Every business, no matter how small or big, requires IT support. While large enterprises have the luxury of an in-house IT department, the same is not feasible for small or medium-sized businesses.
As a small business owner, you can consider relying on a budding IT engineer, but let's face it - they will not have all the answers to every tech challenge. Alternatively, you can take the reins of your IT environment yourself. But then, you’ll be juggling technology and business management, which leaves little to no time for what you actually need to do, i.e. nurture your business.
However, it’s not all gloom and doom. Managed IT services offer a lifeline for business leaders in your shoes.
If the thought of outsourcing or hiring an IT service provider makes you uncomfortable, you are in the right place. This blog post aims to demystify how managed IT services can fit into your business strategy and serve as a resource for a comprehensive understanding of the financial impact of hiring Managed IT services.
What Is Managed IT Services?
Before diving into the pricing, plans, and return on investment (ROI) offered by managed IT services providers, let’s take a moment to gain a better understanding of the concept of managed IT services. The terms IT Support, IT Services, IT consulting, and Managed IT Services are used commonly and interchangeably, but they are not all the same. In a business context, there is no room for ambiguity and uncertainty. So, let’s clarify what managed IT services are.
Fundamentally, managed IT services include a broad range of IT services “managed” by third-party vendors instead of in-house teams. The vendors can manage various aspects of an organization’s IT environment, including onsite support, remote helpdesk, network monitoring, cybersecurity, etc. Which aspects are managed is typically decided in the contract between the vendor and the organization. Service level agreements (SLAs) are also defined to manage expectations regarding response time, uptime, support, etc.
Managed IT services can be either fully managed or partially managed. As the name suggests, fully managed IT services cover all aspects of an organization’s IT needs - from simple helpdesk to managing stakeholders and influencing technology investments. Partially managed IT services, on the other hand, have a limited scope that is guided by the business need. Typically, they will manage helpdesk support, network monitoring, cybersecurity, etc., allowing the in-house IT team to focus on more important activities.
How Can You Use Managed IT Services?
You can utilize managed IT services in various ways depending on the specific needs and goals of your business. Here's an overview of three common approaches:
1. Using Managed IT Services As Your Primary IT Team
When you use a Managed Services Provider (MSP) as your primary IT team, you outsource your entire IT management to them. They take the responsibility of managing and maintaining all of your company's IT systems, networks, security, and other technology-related functions.
This approach is common among small to medium-sized businesses that either have limited resources or prefer to maintain a lean structure.
Here are some advantages of this model:
Outsourcing your IT management is much more cost-effective than hiring and maintaining an in-house team.
MSPs offer a level of skills, experience, and expertise that is not possible to have in-house.
Outsourcing their IT management allows businesses to focus on their core competencies without the distraction of managing IT operations.
Here are some important considerations when adopting this model of outsourcing:
Ensure that the MSP has the expertise in the technologies and systems you utilize.
Define clear SLAs that meet your business requirements and service expectations.
Ensure that they are a good culture fit so that there is seamless collaboration and clear communication.
Pay attention to the vendor’s technology recommendations; ensure that these are aligned with your business goals and objectives.
2. Using Managed IT Services Alongside An In-House IT Department
This is a hybrid model in which organizations maintain an in-house IT team while leveraging the expertise of an MSP for specific functions or to augment the capabilities of the internal team. This approach is common among organizations both large and small and is often referred to as “co-managed IT services”. Reasons for outsourcing typically include reducing operating costs, focusing on core business, and adapting to talent scarcity.
Here are some advantages of this model:
This model allows organizations to scale their IT resources up or down based on fluctuating needs.
MSPs provide expertise in niche areas, complementing the skills of the in-house team.
It allows organizations to focus on and develop expertise in business-critical IT functions without getting distracted by mundane IT issues.
Here are some important considerations when adopting this model of outsourcing:
You need to clearly define roles and responsibilities to avoid duplication of efforts and misunderstandings.
Cultural integration is again a challenge. You need to ensure that the in-house team and the MSP can work together without friction.
3. Using Managed IT Services To Scale During Growth
Organizations sometimes experience periods of rapid growth when their IT needs rapidly multiply and systems become more complex. During this period, they need scalable solutions and expertise. In such situations, managed IT services serve as excellent partners by supporting and facilitating growth in the short to medium term, while the organization focuses on growth and long-term IT solutions.
Here are some advantages of this model:
MSPs support rapid growth by quickly adapting to accommodate the increased demands of a growing business.
MSP can effectively manage day-to-day IT operations, allowing you to focus on strategic goals and expansion.
MSPs allow you to scale rapidly without having to compromise on the quality of hires and security considerations.
Here are some important considerations when adopting this model of outsourcing:
You need to plan for the future by choosing an MSP that can evolve its services to meet the changing requirements of your growing business.
You should periodically reevaluate your organization's IT needs to ensure that the managed services are aligned with your growth trajectory.
What Can Managed IT Services Do For Your Business?
