Just to provide some support for point 1 in my last post:

Cringely: A lesson on IT labor economics from Memphis

When ServiceMaster announced its decision to cancel its contract with IBM and to in-source a new IT team, the company had to find 200 solid IT people immediately. Memphis is a small community and there can’t be that many skilled IT workers there, right?  ServiceMaster held a job fair one Saturday and over 1000 people attended.  They talked to them all, invited the best back for second interviews, and two weeks later ServiceMaster had a new IT department.  The company is reportedly happy with the new department whose workers are probably more skilled and more experienced than the IBMers they are replacing.

Read the whole thing. No, really, read it.

Labor costs represent a very high percentage of IT support costs. Managers who note this usually think the solution is to find cheaper labor. This is invariably wrong.