Brief: Explore the Cost-Benefit Analysis of Fully Managed IT, covering key costs, benefits, and ROI. Learn the advantages of outsourcing IT, including expert access, improved security, and flexible budgeting. Compare in-house versus managed IT costs to make informed decisions.
“Well, Evelyn did a cost-benefit analysis, comparing all your last five years crime-fighting before going underground. Elastigirl’s numbers are self-explanatory.”
—Winston, Incredibles 2
Just as Evelyn’s cost-benefit analysis in Incredibles 2 evaluated the effectiveness of each hero’s contributions, businesses today must carefully assess the value of their internal and external resources.
The decision to outsource IT management, much like evaluating Elastigirl’s impressive track record, is about understanding both the clear and subtle benefits.
This involves a detailed analysis of how various strategies can optimise resources and achieve business goals.
For instance, companies like Airbnb have recognised that using managed services for their cloud infrastructure allows them to handle fluctuating demand efficiently without the heavy investment required for their own data centres.
Similarly, Spotify utilises managed IT services to focus on their core competency—delivering music—while experts handle their IT needs.
These examples highlight the tangible benefits of outsourcing IT, such as cost savings, access to cutting-edge technology, and improved focus on core business activities.
However, it’s equally important to consider the indirect expenses and intangible advantages, like increased security and compliance with industry standards, which can be crucial for long-term success.
This comprehensive review covers direct costs, tangible benefits, and the indirect expenses and intangible advantages of outsourcing IT operations.
Let’s get started.
What is a Cost-Benefit Analysis for Fully Managed IT?
- Cost-benefit analysis helps businesses weigh the costs and benefits of fully managed IT services
- It provides a systematic approach to evaluating the financial impact of outsourcing IT management
- By conducting a cost-benefit analysis, companies can make informed decisions about their IT budgeting and resource allocation
Understanding the Basics of Cost-Benefit Analysis
A cost-benefit analysis is a financial decision-making tool that helps businesses compare the potential costs and benefits of a particular action or investment.
In the context of fully managed IT services, a cost-benefit analysis involves evaluating the expenses associated with outsourcing IT management to a third-party provider and weighing them against the potential benefits, such as improved efficiency, reduced downtime, and access to specialised expertise.
By conducting a thorough cost-benefit analysis, businesses can determine whether fully managed IT services are a financially viable option for their organisation. This analysis takes into account various factors, including the size of the company, its current IT infrastructure, and its long-term goals.
Key Components of a Cost-Benefit Analysis for Fully Managed IT
To effectively conduct a cost-benefit analysis for fully managed IT services, businesses must consider several key components:
Direct Costs
Direct costs include the monthly or annual fees charged by the managed IT service provider. These costs may vary depending on the level of service required, the number of devices and users supported, and any additional services or features included in the contract.
Indirect Costs
Indirect costs encompass any expenses that may arise due to the transition to fully managed IT services. These can include training costs for employees to adapt to new systems or processes, potential downtime during the implementation phase, and any necessary hardware or software upgrades.
Tangible Benefits
Tangible benefits are the measurable advantages that a company can expect to gain from fully managed IT services. These may include reduced IT staffing costs, increased productivity due to minimal downtime, and improved security measures that protect against costly data breaches or cyber attacks.
Intangible Benefits
Intangible benefits are the less quantifiable advantages of fully managed IT services.
These can include access to a wider range of expertise and resources, improved scalability to accommodate business growth, and peace of mind knowing that IT systems are being monitored and maintained by professionals.
Calculating the Return on Investment (ROI)
One of the primary goals of a cost-benefit analysis for fully managed IT services is to determine the potential return on investment (ROI).
To calculate the ROI, businesses must compare the total costs of outsourcing IT management to the expected benefits, both tangible and intangible, over a specified period.
For example, if a company spends $10,000 on fully managed IT services and expects to save $15,000 in IT staffing costs and reduce downtime by 50%, resulting in an additional $5,000 in productivity gains, the ROI would be:
ROI = (Total Benefits – Total Costs) / Total Costs ROI = ($15,000 + $5,000 – $10,000) / $10,000 ROI = 100%
By expressing the ROI as a percentage, businesses can easily compare the potential return of fully managed IT services to other investment opportunities.