Here’s a look at what a typical managed IT services provider can do for your organization:
1. Helpdesk Support
Helpdesk support is the most important aspect of managed IT services. Quick and reliable help for IT issues is necessary to ensure that your employees can work without technical hindrances and that your business operations run smoothly. Helpdesk support covers a broad range of IT issues, from password resets to network connectivity issues to application-specific errors.
2. Monitoring Services
IT network security and performance monitoring services form the backbone of managed IT services. Excellence in these services is the hallmark of mature MSPs since it ensures proactive IT service as opposed to reactive IT support. Robust IT monitoring also catches IT issues before they become too big, leading to fewer helpdesk tickets and security incidents.
3. Security and Compliance
MSPs should also be able to offer security solutions that defend your IT infrastructure against prevalent cyber threats. Expertise in standard security measures such as endpoint protection, Mobile Device Management (MDM), Identity and Access Management (IAM), etc., and experience in regulatory compliances such as HIPAA, PCI-DSS, etc. are pretty much a necessity for most organizations.
4. Asset Management
For any sustainable business, the use of capital is always an important consideration. No matter the size of your organization, your investment in devices is always going to be a significant portion of your IT budget. So, you’ll want to keep track of your devices to ensure that you are making the most out of your investments.
Many MSPs can help you with this by actively managing your fleet of devices. A robust asset management system can help you achieve the following:
ensure efficient use of IT assets
reduce costs by optimizing the total number of assets in use
extend the useful life of assets
optimally time technology upgrades
5. Disaster Recovery
Disasters, whether natural or manmade, can have devastating impacts on business operations. Anytime events such as floods, wildfires, or cyberattacks threaten to derail your business operations, causing downtime or impairing business functions, a disaster recovery program can help you get back to normal operations as quickly as possible.
Your MSP should be able to create a comprehensive disaster recovery program for your business, including policies, procedures, and tools designed for the recovery of critical IT infrastructure and systems in the immediate aftermath of a disaster. The goal of disaster recovery is to mitigate any damage caused by a disaster and get the business back on track as quickly as possible. So, the disaster recovery plans must meet specific timelines similar to business SLAs.
6. Cloud Services
Cloud services have become the mainstay for most businesses since they offer cost-effective storage, effortless scaling, rapid deployment, and access on the go. But to effectively harness the benefits of the cloud you need specific expertise for not only migrating your workload to the cloud but also running them optimally, and keeping your cloud environment safe.
So, whether you are using only Software-as-a-Service (SaaS) or Infrastructure-as-a-Service (IaaS), you need your MSP to have expertise in migration, management, optimization, and security of cloud infractures.
Managed IT Services Pricing Models
How much an MSP charges you for their services depends on several factors, including the services provided, the size of your organization, and the complexity of your IT infrastructure. In any case, they will follow one of the following pricing models:
1. Per Device
The per-device pricing model is a popular model where the monthly fee is calculated based on the number of devices owned by the client organization. Supported devices attract different rates with servers attracting the highest rates while tablets and smartphones costing less.
This model is popular among small organizations that own few devices since the monthly costs are easy to calculate and predictable. However, things can quickly get complicated if you use bring your own device (BYOD) or allow work from home (WFH), where personal devices are often used for work.
2. Per User
As you might have guessed, the per-user model calculates the monthly fees based on the number of users. It covers all the devices utilized by the end-user so there are no issues with BYOD or WFH. Per-user pricing is also easy to calculate and is predictable. This pricing model is more convenient than the per-device model because there are no billing complications arising out of adding or removing users, or migrating servers to the cloud.
Per-user pricing is also popular among small organizations. In most organizations, only a portion of employees require regular support while the rest of the employees rarely require IT support. In the per-user pricing model, you will have to pay for all employees irrespective of their IT needs. So among medium to large organizations with many employees, this model is not ideal.
3. All You Can Eat
The “all you can eat” model of pricing offers virtually unlimited service for a fixed monthly fee. This is one of the simplest pricing models with no complexities in monthly billings. Since this pricing model encourages clients to make the maximum possible use of the IT services, it becomes very challenging for the MSPs to maintain profitability.
As you can imagine, this pricing model is very appealing for business owners but in the long term, the low margins of profitability will invariably cause low quality of work, resulting in downtimes, cybersecurity incidents, and other business disruptions.
4. Break/Fix Pricing
The break/fix or hourly pricing model is a kind of model where the IT service is provided only when needed, i.e. when something breaks down or needs repair. The hourly rates of break/fix IT firms vary widely depending on the service requested, transportation costs for the site visit, expertise required, etc.
The break/fix pricing model can be quite cost-effective for organizations that rarely suffer service disruptions or downtimes, but frequent service calls and long resolution times can quickly erode those savings.
The break/fix model provides reactive service that is associated more with helpdesk support than with MSPs, which specialize in providing proactive managed IT services that prevent downtime and service disruptions.
