Driving Growth via IT Service Delivery Models.

Technology is no longer a back-office function—it’s a core driver of business growth, operational efficiency, and shareholder value. For executives, shareholders and investors, selecting the right IT service delivery model is critical to maximizing EBITDA and ensuring sustainable business performance. Below we will explore four key IT operating models, their value, drawbacks, and strategic considerations to aid informed decisions.

Internal IT (In-House Model)

The internal IT model involves building and managing an in-house technology team responsible for all IT functions, including infrastructure, cybersecurity, software development, and user support. This model provides companies with full control over their IT strategy, allowing for direct oversight of priorities and security. IT teams working in-house are closely aligned with business objectives, enabling tailored solutions that support company goals. Additionally, having internal IT reduces third-party exposure risks, which is especially important in highly regulated industries.

However, the in-house model comes with significant costs. Salaries, benefits, infrastructure, and ongoing training create a considerable expense. It is also challenging to scale quickly, making it difficult for companies to expand or pivot to new technologies efficiently. Furthermore, retaining top IT talent can be a struggle, as competition for skilled professionals is intense. According to a 2023 Deloitte report, companies that keep their IT fully in-house spend an average of 3.28% of their revenue on IT, a higher cost compared to hybrid or outsourced models (Deloitte Report).

Managed IT Services (Outsourced Model)

In the managed IT services model, a managed service provider (MSP) takes over some or all IT operations under a contractual agreement. These services include technology infrastructure, cybersecurity, and support, among others. This model is often chosen for its cost efficiency, as it reduces the need for an expensive in-house IT department. Additionally, it provides scalability, allowing businesses to adjust IT services as their needs change. Managed service providers also bring specialized expertise and access to emerging technologies, which can be a significant advantage.

Despite its benefits, the outsourced model has limitations. Standardized solutions may not fully align with unique business objectives, and companies may become dependent on third-party providers. The quality of service varies based on the provider’s expertise and the terms of the contract. A 2024 Gartner study found that 63% of mid-sized companies outsource at least 50% of their IT operations to optimize costs and efficiency (Gartner Report).

Hybrid IT Model (Blended In-House & Outsourcing)

The hybrid model blends in-house IT staff with outsourced services for specific functions such as cloud management, cybersecurity, or software development. This approach allows companies to retain core IT capabilities internally while outsourcing non-essential services. The result is optimized costs, with businesses keeping strategic IT operations in-house while leveraging external partners for specialized or high-maintenance tasks. The hybrid model also provides flexibility, allowing companies to scale IT operations based on business growth. By diversifying IT dependencies, this model reduces vendor lock-in and internal operational constraints.

However, managing a hybrid IT model requires careful integration and oversight of multiple service providers, which can be complex. If not managed effectively, outsourcing savings may be lost due to inefficiencies or service duplication. Additionally, governance challenges can arise, requiring clear roles, responsibilities, and security policies to ensure smooth collaboration between internal and external teams. A 2023 McKinsey report states that 72% of enterprises use a hybrid IT model to enhance agility while managing costs (McKinsey Report).

Cloud-First & SaaS-Driven Model

A cloud-first approach prioritizes software-as-a-service (SaaS) and platform-as-a-service (PaaS) solutions, reducing reliance on traditional infrastructure. This model enables businesses to deploy new applications and features quickly, improving operational agility. It also lowers capital expenditures, as companies no longer need to invest in expensive on-premises hardware. Cloud solutions enhance collaboration, particularly for remote and distributed teams, by providing secure and scalable access to enterprise applications.

Nevertheless, the cloud-first model introduces risks. Data stored externally increases exposure to cyber threats, which can be a significant concern. Vendor lock-in can also become an issue, as companies that depend on a single cloud provider may face challenges when trying to switch services. Additionally, while cloud solutions reduce infrastructure costs, ongoing subscription fees can accumulate, potentially increasing total IT spending. According to IDC, public cloud spending is expected to reach $679 billion by 2025, with 85% of enterprises adopting a cloud-first strategy (IDC Report).

Choosing the Right Model

Selecting the right IT service model depends on several factors, including company size, industry, growth stage, and risk tolerance. Businesses in highly regulated industries may prioritize security and control, making an in-house IT model the preferred choice. Fast-growing companies that require rapid scalability may benefit more from a hybrid or cloud-first approach. Additionally, organizations seeking cost efficiency might find that outsourcing IT services is the best option.

For companies requiring full control and security, the in-house IT model is the most suitable, despite its higher costs. Organizations looking for a cost-efficient and flexible solution may opt for managed IT services, though they must be mindful of provider dependency. The hybrid IT model offers a balance between control and outsourcing but requires strong governance to manage multiple vendors effectively. Lastly, a cloud-first model provides operational agility but comes with potential security and vendor risks.

Lastly, understanding IT service models is essential to make technology decisions that drive business value, enhance operations, and improve EBITDA. Whether keeping IT in-house, outsourcing, blending both, or embracing a cloud-first approach, the right choice aligns technology strategy with business objectives.