How Much Do Managed IT Services Cost a Small to Medium-Sized Business?

As a Managed IT provider, one of the first questions we get asked is how much Managed IT services cost. We, as a society, are used to being able to simply type a question into a search engine and have a plethora of answers at our fingertips. Unfortunately, the answer is not that simple for a multitude of reasons. Lucky for you, I am going to provide you a buyers guide to IT and give you an idea on some of the costing associated with these types of services.

First things first, why would you move to a Managed IT or managed network infrastructure scenario? Depending on the size and makeup of your organization, Managed IT may or may not be the right fit for you. In larger organizations, that already have fully staffed IT departments, it may not make sense to outsource to a Managed IT provider unless you are wanting to virtualize your infrastructure and move most of it to the cloud. The IT vendor would manage the resources in the cloud and support those resources while the onsite staff would focus on strategy, compliance or a specific line of business software. One other scenario would be if you wanted to simply outsource your help desk support while your internal staff focused on enterprise-related issues. Since this article is focused on the small to medium-sized business I will move along.

The first question to ask is, have you considered hiring your own IT person? Typically this isn’t considered until you have around 15+ employees. That being said, depending on what part of the country you are in, those salaries can range from $60K to $100K+ for that IT person. Since I am writing this from Knoxville, Tennessee, it would probably be towards the bottom half of that range in our market. Now if your organization or industry is highly regulated then that IT professional may need additional certifications and/or experience which would drive that salary even higher.

Taking all of this into account, the salary is just one component of the package paid to this individual. You still have the insurance, retirement plan, and all of the tools you will need to pay for to help them do their job. The other downside—this is just one individual. What happens when they are sick or actually want to take a vacation? At some point, you are going to have some type of network projects like hardware refresh or some software upgrade. How are they going to be able to support day to day business while completing the project? In almost all cases, you can outsource to a Managed IT provider and get a complete team of individuals with a ton of experience for less than just the salary of that one individual IT person. You could get a fully staffed help desk that never gets sick, never goes on vacation and always answers the phone and can be onsite.

For a business owner, the other plus is most Managed IT providers are easy to fire if you are not happy. Typically they have some type of SLA (service level agreement) in their contract that provides an out for the business owner if the IT provider is not keeping up their end of the bargain. Worst case scenario, the business owner is not happy with the level of service they are receiving, firing an employee can be ugly.

When firing an IT person, there is always the concern of what they will do since they have all the keys to the kingdom. Firing a Managed IT provider is much easier. They know they have a reputation to maintain in the market. Certainly losing a customer is not good, but if they back out with grace the customer tends to not bash them as much to their associates. Plus, typically it is in their best interest. If you are making a ton of calls that they are responding to, unless they are billing you per hour on top of their monthly fee, they are losing money and time.

The second option for a business owner is in a very reactive mode in regards to their IT needs. In this option, the business either is using the most technical employee to handle IT in addition to their daily responsibilities or they call some IT provider to come help when things get so bad they can’t take it any longer. . . or things blow up.

Let’s look at the dual employee for a moment. This individual is the most “techy” person in the office and ends up handling all the IT related issues. The downside is their time is split between doing activities that may help drive revenue or work on billing out services versus taking help desk calls because Jim cannot figure out how to change his out-of-office email reply.

Here is what happens next, an employee spends time messing around with a problem because they don’t want to bother our office hero since they know he or she is always super busy doing their role as well as helping everyone else.

Eventually, the problem rises up to our office hero and after they spend some time looking for answers they do one of two things. They either find a less painful workaround or reach out to an IT provider who you have to pay hourly for (Note: You may have them on some type of Block of Time or retainer). Many times the hero lets issues build up because they don’t want to waste money on a 30-minute call for one issue. They figure if we are going to pay them to come out, we are going to make the most use of that time with all of these other issues they have created workarounds for. This leads to a lot of unproductive time for your staff.

The next problem is similar to the problem mentioned in the previous example. Who supports the office when they are out sick or on vacation? Many times these office heroes feel too guilty to take a sick day or vacation, which can lead to burn out.

Next, let’s talk about why it is not so simple to throw out an estimate without some due diligence. The best analogy I can give for this is going to the doctor. In my experience, if you are looking at going to having fully managed network infrastructure or IT services, you are currently having some type of pain. This pain could be something fairly benign like your internet is slow or your computer occasionally freezes. Sometimes the pains are much worse. It could be something malicious like malware, ransomware or a DDoS (distributed denial of services) attack. It could be your server has crashed and you realize the backups you thought you had, were not being verified and you can only recover a fraction of your information.