A positive ROI indicates that the benefits of outsourcing IT management outweigh the costs, while a negative ROI suggests that the costs are higher than the expected benefits.
Elements of a Cost-Benefit Analysis for Fully Managed IT
- Understand the direct and indirect costs associated with fully managed IT
- Identify tangible and intangible benefits to calculate the overall value
- Learn how to quantify and compare costs and benefits for informed decision-making
Direct Costs: Service Fees and Setup Expenses
When considering fully managed IT, the most apparent costs are the direct expenses associated with the service. These include the monthly or annual service fees charged by the managed service provider (MSP) based on the scope of services, number of users, and devices supported.
Setup costs may also be incurred, which can involve the initial configuration of systems, migration of data, and integration with existing infrastructure.
It’s crucial to obtain detailed quotes from potential MSPs, clearly outlining the services included in their fees. Some providers may offer tiered pricing plans with varying levels of support, while others may provide custom quotes based on specific business requirements.
Be sure to clarify what is covered in the service agreement, such as helpdesk support, proactive monitoring, patch management, and hardware replacement.
Indirect Costs: Transition Expenses and Potential Downtime
In addition to direct costs, it’s essential to consider the indirect expenses that may arise during the transition to fully managed IT.
These can include the time and resources required to train employees on new systems, processes, or communication channels. If there is a need to replace or upgrade existing hardware or software to meet the MSP’s standards, those costs should also be factored in.
Another potential indirect cost is the risk of downtime during the transition period. While a well-planned implementation can minimise disruptions, there may be instances where services are temporarily unavailable or performance is impacted.
It’s important to work closely with the MSP to develop a comprehensive transition plan that addresses these risks and includes contingencies for critical systems.
Tangible Benefits: Reduced IT Expenses and Improved System Performance
One of the primary tangible benefits of fully managed IT is the potential for reduced overall IT expenses. By outsourcing IT management to an MSP, businesses can avoid the costs associated with maintaining an in-house IT team, including salaries, benefits, training, and certifications.
Additionally, MSPs often have access to advanced tools and technologies that may be cost-prohibitive for individual businesses to acquire and maintain.
Fully managed IT can also lead to improved system performance and reliability. MSPs typically employ best practices for network management, security, and data backup, which can minimise the risk of system failures and data loss.
They also proactively monitor systems to identify and resolve potential issues before they cause downtime. This can result in increased productivity and reduced costs associated with system repairs and data recovery.
Intangible Benefits: Increased Productivity and Improved Security
While tangible benefits are easily quantifiable, fully managed IT also offers significant intangible benefits that can be more difficult to measure but are equally important.
One such benefit is increased productivity, as employees can focus on their core job functions rather than dealing with IT issues. With proactive monitoring and prompt support from the MSP, employees can work more efficiently and effectively, leading to improved overall business performance.
Improved security is another critical intangible benefit of fully managed IT. MSPs typically employ strong security measures, including firewalls, intrusion detection, and threat monitoring, to protect client networks from cyber threats.
They also ensure that systems are regularly updated with the latest security patches and provide employee training on best practices for data security. This can help businesses avoid the financial and reputational costs associated with data breaches and cyber attacks.
By understanding the various elements of a cost-benefit analysis for fully managed IT, including direct costs, indirect costs, tangible benefits, and intangible benefits, businesses can make informed decisions about whether outsourcing IT management is the right choice for their organisation.
In the next section, we will explore the steps involved in conducting a thorough cost-benefit analysis to evaluate the potential return on investment of fully managed IT services.
Steps in Conducting a Cost-Benefit Analysis
- Understand the process of quantifying costs and benefits
- Learn how to calculate the net present value (NPV) of an investment
- Determine the importance of sensitivity analysis in decision-making
Conducting a cost-benefit analysis is a crucial step in determining the viability of fully managed IT services for your organisation. By following a structured approach, you can make informed decisions based on quantifiable data.
Let’s explore the steps involved in this process.
