, my dissatisfaction was based on the fact that IT professionals had a fixed ceiling on earnings. I have the opportunity in my company for employees to get compensated for sales as well.

That way I don't have to give away my company, and the income to those who bring the clients in is much higher than those who get assigned a client.

my exp

[Facekhan]

I was getting 25-30/hour for doing this kind of work. They were probably billing me out at around $100/hour. More recently I worked on a short project at a school system, literally logging into hundreds of servers and doing a few quick things with each one, as a one off for a company paying me $30/hour and I ended up with an email of the contract by accident and it said I was being billed at $107/hr.

Re:

[Sorthum]

The noncompete sounds largely unenforceble. I'd check with your state labor board or a lawyer.

Re:

[duffbeer703]

That's a great non-compete for you, because its unenforcable in most states!

I do exactly that job

[AmiMoJo]

I work for a small computer shop that has moved into doing PC repairs, and now business support. We have had similar issues as you, mainly because we go and set up an SBS server and the one IT guy the client company employs wrecks it after a week, but anyway...

We charge £39 + VAT per hour, but are looking to increase this a bit soon. We also have "day rates", which is basically 8x39 but includes any overtime we do that day. We also have out-of-hours rates, which are £65 + VAT per hour. Core hour

Service Business is tough anywhere

[pprboy]

I have been on both sides and visited with others on both sides. Any trade where the cost of entering the field (barriers to entry) are low see the same thing. I've seen mechanics, electricians and plumbers all hang out their own shingle.
I have also audited change order costs for contract work, including employee costs.
Consider this:
Basic 40 hrs/wk = 2080 hrs/yr
Assuming independent (sole Proprietor), simple basic in US

As an independent you will be lucky to get paid for 50% of that. Employee get paid for all

Re:

[notaspunkymonkey]

I work for a large company who provides this type of service - we typically charge $40 per month per desktop / laptop which allows us to pay a 3rd Party Hardware maintainer for HW Break Fix and still make money, and we do most of the Software Break Fix remotely. We work 8am - 6pm but can work outside of this on a T&M basis (I think it averages out at around $70 - 80 per hour) However - we only really take on clients with 2000 items to be supported - however the figures probably dont alter that much to

So start your own company and go it alone.

[Slashdot Parent]

Why sit around and complain that someone else is making money other than you? Go for it! Go out on your own.

What's stopping you?

$125/hr as-needed

[Webmoth]

My company charges a rate of $100-125/hour in our market (small blue-collar city in Pacific NW), depending on the experience of the tech. Most of our work is "time & materials" -- we do have a few clients who have us on a retainer for a specified number of hours per month. Most of the time involved is for weekly checkup & maintenance. Over that is T&M.

As the most experienced tech in my company (nine employees, of which 4 are technical and 2 are part-time developers), I am paid ~$45K/yr which is