We are often asked, “Isn’t an IT Managed Service Provider more expensive than hiring an IT Manager?” And the immediate calculation is to compare the potential manager’s salary to the annual invoices of the MSP.  A better question is about return on investment: which approach wins over the other?  The true return is not always obvious and therefore we dive into a few hidden but real aspects that have a direct relation to dollars in both scenarios. 

What is the typical annual investment? 

Let’s analyze an average 25 person company with no in-house IT person.

The costs of managed services vary depending on the services included, location, whether the price is per user or device, but generally it can range from $100 to over $300 per user per month. With this in mind, we are going to choose an average figure of $150 per user per month, which translates to $3,750 per month for a company with 25 users, totalling $45,000 per year for fully managed IT services. 

The managed services include things like a Service Level Agreement, which details the performance guarantees the service provider is making related to the contracted services. These performance guarantees may include infrastructure uptime and availability, core services, and minimum compliance standards..

An IT Manager will not come with a Service Agreement, but you will need to pay a salary, payroll taxes, and benefits regardless of performance.

When comparing the average annual salary of a single IT professional of $62,000 per year according to PayScale, the costs alone make the case for contracting strong. 

But expenditure alone isn’t the full picture, or even the most important factor to consider -- it’s the return the organization receives that we really should explore further.

The Real Cost of Downtime

MSPs have tools to ensure that clients’ networks are running consistently and smoothly. Here is how to value lost productivity in a worse-case scenario.

Cost of Downtime (per hour) = Lost Revenue + Lost Productivity + Recovery Costs + Intangible Costs

For example, if a professional services firm is hit with ransomware and suddenly billable hours are at a standstill (lost revenue), administrators can’t perform their job functions (lost productivity), and the recovery time has no clear path (recover costs and intangible), the total costs become substantial.

Partnering with an MSP will not guarantee perfection, but it will usually mean better protocols will exist to reduce downtime risk and systems to recover faster. This is  because MSPs are highly tuned to industry best practices. This aligns with the idea that MSPs have greater exposure to a broader base of technology than any one individual or even an internal IT department can have. The cost of downtime, however, is steadily increasing. In fact, the price tag is estimated at $5,000 to $25,000 per hour for SMBs with less than 250 employees, costs go even higher as company size increases. 

An in-house IT manager is one pair of eyes that focuses on monitoring the network and providing end-user support. This puts a lot of stress on one person and also means only one thing can be worked on at a time, possibly leading to costly mistakes.

The Returns of Technology Alignment

In an article by the Harvard Business Review, in a survey of 202 working professionals, conducted prior to Covid-19, 40% of the respondents reported experiencing more than 10 interruptions per day, with 15% reporting more than 20 interruptions a day

This is another area where an MSP has an advantage because a qualified team can often minimize interruptions. A team can tackle vendor negotiations, has exposure to more business applications, and finally, more time to catch technology issues ahead of time.

MSPs tend to be better at long-term planning, but once again, how do we put a dollar figure on this? Having long-term goals for your IT needs that align with your business’s goals are not just nice things to have, they are critical to survival.  

An MSP can audit, evaluate, and identify where potential security gaps are present in a business. This allows the MSP to take action towards improving current security, increasing monitoring, and establishing protocols to ensure a data breach is less likely to occur and in the event of one the response time is quicker and better organized potentially saving thousands from being lost.