As you may have already learned, it’s not easy to determine and compare MSP pricing. For whatever reason, MSPs are reluctant to provide transparency on pricing. There is some consensus within the MSP community that the pricing, due to many variables, is too complex. The thought is the pricing can only be determined in the backrooms of IT companies.
We feel it’s time to lift the veil.
There are a multitude of ways MSPs can charge for services and nine times out of ten these MSPs will charge you slightly differently. Most MSPs will tell you that the pricing is too complex for them to put the costs on their websites. Our feeling is that, with a little knowledge and guidance, most people are capable of figuring out the pricing on their own.
Regardless, we will explain that different models have various pros and cons, described below. Determine what would work best for your business, and talk to a potential MSPs to see if they follow a pricing model that aligns with your objectives.
There are three (and a half) common pricing models you’ll come across in the MSP world:
Managed IT Services Pricing Models
What is the Average Cost of Managed IT Services Per User Per Month?
When considering managed IT services, understanding the associated costs is crucial for budgeting and decision-making.
On average, businesses can expect to pay between $150 and $400 per user each month for services provided by managed service providers (MSPs). This cost range covers essential IT support, monitoring, and maintenance required to keep operations running smoothly.
To get a rough estimate for your company, simply multiply the number of users by an average cost of $175 per user per month. For instance, a business with 20 employees would look at approximately $3,500 monthly for managed IT services.
Keep in mind that the exact cost can vary based on factors such as:
- Scope of Services: Comprehensive packages including advanced cybersecurity, data backup solutions, and cloud management may incur higher costs.
- Provider's Expertise: Renowned providers with extensive experience and specialized skills might charge more.
- Customization Needs: Tailored solutions designed to meet specific business requirements can influence pricing.
By recognizing these variables, you can better assess how managed IT services fit into your financial plans and operational goals.
What Percentage of a Company’s Revenue Is Typically Allocated to IT Services?
The budget allocated for IT services often varies depending on several factors, such as the company's size, the complexity of its IT infrastructure, and its specific business objectives. Generally, companies set aside 4-6% of their revenue for IT services.
However, consulting with a managed IT services provider can offer a more precise recommendation tailored to your business needs.
Industry-specific spending also varies significantly:
- Banking institutions: Allocate approximately 7.16% of their revenue to IT services, reflecting the high importance placed on data security and advanced tech infrastructure in this sector.
- Construction companies: Spend as little as 1.51%, often due to less reliance on complex IT systems.
- Across all industries: The average IT budget allocation sits around 3.28%.
Each company is unique, so it's essential to evaluate your specific requirements to determine the optimal budget for IT services.
Per-User MSP Pricing Model
As the name suggests, this MSP pricing model is based on how many users are within your business.
This is the pricing model TechNoir Solutions uses, (more and more MSPs are using this model too) because the costing is easy to track for both parties.
Every employee has to go through an onboarding process when they’re brought into a company or an offboarding process when they leave. This makes it easy to track when users are added or lost. We refer to this as the Mountain/Valley principle. Services increase as employees increase and services decrease when employees decrease.
Changes to the services based on employees will be reflected in your monthly rate as your per-user count increases or decreases.
Per-Device MSP Pricing Model
As you likely guessed, this pricing model is based on the number of “managed” devices within your IT environment.
Traditionally, this is how most MSPs charge. However, as reliance on IT increased and the number of devices grew, it became difficult for MSPs to keep track of every device coming in and out of service.
That said, this model is not obsolete. TechNoir Solutions uses this model for quite a few clients. Many businesses find the model makes more sense for them if they have a high turnover of employees but rely on the same set of devices.
Different devices are assigned different recurring rates based on their complexity. For example, a server, which requires more knowledge to troubleshoot and solve issues, will cost more per month than a desktop, which even entry-level IT engineers can typically troubleshoot
Tiered MSP Pricing Model
Regardless of whether your MSP uses the per-user or per-device model, they may further break down their rates into tiers.
These tiers generally include varying degrees of availability, company size, and term length. These variables have to be considered to ensure our clients get the coverage they need to meet business outcomes.
TechNoir uses a calculation that accounts for the number of users, availability needed, complexity of environment, and term length.
For example, a business of 50 users with a straightforward IT environment and a 5-year contract for remote-only managed IT services will pay less than a business of the same size with a complex environment, in a 1-year contract, with regular visits to the office.
Ala-Carte Pricing
Ala-Carte services are not typically offered independently from the standard managed services, however certain may require special accommodations.
Remote-Only IT services, can work well in the right situation. The MSP will solve problems remotely, change passwords, maintain the email servers, add or remove accounts, etc. Remote-Only services can also provide provisioning and on/offboarding too.
This means unless you have a hardware failure, you won’t see your MSP, it will be 100% outsourced.
After Hours and Weekend support is generally an Ala-Carte add on to a service agreement. If guaranteed off-hours support is required, MSPs can provide off-hour resources, however, be warned, it is very costly..
What Determines The Cost?
The models define the way an MSP charges.This section describes what components go into the cost of Managed IT Services. There are three components you need to keep in mind when pricing out your MSP contrat.
Meeting Minimum Standards
Before an MSP starts supporting your business, it will want to audit your environment in order to know what technology your business is using and how it’s being used.
They’ll review your company’s IT environment to develop a general overview, see what solutions you’re using, and evaluate its size and complexity.
Most MSPs charge for an audit, this typically costs $500 per site.
TechNoir Solutions does not charge for an audit, because we believe audits are a necessary part of the estimation process and should not be a burden on the client.
Onboarding Costs
There are many variables when it comes to onboarding a client to our services. Is there another MSP that we need to interface with? Are all the admin passwords accurate, will there be migration of services (email, web hosting, data backup etc) and how many users need to be onboarded?
