Terry Zink's Cyber Security Blog

Discussing Internet security in (mostly) plain English

The cost of in-house vs hosted services

The cost of in-house vs hosted services

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I was reading in another blog post about the cost of doing a messaging service in-house vs farming it out to a hosted services company.  Basically, for a 250-employee company, the cost of doing it in-house was around $300k, while the hosted-services company could do it for about $200k.

The numbers breakdown is interesting in that it implies that the larger the company, the more economical it is to do it yourself (ie, more users = more dollars required to pay the hosted services company who charge per seat).  I can't disagree with the cost-breakdown on the hardware and software required to set it up yourself.  For a mid-sized company obviously it makes sense to have a hosted services company, but if we employ the economies of scale could a large company with many more employees do it themselves?

The hardware estimates would clearly go up, but I think where network adminstrators are underestimating how much it costs to maintain the service.  The cost breakdown for a full-time employee for 3 years is $120k, according to the above link.  This translates to 1 full-time employee at $80k per year.  Assuming that includes all the costs of the employee (ie, health benefits, payroll taxes, etc) I think that the figure is very optimistic.

Speaking from personal experience, the amount of work that everyone on my anti-spam team does has not gone down or stayed the same during the past year - it's gone up.  As the business grows so do the amount of services customers want.  This inevitably translates to the people in charge of this maintaining this stuff doing more and more.  Thus, my point is that this poor employee will sign up to maintain the hardware but he's got to get it up and running and then keep it up and running. 

Next, he'll have to provide more services and users demand more and more, and invariably the maintenance will take up much more time than anyone thinks (trust me on that one).  He'll also be responding to requests from other people to look into this issue, look into that issue, look into another issue, and so forth.  Eventually, he'll request somebody else be hired to ease his workload.  And then they'll be asked to do more and more, and the team will be forced to grow.  I think the HR issue cannot be assumed to always exist in equilibrium.

That's the way I see things, anyways.

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