WHEN IT STAFF
UTILIZATION IS BELOW BREAK-EVEN

Lease versus buy is the age old question here. If your staff’s actual utilization is less than the cost for equivalent consulting move to an outsourced or consulting model.

Consider vacations, training, HR compliance, staff meetings, sick days, holidays, personal days, corporate development time, long lunches or any other time invested by an employee that is not directly related to producing something for or enhancing your business. It is not unusual for the corporate IT professional to only work 1200 productive hours annually. Some quick math reveals that a $90,000 employee with benefits can cost over $105 per productive hour. If the cost of the consultant “per productive hour” is less than the cost of the employee “per productive hour” leverage consulting. It’s important to note that there are mitigating circumstances that override this business case. For example, if the employee maintains critical intellectual capital that can’t otherwise be maintained elsewhere.

Case Study 5: ABC Insurance takes excellent care of their IT staff. An analysis of the utilization of the staff programmers revealed that they average 1370 productive work hours annually. With an average salary of $72,000 and a benefits package that is valued at 40% of annual salary. The cost per productive hour for ABC was $73.57. Consultants were deployed replacing half of the staff at a cost of $64.00 per productive hour worked yielding a sizable savings to ABC Insurance.