Identify Costs and Benefits
The first step in conducting a cost-benefit analysis is to identify all the costs and benefits associated with fully managed IT services. This involves a comprehensive assessment of both direct and indirect factors.
Direct Costs
Direct costs include the monthly or annual fees paid to the managed IT service provider. These costs are typically based on the level of service required, the number of users, and the complexity of your IT infrastructure.
According to a survey by Gartner, the cost of managed IT services typically ranges from $100 to $250 per user per month, depending on the specific services provided and the complexity of the IT infrastructure.
Indirect Costs
Indirect costs may include the time and resources required to transition to the new managed IT service, as well as any potential disruptions to business operations during the implementation phase.
Benefits
Benefits of fully managed IT services can include increased productivity, reduced downtime, improved security, and access to expert knowledge and support.
It’s essential to consider both tangible and intangible benefits when conducting your analysis.
Quantify Costs and Benefits
Once you have identified the costs and benefits, the next step is to quantify them in monetary terms. This process involves assigning a dollar value to each cost and benefit.
Quantifying Costs
Quantifying costs is relatively straightforward, as most managed IT service providers offer transparent pricing. Be sure to account for any additional costs, such as hardware upgrades or software licenses, that may be required to support the transition.
Quantifying Benefits
Quantifying benefits can be more challenging, as some benefits may be intangible or difficult to measure. For example, increased productivity can be quantified by estimating the number of hours saved per employee and multiplying it by the average hourly wage.
Reduced downtime can be quantified by calculating the average cost of downtime per hour and multiplying it by the expected reduction in downtime. According to a study by Gartner, the average cost of downtime per hour is around $5,600.
Calculate Net Present Value (NPV)
Net present value (NPV) is a financial metric that allows you to compare the costs and benefits of an investment over time. It takes into account the time value of money, which means that a dollar today is worth more than a dollar in the future.
To calculate NPV, you’ll need to determine the discount rate, which is the rate of return you could expect to earn on a similar investment with a similar level of risk. Once you have the discount rate, you can use the following formula:
NPV = (Benefits – Costs) / (1 + Discount Rate)^Number of Years
A positive NPV indicates that the benefits of fully managed IT services outweigh the costs, while a negative NPV suggests that the costs outweigh the benefits.
Perform Sensitivity Analysis
Sensitivity analysis is a technique used to determine how changes in key variables can impact the outcome of your cost-benefit analysis.
By performing a sensitivity analysis, you can identify which variables have the greatest impact on the NPV and make informed decisions based on potential scenarios.
Variables to Consider
Some of the variables to consider in your sensitivity analysis may include:
- Changes in the cost of managed IT services
- Variations in the expected benefits, such as productivity gains or reduced downtime
- Fluctuations in the discount rate
By adjusting these variables and recalculating the NPV, you can develop a range of potential outcomes and assess the strength of your decision to invest in fully managed IT services.
Make a Decision Based on the Analysis
The final step in conducting a cost-benefit analysis is to make a decision based on the results.
If the NPV is positive and the sensitivity analysis indicates that the investment is likely to remain profitable even under less favorable conditions, then investing in fully managed IT services may be a wise choice for your organisation.
However, if the NPV is negative or the sensitivity analysis reveals significant risks, it may be necessary to reevaluate your options or consider alternative solutions.
By following these steps and conducting a thorough cost-benefit analysis, you can make an informed decision about whether fully managed IT services are the right choice for your organisation.
While the process may seem challenging at first, breaking it down into manageable steps and using quantifiable data can help you explore the decision-making process with confidence.
Advantages of Outsourcing IT Management
- Gain access to specialised expertise and cutting-edge technology
- Scale IT resources effortlessly to match business demands
- Strengthen cyber security and ensure regulatory compliance
Access to Expertise and Advanced Technology
Outsourcing IT management provides businesses with immediate access to a team of highly skilled professionals who possess a wealth of knowledge and experience in various IT domains.
These experts stay up-to-date with the latest industry trends, best practices, and emerging technologies, ensuring that your organisation benefits from their expertise without the need to invest in extensive training or hiring specialised staff.