5. A La Carte Pricing Model
The “a la carte” pricing model allows organizations to pay only for the services they need. Organizations can build a suite of services that includes specific services such as network management, asset management, endpoint security, etc.
Although the “a la carte” model appears to be a cost-effective solution, on closer inspection it is not always affordable. Gray areas in the scope of work, ever-increasing line items, billing complexities, and unpredictable fees cost you not only money but also time and peace of mind.
6. Tiered Pricing Model
Many MSPs offer bundled service packages that typically come in three tiers. The budget tier may consist of basic antivirus, network monitoring, and SLAs with a lot of margin. Higher-tier packages will offer better SLAs, on-site support, and a robust suite of services.
The tiered pricing with pre-packaged service is not a very good model for IT services because the technology needs of businesses are very complex and diverse. The budget options rarely offer all of the services that businesses need and this service model as a whole lacks the flexibility of the “a la carte” model. So, if you have to go for the highest tier, then you might as well go for the all-inclusive service instead.
7. All-Inclusive Hourly- JIT Model
Jones IT offers a unique pricing model that offers an all-inclusive service package charged hourly with a fixed minimum monthly commitment. This model offers one all-inclusive service rate. So, there’s no separate pricing for network engineers or systems engineers, and no hassles around the number of devices or users. This makes tracking and monitoring monthly costs simple.
Additionally, hourly rates are tiered, which means that the more you use the IT services, the lower the hourly rate you pay. This model is ideal for businesses of all sizes but is especially attractive for medium to large organizations since the savings in hourly rates for them will be significant.
The minimum monthly commitment ensures that Jones IT is able to offer optimal SLA, reliability, and quality of service while maintaining profitability. So, it’s a win-win for both Jones IT, the MSP, and its customers.
Is It Worth Hiring Managed IT Services?
Like with most other business decisions, the most important consideration regarding hiring an MSP is financial. There are essentially two questions you need to answer:
Should we hire internally or outsource to an MSP?
How much should we be willing to spend?
Depending on how you look at it, the answers to these questions can be incredibly simple or confoundingly complex. This is because financial measurements typically use cash flow to calculate Return on Investment (ROI) but IT services do not directly produce cash flow. Managed IT services are designed to prevent disruption and enhance productivity, which means that their financial impact is not evident.
I have discussed this in detail in an earlier blog post that you can access here: Essentials of Managing IT Finance - Primer for the new CIO.
Here are the key takeaways from that blog that are relevant to our discussion here:
Financial metrics such as ROI are inadequate for measuring IT investments
To capture the impact of IT services, we need to consider non-traditional returns such as time savings, increased productivity, etc.
Finally, we need to quantify the non-traditional returns, expressing them in monetary value.
With the above points in mind, let’s tackle the two questions…
1. Hiring Internally Vs Outsourcing
To evaluate the case of hiring internally vs outsourcing, create a hypothetical IT department for your organization, determine their salaries (you can find these on job boards), and add overheads such as recruiting, onboarding, training, management, device, and SaaS costs. Then compare this figure with the expected monthly cost of an MSP.
You can find a sample calculation in our earlier blog post: How To Scale IT After Getting Series A Funding For Your Startup.
If your cost of maintaining an internal IT department is higher than hiring an MSP, then you have a good business case to outsource your IT management.
2. How Much Should You Spend On IT Services
As I mentioned earlier, managed IT services are designed to prevent disruption and facilitate productivity. So, their value can largely be attributed to the prevention of interruptions, which in turn has two parts - lost time and opportunity cost.
I have discussed how to calculate the cost of IT in a previous blog post that you can access here: How To Calculate IT Support Cost For Your Business
Here are the key takeaways from that blog:
The average cost of IT is $6,876 per employee per year.
The higher the value of your employees’ work, the higher the IT cost.
Productivity interruptions are different from company-wide downtime, in which case the cost will be significantly higher.
When you are investing in IT services you are essentially paying for preventive services. The true value of an MSP lies in its ability to prevent disruptions and enhance productivity so that your business operations run unhindered.
Conclusion
Managed IT services, more often than not, prove to be a valuable investment, more than justifying the associated costs. The outsourcing of IT services through MSPs consistently delivers positive outcomes, striking a balance between improved productivity and cost efficiency.
Maintaining an in-house IT department is often cost-prohibitive or excessively labor-intensive for most SMBs, making the option of hiring MSPs more attractive. The benefits of outsourcing are particularly pronounced for small and medium-sized businesses given their need to optimize limited resources within tighter budget constraints.
Though the case for outsourcing is strong, choosing the right IT partner requires thorough evaluation and due diligence.
If you liked the blog, please share it with your friends
About The Author
Hari SubediMarketing Manager at Jones IT
Hari is an online marketing professional with a focus on content marketing. He writes on topics related to IT, Security, and Small Business. He is also the founder and managing director of Girivar Kft., a business services company located in Budapest, Hungary.