How Much Do Managed IT Services Cost?

How much do managed IT services cost? The short answer is that it depends on various factors.

Because of the complexity of IT services and the varied nature of IT infrastructures and business requirements, it is impossible to estimate costs without first understanding the IT environments and business needs being served.

Costs should be viewed in a comparative context. If you are considering outsourced managed IT services, you will want to compare the costs and benefits of that model against the costs and benefits of staffing an internal IT department.

To that point, with average tech salaries hovering around $150,000, it’s no surprise that over a quarter of all small business owners (and some estimates point to many more) outsource their IT needs. Even larger companies that once maintained in-house departments are now looking outwards for some or all of their IT services.

So, what are the factors that influence how much managed IT services cost, and how can you maximize your ROI on outsourcing?

In this article, we’ll take a closer look at managed IT pricing models, a review of factors that may affect that pricing, and offer suggestions for finding a provider that can meet your needs.

 

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Managed IT Services Costs and Managed IT Services Pricing Models

Managed IT Services Costs and Managed IT Services Pricing

In order to understand what can affect managed IT services pricing, let’s first examining the three main types of pricing models.

 

Pay-as-You-Go IT Services

 

1. Break/Fix Services

These services are best suited for businesses with sporadic, limited IT needs. In this model, you only pay for the services you use and there is no long-term contract for IT management services.

This can be a good option for businesses who only need temporary IT support, but there are a long list of caveats, including:

  • Services without a contract are usually charged at a higher rate
  • With no contract, it is unlikely you will receive a guaranteed SLA, so service response times may be longer.
  • Since you will only engage with IT engineers on a sporadic basis, they will generally be less knowledgeable about your environment, so there may be an ongoing learning curve which you will pay for
  • There will be no focus on strategic IT planning

2. Project-Based IT Services

Project-based pricing is used when a business needs a one-time solution, such as upgrading their network infrastructure or migrating to the cloud.

The provider will quote a price for the entire project and, once completed, so is the engagement. This can be a good option for businesses that need extra bandwidth for one-time IT projects but don’t want to commit to a longer-term contract.

 

Subscription-Based Managed IT Services

Subscription models are common for managed IT services, since they are simple and easy to budget for on a monthly basis.

In this type of arrangement, you pay a fixed monthly fee for a set of predetermined ongoing services, such as monitoring and help desk support. Services provided beyond the scope of the contract are usually billed on an hourly basis.

There are five types of recurring service plans:

  1. Per-User

This pricing model is among the most common. Companies pay a fixed fee per user, per month for specified services. End users are counted during the onboarding process, and reconciled on a regular basis, providing predictable scalability as business conditions change.

  1. Per Device

With this pricing model, companies expect to pay a fixed monthly fee for each device that’s being managed. This can be a good option for businesses with a lot of users but few devices. However, things can get complicated as the number of supported devices grows, especially in BYOD environments.

Another challenge is that not all devices will incur the same monthly cost. For example, servers generally cost more to manage than desktops and laptops, which cost more to manage than mobile devices.

  1. Tiered Pricing

Some MSPs sell their services in the form of bundled packages. These packages usually range from budget-tier services that provide only the most basic services to premium packages offering a complete suite of services, along with 24/7 support.

Tiered pricing allows MSPs to organize their offerings to achieve maximum profitability. Unfortunately, the tiered pricing model lacks flexibility and is not well suited for small and medium sized businesses looking to maximize their tight budgets.

  1. All-You-Can-Eat

Unlimited or “all you can eat” managed services contracts were once popular with MSPs, most notably those focused on growth and client acquisition. This approach encourages clients to sign up by offering a nearly unlimited range of proactive IT services for a guaranteed fixed price.

While this pricing model appeals to business owners who want all of their needs covered at an attractive cost, the fixed-price nature is not sustainable from a business perspective, as it makes it difficult for MSPs to adjust pricing structures to maintain profitability.

Consequently, if a model is not sustainable for an MSP, it’s not sustainable for their customers either.

  1. A la Carte

Unlike other managed IT services that are all-inclusive, the “a la carte” pricing model lets organizations choose and pay only for the services they need.

This approach allows you to build a more customized suite of services your organization needs most, providing significant cost savings over pre-priced packages.

A la carte models are cost-effective for many businesses, but due diligence and a trust in your provider are critical when developing your plan.

 

The Hybrid Model for Managed IT Services

An evolution of the a la carte model is the hybrid approach, which seeks more flexibility in services and pricing by leveraging the best elements of multiple pay-as-you-go and subscription models.

The hybrid model is usually built on the foundation of an “A La Carte” pricing model where businesses only pay for the services they need. It also includes useful elements of break/fix pricing, project pricing, and per-user pricing. This approach allows MSPs to build a cost-effective suite of services, customized for each customer to meet their business requirements.

Effective implementation of this model requires little more strategizing and discovery work up-front to get things right, but that work pays significant dividends in efficiency in the long run. As is the case with other aspects of IT, careful planning always results in a better product.

 

Finding Out How Much Managed IT Services Will Cost

Finding Out How Much Managed IT Services Will Cost

Now that you understand the different pricing models, you may still be wondering: how much do managed IT services cost?

The best way to answer this question is to determine which pricing model represents the best fit for your business. Here are a few closing thoughts on how to understand and control your managed IT services costs:

  1. Do your research. When looking for an IT provider, be an educated consumer. Understand the business model. Understand that you can’t get something for nothing and that if an offer seems too good to be true, it probably is. Ask your colleagues for recommendations of trusted providers and compare their offerings relative to the costs of managed services from several vendors.
  1. Carefully consider what services you need. It is vital to be realistic about the IT resources you may need to support your business plans. It is equally critical to align your managed IT services agreement to your specific requirements so you get what you need but don’t end up overpaying for redundant or unnecessary services.
  1. Understand your budget. Consider what you are spending now, what you would need to spend to get the services you want, and what businesses like yours typically spend on IT as a percentage of revenue.
  1. Find a trusted provider. Look for a partner who has a proven track record of success and a commitment to its customers.

 

 

Finally, carefully consider the human element. The best and most trustworthy managed IT services providers will stand out in this regard. They won’t make you feel uncomfortable by trying to push services you don’t need or by complicating their pricing.

Instead they will have a team of seasoned IT engineers, managers and executive-level resources available who can help design a support program that meets your business needs, with everything from day-to-day technical support to long-term strategic IT planning.

As a leading managed services provider, ITSco is committed to helping businesses like yours achieve peak efficiency with best-in-class IT services. Find out how we help small, large, and mid-sized businesses get more out of their managed services by contacting us today.

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