Moreover, fully managed IT service providers invest heavily in state-of-the-art tools and technologies to deliver top-notch services to their clients.
By partnering with such providers, businesses can utilise these advanced solutions without incurring the high costs associated with purchasing, implementing, and maintaining them in-house. This allows organisations to stay competitive and efficient.
Specialised Skills for Specific Business Needs
IT service providers often have teams with diverse skill sets, allowing them to cater to the unique requirements of different businesses. For instance, if your organisation requires expertise in cloud computing, cyber security, or artificial intelligence, you can find a provider that specialises in these areas.
This targeted approach ensures that you receive the most relevant and effective solutions for your business needs. For example, data analytics, IoT implementation, or blockchain development are specialised skills that businesses might require.
Scalability and Flexibility
One of the most significant advantages of outsourcing IT management is the ability to scale resources according to your business demands.
As your organisation grows or faces fluctuations in workload, a fully managed IT service provider can quickly adapt to these changes by allocating additional resources or adjusting the level of support provided.
This flexibility allows you to maintain optimal performance and efficiency without the need to hire or lay off in-house IT staff.
Furthermore, outsourcing enables businesses to respond swiftly to changing market conditions and technological advancements. IT service providers constantly monitor the latest developments in the industry and can help your organisation adopt new technologies or pivot strategies when necessary.
This agility is crucial in today’s business environment, where the ability to adapt quickly can mean the difference between success and failure.
Improved Security and Compliance
Cyber security threats are becoming increasingly sophisticated and frequent, making it essential for businesses to prioritise the protection of their digital assets and sensitive data.
Fully managed IT service providers have the expertise and resources to implement strong cyber security measures, such as firewalls, intrusion detection systems, and multi-factor authentication, to safeguard your organisation against potential threats.
In addition to security, maintaining compliance with industry regulations and data protection standards is a critical aspect of IT management. Outsourcing to a reputable provider ensures that your organisation adheres to relevant regulations, such as HIPAA, GDPR, or PCI DSS, depending on your industry.
Non-compliance can result in hefty fines, legal consequences, and reputational damage, making it crucial to partner with a provider that prioritises compliance.
Proactive Monitoring and Incident Response
Fully managed IT service providers often employ proactive monitoring tools and techniques to identify and address potential security threats before they can cause significant damage.
This approach minimises downtime and ensures that your organisation’s critical systems and data remain protected at all times.
In the event of a security incident, having a dedicated team of experts ready to respond and mitigate the impact can make a significant difference in the outcome.
IT service providers have well-defined incident response plans and procedures in place to quickly contain and resolve security breaches, minimising the potential for data loss or reputational damage.
Focus on Core Business Functions
By outsourcing IT management, businesses can free up internal resources and allow their employees to focus on core business functions and strategic initiatives.
Instead of dedicating time and effort to managing complex IT infrastructures, your team can concentrate on tasks that directly contribute to the growth and success of your organisation.
Moreover, outsourcing IT management can help alleviate the burden on your internal IT staff, enabling them to prioritise high-value projects and initiatives that drive innovation and competitive advantage.
This strategic shift can lead to increased productivity, improved employee morale, and a more agile and responsive organisation overall.
Cost Savings and Predictable Budgeting
Outsourcing IT management can result in significant cost savings for businesses, particularly in the long run. By partnering with a fully managed IT service provider, organisations can avoid the high costs associated with recruiting, training, and maintaining in-house IT staff.
Additionally, the provider bears the responsibility for investing in and maintaining the necessary hardware, software, and infrastructure, further reducing capital expenditures for the business.
Furthermore, fully managed IT services often operate on a predictable, subscription-based pricing model, making it easier for businesses to budget for their IT expenses. This predictability allows organisations to allocate resources more effectively and make informed decisions about their technology investments.
| Cost Component | In-House IT Management | Outsourced IT Management |
| Staffing | High costs for recruiting, training, and maintaining IT staff | Lower costs due to shared resources |
| Hardware and Software | High upfront costs for purchasing and maintaining infrastructure | Lower costs due to provider’s investment |
| Maintenance and Upgrades | Ongoing costs for maintenance and upgrades | Included in subscription fees |
| Training and Support | Ongoing costs for training and support | Included in subscription fees |
By outsourcing IT management, businesses can tap into a wealth of expertise, use advanced technologies, and ensure the scalability, security, and compliance of their IT infrastructure.
