The IT Talent Shortage Is Hitting SMBs Hard
Our 2025 IT Trends Report, found that 45% of small and midsized businesses (SMBs) use an in-house IT team to manage their technology needs. Yet, while 41% of SMBs prioritize finding IT talent, they struggle to find skilled employees.
Why? IT professionals are in high demand across industries, and small businesses can’t always match the salaries and benefits enterprises offer. These larger companies also have greater brand recognition to attract highly skilled job candidates.
Here’s how to decide on your approach.
The Growing IT Talent Crisis for SMBs
There are many reasons why SMBs struggle to hire IT staff:
High demand, limited supply. Enterprises can offer the chance to work toward blockchain engineering or becoming a manager, whereas smaller, more specialized companies might not. SMBs can still focus on creating career paths in the long term to retain the talent they hire, but most need to solve their staffing issues now.
Budget constraints. Many SMBs can’t afford to offer competitive salaries and benefits. This also limits their recruiting efforts to free or low-cost channels, like posting on job boards instead of using targeted job ads or staffing agencies.
The need for specialized expertise. 44% of SMBs report IT project management as a major skill gap they need to fill, and 39% say their data security expertise is lacking (these findings are from our 2025 IT Trends Report).
The Real Cost of IT Talent in 2025
The following table, based on information from this site, shows the difference between hiring full-time employees vs. outsourcing IT staff.
In high-cost tech hubs (Seattle, Phoenix, etc.), salaries are even higher, making outsourcing an attractive option.
When figuring the expense of hiring, you’ll need to calculate the total cost of employment. That includes recruiting, bonuses, benefits, training, unemployment insurance costs, and so on. There will be unexpected costs, too, if a new employee leaves soon after being hired.
In contrast, the cost of a managed services provider (MSP) is structured differently. “MSPs only bill for the time we work. So while it can look more expensive on paper, in many situations, we deliver more value,” says Doug Costa, Director of Strategic Accounts at ISOutsource. “Look at it from a cost-benefit analysis standpoint. What is your budget for IT services, and what are your needs? If you’re outsourcing a function, research local salary ranges, figure the total cost of employment, and compare this to what you’re spending now for managed IT services.”
Should SMBs Hire, Outsource, or Do Both?
Weigh your internal IT needs with your staffing budget. You can also approach hiring vs. outsourcing on a hybrid, role-by-role basis.
When deciding whether to hire in-house IT staff, consider:
- How many employees need on-site IT support, and whether you want to manage in-house staff? For some clients, the overhead of having an internal IT team feels too high when weighed against the range of specialized services they need, even when they have 200 or more employees.
- Whether your business is tech-driven and needs dedicated software development or infrastructure.This usually calls for an in-house or a hybrid approach to IT staffing.
- Whether you need constant, on-site IT support for hardware troubleshooting. For example, organizations like schools or research and development firms with laboratory facilities might need in-house IT help to fix specialized hardware when it breaks in the middle of time-sensitive processes. MSPs can respond remotely to monitoring, helpdesk, and cybersecurity incidents 24/7. But it’s not always cost-effective to have them arrive on-site for small hands-on hardware repair jobs at a moment’s notice.
When deciding whether to outsource IT functions by hiring MSPs, vCIOs, and so on, weigh these factors:
- Your IT budget is limited, but you need high-level expertise. The total cost of employment for in-house talent might mean that the strategic use of MSPs provides more value for the money.
- You require 24/7 monitoring. It might be difficult to find an IT employee who will respond to alerts at 3 AM on a weekend, while MSPs offer this service at a more affordable cost.
- You need help with specialized projects. These might include cloud migrations, responsibly managing AI implementations, or cybersecurity audits. MSPs have an entire staff of IT specialists whom you can hire for this kind of work.
Hybrid IT staffing models (combining in-house and outsourced support) are becoming the new standard for SMBs. According to our IT Trends Report, 30% of SMBs use a hybrid IT model, but we expect this percentage to rise. It’s a flexible way to control critical IT functions while using external providers for specific needs.
Actionable Next Steps for SMBs
- Assess your IT needs and budget. Take the time to identify the skills gaps in your organization and balance them with your needs and business goals.
- Decide between hiring vs. outsourcing. Focus on finding which functions should be kept in-house and where you can benefit from partnering with an MSP. This is where your total cost of employment calculations come into play.
- Consider using an MSP to help with select IT projects. It often makes more sense to outsource specialized projects for cybersecurity, cloud management, compliance, infrastructure, and networking to MSPs, especially if you don’t expect to repeat the project.
- Explore fractional IT leadership. A virtual CIO (vCIO) or vCISO can provide strategy and lead business-critical initiatives without a full-time salary.
- Train your existing team. Invest in upskilling your employees to bridge internal knowledge gaps. This can also help with productivity while improving talent acquisition and retention.
Conclusion: SMBs Must Adapt to Win the IT Talent War
The IT talent shortage isn’t going away, and SMBs need creative ways to fill skill gaps. The right mix of hiring, outsourcing, and upskilling can help your organization stay competitive and cost-efficient.
Contact ISOutsource today for more information on supporting your budget, IT strategy, and business goals.