In our doctor visit analogy, you are having stomach pains. If you called the doctor’s office and told them you were having stomach pain, they, of course, would tell you to schedule an appointment and come see the doctor so he/she could check you out. When you get to the doctor’s office they are going to do a series of diagnostics, right? They are going to start with the basics; weight, blood pressure, and oxygen levels. Once the doctor comes into the room, they are going to feel around on your abdomen. They may order an ultrasound or CT scan to gather more in-depth information. Back to the IT world, your IT provider is going to want to do the same. They are going to load some diagnostic tools onto your network that will probe all your network hardware. They are going to identify the basics and get a list of all the devices on your network. They are going to then dig into those devices.

For instance, how much hard drive space do you have left on your PCs or servers? What operating systems do you have loaded? Are those operating systems current and are they still supported by the software vendor? How are your users (employees) set up on the network? What does your firewall look like? Is it up to date, is it capable of handling your needs? Is it even set up correctly? They will look into your ISP (internet service provider). Do you have enough bandwidth to do business at the level you need to? Anyone of these could cause the “pain” you are currently having.

Flip back to our doctor visit. Assuming you have a good doctor, not only is he/she going to do all the testing and diagnostics, they are going to ask you some questions and talk to you about your stomach pains. When do they happen? Is there a certain time of day? Is it around eating? Are you stressed about anything? Have you made any changes in your daily activities? What is the medical history of your immediate family? In our IT scenario, your IT provider should be asking you about how you run your business and what is most important to you. How many locations do you have and how do they communicate? How do you interact with your main line of business software applications? How do you do backups and are they being verified? When you have IT related issues, what do your employees do?

In some cases, the answers to these questions are more important than the diagnostics they run on your network. So now, our doctor has received back all of your test results. They have reviewed the ultrasound and your input on your daily habits. Now our outcomes could range from simple indigestion that can be treated with over the counter medicine (and the next time you go to the Thai restaurant you order spicy level 2 instead of 5). This would be a fairly inexpensive outcome. The other end of that outcome spectrum could be much more painful and substantially more expensive.

Now back to our IT friends. After reviewing all the information they pulled from their network assessment and interviews with you and your key staff, they have identified some issues that need to be rectified. Again, it may be something simple like increasing your bandwidth with your ISP (internet service provider) or a complete rip and replace of most of your network infrastructure. Either way, your monthly expense in these two scenarios would vary substantially.

Now let’s get into the pricing structure for a Managed IT Services agreement. The majority of these agreements are based around the number of computer users or devices in your office environment. For our purposes, let’s assume one user per device, although many offices may have multiple users that log into and share multiple devices. Most of these contracts are billed out somewhere between $95 to $200 per user/device depending on the complexity of the environment. You may be asking what pushes the per-user cost up to the higher end versus the lower end of that range? If you are in a highly regulated industry and deal with a lot of different compliance regulations you would tend to be on the higher end because there are added security measures that will need to be in place to meet your regulatory agencies.

For example, if you are in the medical industry you are very aware of the HIPAA compliance you must follow. If you are in any industry that serves the government they tend to be highly regulated, as are most financial institutions. Another factor driving costing that many people do not think about is the infrastructure itself. Many times there is physical hardware tied up in that monthly number, like firewalls or data back up appliances that are on your network. Speaking of backups, that number could include cloud services for storage or backup disaster and recovery plans (BDR). Some Managed IT Services, especially if you are heavily utilizing cloud services, include the costs of your internet service providers (ISP) monthly bills. Some companies require 24/7 support due to the nature of their business, which means the provider has to have a help desk manned around the clock.

Lastly, one of the things that can get overlooked is the Chief Information Officer (CIO) services that come along with this. This is a highly trained individual who helps with strategic planning and budgeting for any technology initiative you may be looking at now or in the future.

I hope this article helps you understand more of the pricing structure and costs associated with a Managed IT Services agreement. They may seem expensive at first, but once you fully understand the depth and breadth of the services, you see they allow your employees to better optimize their time and help protect your business from attacks from the outside. The most important thing is to find someone you trust who is interested in helping you not only protect your business, but also grow your business. At the end of the day, the more successful your business is, the more successful your IT partner’s business is as well. If Centriworks can be a resource for you, or if you just have a question, contact us today and we will be happy to answer any questions you may have.

— Matthew Coleman / Sales and Marketing Manager at Centriworks

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