This strategic decision allows organisations to focus on their core competencies, drive innovation, and achieve long-term success.
IT Budgeting for Fully Managed Services
TL;DR:
- MSP costs depend on devices, users, service level, and specific services
- Pricing models include per-device, per-user, and tiered pricing
- Budgeting for managed IT requires considering current and future needs
Factors Influencing Managed Service Provider (MSP) Costs
When budgeting for fully managed IT services, it’s important to understand the factors that impact MSP pricing. The number of devices and users supported is a key consideration. The more devices and users an organisation has, the higher the cost of managed services.
This is because MSPs need to allocate more resources, such as technicians and support staff, to manage a larger IT environment.
The level of service and support required also plays a significant role in MSP costs. Organisations that require 24/7 support, rapid response times, and proactive monitoring will typically pay more than those with less stringent requirements.
It’s essential to clearly define service level agreements (SLAs) with your MSP to ensure that your organisation’s needs are met without overpaying for unnecessary services.
Specific Services Included in MSP Contracts
Another factor that influences MSP costs is the specific services included in the contract. Basic services like helpdesk support and network monitoring are often included in standard packages.
However, more advanced services such as cyber security, data backup and recovery, and cloud management may come at an additional cost.
Organisations should carefully review their MSP contracts to ensure that all necessary services are included and that they are not paying for services they don’t need.
Typical MSP Pricing Models
MSPs typically use one of three pricing models: per-device, per-user, or tiered pricing. Per-device pricing involves paying a flat fee for each device managed by the MSP. This model is straightforward and easy to budget for, but it can become expensive for organisations with a large number of devices.
Per-user pricing, on the other hand, charges a flat fee for each user supported by the MSP. This model is often more cost-effective for organisations with many users but fewer devices. It also ensures that all users receive the same level of support, regardless of the number of devices they use.
Tiered pricing is a more flexible option that allows organisations to choose from bundled services at different price points. This model can be customised to meet specific needs and budget constraints.
For example, an organisation might choose a basic tier that includes helpdesk support and network monitoring, while a higher tier might add cyber security and cloud management services.
Budgeting for Current and Future IT Needs
When budgeting for fully managed IT services, it’s important to consider both current and future needs. As businesses grow and technology evolves, IT requirements can change rapidly. Organisations should work with their MSP to develop a scalable solution that can adapt to changing needs over time.
This might involve starting with a basic package and gradually adding services as needed, or choosing a higher-tier package that includes room for growth.
By planning ahead and budgeting for future needs, organisations can avoid unexpected costs and ensure that their IT infrastructure keeps pace with their business goals.
Maximising Value in MSP Budgeting
To get the most value from fully managed IT services, organisations should focus on finding an MSP that aligns with their specific needs and goals. This involves carefully evaluating different providers based on factors such as expertise, service offerings, reputation, and cost.
Organisations should also communicate openly with their MSP about their budget constraints and priorities. By working collaboratively to develop a customised solution, organisations can ensure that they are getting the best possible value for their investment in fully managed IT services.
Table: Comparison of MSP Pricing Models
| Pricing Model | Description | Advantages | Disadvantages |
| Per-Device | Flat fee per device | Easy to budget, straightforward | Can be expensive for large device counts |
| Per-User | Flat fee per user | Cost-effective for many users, consistent support | May not account for varying device usage |
| Tiered | Bundled services at different price points | Flexible, customisable | Requires careful planning and budgeting |
Examples of Changing IT Needs
- Business Expansion: As a company expands into new markets or locations, its IT infrastructure must adapt to support additional users, devices, and services.
- Cloud Adoption: The shift to cloud-based services can significantly alter IT requirements, necessitating adjustments to MSP contracts and budgets.
- Cyber security Threats: Evolving cyber security threats may require organisations to add or upgrade services to ensure adequate protection.
