Here's How to Determine the Cost of an MSP For Your Business

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The cost of Managed Services uses a variety models and is comprised of a number of variables.  These models and variables are detailed here.  To make it easier to understand, the diagram below shows the various components that make up the fees and charges that will be incurred by a client.  Initial fees are one time costs, monthly recurring charges will be the ongoing costs that a client can expect to pay each month.

How Much Does It Cost To Have In-House IT Staff?

Having an in-house IT team can be a significant investment. Expect to primarily incur costs for key roles like IT managers and help desk technicians.

IT Manager Costs

An IT manager is essential for overseeing the department. On average, their annual salary in the United States is around $145,288. However, this can vary widely depending on experience and expertise:

  • Low end: Approximately $80,000
  • High end: Over $180,000

Factors like company size, industry, and geographic location heavily influence IT manager salaries. Additionally, those with specialized skills—such as cloud computing or cybersecurity—can command higher pay.

Help Desk Technician Costs

A help desk technician handles day-to-day IT support. The average salary in the U.S. hovers around $47,806 per year:

  • Entry Level: Starts at about $30,000
  • Experienced Technicians: Can earn up to $60,000

The number of help desk technicians you'll need depends on your company's size. For instance, companies with more than 30 employees might require multiple technicians.

Additional Considerations

Remember, these salaries do not account for benefits, taxes, and other overhead costs. Companies also need to consider the cost of equipment, software licenses, and ongoing training. By understanding these costs, you can better decide whether an in-house IT team is a viable option for your organization.

These are a few examples of how the needs of different businesses can affect the price of managed IT.

Mid-Sized, Downtown Law Firm

Demographics-
70 Computers
5 Servers
Data backup service
1 Location
35 Computers needing updating

One Time Initial Fee-
Onboarding – $16,625 (Monthly fee x 40%)
Compliance- $8750 services + hardware
Total -$25,375 + hardware

Monthly Recurring Cost-
Computers:  70 x $145 = $10,150
Site monitoring: 1 x $250 = $250
Servers: 5 x $185 = $925
Backup service: $550
Total: $11,875 per month/ $142,500 annually

Preschool Franchise

Demographics–
37 Employees
6 Locations

One Time Initial Fee-
Onboarding – $9,611 (Monthly fee x 40%)
Total -$9,611

Monthly Recurring Cost-
Employees: 37 x $145 = $5,365
Site monitoring: 6 x $250 = $1500
Total: $6,865 per month/ $82,380 annually

Property Management Company

Demographics-
15 Employees
1 Location
2 Servers

One Time Initial Fee-
Onboarding – $8,379 (Monthly fee x 40%)
Total -$8,379

Monthly Recurring Cost–
Employees: 15 x $145 = $5,365
Site monitoring: 1 x $250 = $250
Servers: 2 x $185 = $370
Total: $5,985 per month/ $71,820 annually

As you can see, in the examples above, there are a lot of variables that can affect the cost of IT management for each business. However, in most cases, outsourcing IT management for a mid-sized business is almost always more cost efficient than hiring one, or more, internal IT resources.

Outsourced IT management is similar to outsourced accounting or legal services.  CPA, law and IT firms provide specialized, professional services that businesses rely upon to run their businesses. However, many small to mid-sized businesses would not find value in hiring internal resources for these services. This is why all but the largest companies have outsourced these roles.

MSPs work on efficiencies. As an MSP creates efficiencies in management of IT services, the more cost effective the services become.  

Breaking Things Down

Before we break things down, keep in mind, best practices for Managed IT Support means being proactive.  The goal of proactive support is to significantly reduce or, in best cases, eliminate “downtime” to the computing environment. Employees can’t be productive when the internet is out or a server is down.In the case of the preschool franchise, there are 37 employees, 6 locations and a lot of employee turnover.

If the preschool was to hire an internal IT resource, this resource would need to manage the IT support for 37 people. Employee turnover requires time consuming work to on and off boarding employees.  The right resource might be able to handle these tasks. However this isn’t the only thing the IT resource has to manage.

The six locations all have their own network infrastructure, internet connectivity, access control, camera systems and IT security that needs to be managed. Managing the infrastructure for 6 locations, could be a full time job for most IT resources.

Typically, infrastructure takes the backseat to employee support, which makes sense. Employees will let you know they are having problems. If infrastructure isn’t being  monitored and maintained, it won’t tell you when problems are occuring.

This is reactive support.

Reactive support results in unexpected tech issues (think, server stopped working or the router stopped connecting to the internet). These tech issues result in lowered productivity and high employee frustration.    

How Much Should a Company Spend on IT Services?

Determining your IT budget can feel daunting, but it's crucial for maintaining robust and efficient operations. The percentage of revenue a company allocates to IT services typically falls between 4-6%. However, the exact figure can vary significantly based on factors like your company's size, IT infrastructure complexity, and specific business goals.

Factors Influencing IT Budget Percentages

  • Company Size: Larger organizations often have more complex IT needs, which can increase expenditure.
  • Complexity of IT Systems: Advanced systems and greater network requirements generally call for higher investment.
  • Business Objectives: Companies focusing on digital transformation or heavy tech dependency may need to allocate more.

Industry-Specific Spending

According to Deloitte, different industries have varying IT budget norms. For example:

  • Banking: High reliance on secure, scalable IT systems leads to an average spend of 7.16% of revenue.
  • Construction: With less dependency on IT, the allocation is generally lower, around 1.51%.

Average Spend Across Industries

Overall, businesses allocate an average of 3.28% of their revenue to IT services. To tailor the budget to your specific needs, consulting with a managed IT services provider can offer customized insight and recommendations.

In summary, while 4-6% is a common benchmark, your ideal IT spending will hinge on unique operational demands and strategic goals.

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