By considering these examples and working closely with their MSP, organisations can ensure that their IT infrastructure remains aligned with their business goals and adapts to changing needs over time.
Calculating ROI for Managed IT Solutions
- Understand the key factors in calculating ROI for managed IT services
- Learn how to quantify cost savings and evaluate long-term benefits
- Explore how to assess the impact of managed IT on your business goals
When considering a move to fully managed IT services, one of the most important factors is determining the return on investment (ROI). Calculating the ROI involves a comprehensive analysis of both the immediate cost savings and the long-term benefits that managed IT can bring to your organisation.
Quantifying Cost Savings
The first step in calculating the ROI for managed IT solutions is to quantify the direct cost savings.
These savings can be broken down into several key areas:
Reduced Hardware and Software Expenses
By outsourcing your IT management, you can significantly reduce the costs associated with purchasing, upgrading, and maintaining hardware and software.
Managed IT providers often have access to bulk purchasing discounts and can pass these savings on to their clients.
Lower IT Staffing Costs
Maintaining an in-house IT team can be expensive, especially when you factor in salaries, benefits, and training costs.
With managed IT services, you can reduce or eliminate these staffing costs, as the provider takes on the responsibility of hiring and managing IT professionals.
Minimised Downtime and Productivity Losses
IT downtime can lead to significant productivity losses, which can have a direct impact on your bottom line.
Managed IT providers offer proactive monitoring and maintenance, which can help prevent downtime and minimise the impact of any issues that do arise.
Evaluating Long-Term Benefits
While immediate cost savings are important, it’s also crucial to consider the long-term benefits of managed IT services when calculating ROI.
These benefits can include:
Improved Operational Efficiency
Managed IT providers can help streamline your IT operations, leading to improved efficiency across your organisation.
This can include implementing standardised processes, automating routine tasks, and ensuring that your IT infrastructure is optimised for performance.
Improved Employee Productivity
By providing reliable IT support and minimising downtime, managed IT services can help boost employee productivity.
When your staff can work without interruption and access the tools and resources they need, they can focus on their core responsibilities and contribute more effectively to your business goals.
Better Customer Satisfaction and Retention
Customers expect seamless experiences and reliable service. Managed IT solutions can help ensure that your technology infrastructure is always available and performing optimally, leading to better customer satisfaction and retention.
A study by American Express found that 86% of customers are willing to pay more for a better customer experience.
Assessing the Impact on Business Goals
To fully understand the ROI of managed IT solutions, it’s important to assess how these services can contribute to your overall business goals.
This may include:
Enabling Growth and Scalability
Managed IT providers can help you scale your technology infrastructure to support business growth, without the need for significant capital investments or hiring additional in-house staff.
For example, Amazon Web Services offers scalable cloud infrastructure solutions that can adapt to changing business needs.
Improving Security and Compliance
With the increasing threat of cyber attacks and the need to comply with various regulations, managed IT services can provide the expertise and resources necessary to keep your data and systems secure.
According to Cyber Security Ventures, the global cost of cybercrime is projected to reach $10.5 trillion by 2025.
Facilitating Digital Transformation
Managed IT solutions can help lay the foundation for digital transformation initiatives, enabling you to adopt new technologies and processes that can drive innovation and competitive advantage. A study by IDC found that organisations still consider digital transformation a key business priority.
By carefully considering these factors and working with your managed IT provider to track and measure the impact of their services, you can develop a clear picture of the ROI for your organisation.
Comparing In-House vs Fully Managed IT Costs
- In-house IT costs can be difficult to predict and control
- Fully managed IT offers a more predictable and scalable cost structure
- Hidden costs and risks of in-house IT can significantly impact a company’s bottom line
In-House IT Expenses
When considering in-house IT costs, there are several key factors to take into account:
Salaries and Benefits for IT Staff
Building and maintaining an in-house IT team requires significant investment in salaries and benefits.
According to the U.S. Bureau of Labour Statistics, the median annual wage for computer and information technology occupations was $104,420 in May 2023.
This figure can vary widely depending on the specific roles, experience levels, and geographic location of your IT staff.
In addition to base salaries, you must also factor in the cost of benefits such as health insurance, retirement plans, and paid time off. These costs can add an additional 30-40% on top of base salaries.
Hardware and Software Investments
In-house IT also requires ongoing investments in hardware and software. This includes the cost of purchasing, upgrading, and maintaining servers, workstations, networking equipment, and various software licenses.
Training and Professional Development Costs
To keep your in-house IT team’s skills current and relevant, you must invest in ongoing training and professional development. This can include the cost of attending conferences, workshops, and certification programs.
The cost of training and development can vary widely depending on the specific needs of your team and the technologies they work with. However, a 2019 report by the Training Industry found that the average training expenditure per learner was $1,286 across all industries.
Fully Managed IT Costs
When outsourcing IT to a fully managed service provider, the cost structure is typically more predictable and scalable:
Monthly Service Fees
Fully managed IT providers typically charge a fixed monthly fee based on the number of users or devices supported.
This fee covers a comprehensive range of services, including help desk support, network monitoring, security management, and strategic IT consulting.The specific cost will vary depending on the provider and the scope of services included.
One-Time Setup and Onboarding Costs
When transitioning to a fully managed IT model, there may be some one-time costs associated with setup and onboarding. This can include the cost of migrating data and systems to the provider’s platform, as well as initial training and orientation for your staff.
These costs are typically lower than the upfront investments required for building and maintaining an in-house IT infrastructure.
Potential Early Termination Fees
It’s important to carefully review the terms of your managed IT service contract, as some providers may charge early termination fees if you decide to cancel the service before the end of the contract term.
However, many providers offer flexible contract terms and allow for adjustments based on changing business needs.
Hidden Costs and Risks of In-House IT
Beyond the direct costs of salaries, hardware, and software, there are several hidden costs and risks associated with maintaining an in-house IT team:
Opportunity Costs of Focusing on Non-Core Business Activities
When your internal resources are tied up with managing IT infrastructure and support, they have less time and energy to focus on core business activities and strategic initiatives. This can lead to missed opportunities for growth and innovation.
Difficulty Attracting and Maintaining Top IT Talent
In today’s competitive job market, it can be challenging to attract and retain top IT talent. According to a survey by ManpowerGroup, 76% of IT leaders reported difficulty finding qualified candidates for open positions.
This can lead to higher turnover rates and increased recruitment and training costs. Managed IT providers, on the other hand, have access to a broader pool of talent and can more easily scale their teams to meet changing client needs.
Lack of 24/7 Support and Monitoring
In-house IT teams typically operate during regular business hours, leaving your organisation vulnerable to downtime and security threats outside of those hours.
Fully managed IT providers offer 24/7 monitoring and support, ensuring that your systems are always protected and potential issues are addressed proactively. This can help minimise downtime and reduce the risk of costly security breaches.
Comparative Cost Analysis
| Cost Category | In-House IT | Fully Managed IT |
| Salaries and Benefits | $91,250 (median annual wage) + 30-40% for benefits | $100-200 per user per month |
| Hardware and Software | $33,614 (average annual hardware budget) + $41,686 (average annual software budget) | Included in monthly service fee |
| Training and Development | $1,286 (average training expenditure per learner) | Included in monthly service fee |
| Opportunity Costs | 49% less time on strategic work | Included in monthly service fee |
| Talent Acquisition and Retention | Higher turnover rates and recruitment costs | Access to broader talent pool and scalable teams |
Making the Right Choice for Your Business
Fully managed IT services offer a cost-effective solution for businesses looking to optimise their IT operations.
By carefully evaluating the costs and benefits, you can make an informed decision that aligns with your company’s goals and budget.
Outsourcing IT management provides access to expert knowledge, advanced technologies, and improved security, all while allowing your business to scale and adapt to changing needs.
When calculating the ROI, consider both the immediate cost savings and the long-term benefits, such as increased productivity and customer satisfaction.
Is fully managed IT the right choice for your organisation?
Schedule a consultation with a trusted MSP to discuss your specific requirements and explore how their services can support your business growth and success in the years to come.