Onboarding can be very time consuming, because the MSP has to “touch” each network device and each user’s computer to install the security bundle and monitoring software.
The cost to onboard a client with a simple environment is typically the cost of one month of services, plus 40%, however this can vary based on the term length. For example, if you monthly service is $2500, the onboarding fee would be as follows:
$2500 (one month) + $1000 (40% of one month) = $3500
Understanding Hardware Procurement in Managed IT Services
Hardware procurement in managed IT services involves several key steps to ensure businesses have the right technology in place.
First, it includes quoting and sourcing necessary computer hardware from various suppliers such as Dell, HP, or Lenovo. This means evaluating the specific needs of the business and finding the most suitable products at the best prices.
Next, it involves coordinating the delivery and installation of the hardware. This ensures that the equipment arrives on time and is set up correctly, minimizing downtime and maximizing efficiency.
Overall, hardware procurement in managed IT services involves:
- Identifying hardware needs: Assessing what kind of technology is required based on the business's operations.
- Sourcing: Finding reputable suppliers to provide the needed equipment.
- Quoting: Getting price estimates from multiple vendors to find cost-effective options.
- Delivery and installation: Ensuring that the hardware is delivered and installed correctly, reducing potential disruptions to business operations.
This thorough process guarantees that businesses have the necessary tools to operate smoothly and efficiently.
Monthly Charges
There are a number of factors that go into the cost that MSPs charge on a monthly basis. In addition to the cost of employees, software tools and systems. Some of the most important factors include:
- Service Level Agreement (SLA)
- An SLA is a contract between the MSP and the client that outlines the level of service the MSP will provide. SLAs typically include guarantees for uptime, response time, and resolution time. The more stringent the SLA, the higher the MSP’s monthly charges are likely to be.
- Services Provided
- The services MSPs offer vary widely, and the more services an organization requires, the higher the monthly charges are likely to be. For example, an organization that requires 24/7 support, monitoring, data backup, and disaster recovery services is likely to pay more than an organization that only requires basic network management.
- Size of the Organization
- The size of the organization also plays a role in determining MSPs’ monthly charges. Larger organizations typically require more services, and the MSP’s fees will reflect that.
- Complexity of the Infrastructure
- The more complex an organization’s IT infrastructure is, the more time and effort the MSP will need to spend managing it. This, in turn, will drive up the monthly charges.
- Geographic Location
The geographic location of the organization can also affect MSPs’ monthly charges. MSPs in areas with a higher cost of living may charge more than those in areas with a lower cost of living.
Additional Factors to Consider
In addition to the factors listed above, there are several other factors that organizations should consider when evaluating MSPs’ monthly charges. These include:
- Contract Length
MSPs typically offer discounts for longer-term contracts. Organizations should weigh the benefits of a longer contract against the potential risks of being locked into a contract with an MSP that doesn’t meet their needs. - Additional Fees
Some MSPs may charge additional fees for services that are not included in the standard package. Organizations should make sure they understand what is included in the standard package and what additional fees they may be responsible for. - Customer Support
Customer support is an important factor to consider when evaluating MSPs. Organizations should look for MSPs that offer 24/7 support and have a reputation for excellent customer service.
Additional Fees
The situations listed above, cover most managed services agreements. However, in the interest of transparency, there are a few additional and “hidden” fees you should consider.
What is Mobile Device Management in Managed IT Services?
Mobile Device Management (MDM) in managed IT services refers to the oversight and safeguarding of mobile devices utilized within a business environment. This includes smartphones, tablets, and laptops that employees use for work purposes.
Key Features of MDM
- Device Security:
- Ensures all mobile devices adhere to the company's security policies.
- Includes encryption, remote wipe capabilities, and antivirus solutions.
- Policy Enforcement:
- Enforces compliance with corporate policies regarding device usage.
- Automates updates and patches to maintain device integrity.
- App Management:
- Controls which applications can be installed and accessed.
- Provides secure app distribution to enhance productivity.
- Data Protection:
- Safeguards sensitive company data on mobile devices.
- Implements data loss prevention strategies to secure information.
Benefits of Mobile Device Management
- Increased Security: Protects company data from breaches and unauthorized access.
- Enhanced Productivity: Ensures employees access necessary tools efficiently.
- Compliance Assurance: Helps meet regulatory requirements effortlessly.
MDM is a fundamental aspect of modern managed IT services, ensuring that mobile devices contribute to business operations smoothly while maintaining high-security standards.
Cost of Meeting Minimum Standards
Managed IT services pricing can be influenced by several factors. One of these factors is the cost of meeting minimum standards. In order to ensure your network is compliant with the MSP’s requirements, an evaluation of your current software and hardware will be conducted. If your equipment is not up to par or nearing its end of life, you may need to invest in updating software licenses and replacing outdated equipment. This helps to optimize the efficiency of your IT operations and minimize potential issues. By being proactive in maintaining capable and current equipment, you can experience smoother workflows and quicker problem resolution from the techs and engineers.
Employee Costs
Employee costs are another consideration when it comes to managed IT services pricing. Per-user pricing offers the flexibility to adjust your contract when adding or removing employees. However, onboarding new users and their devices may fall outside of the standard agreement. Support for these new users, who are onboarded mid-month, may also be billed separately until the next billing cycle, which is typically the following month. In most cases, MSPs have a set cost for onboarding and provide pro-rata support if needed. Similarly, if an employee leaves mid-month, the change will be incorporated into the next billing cycle.
After-Hours or Holiday Support
After-hours or holiday support is an important aspect to consider, as well. While MSPs often offer 24/7 support, it is typically not included in a standard agreement. This additional level of support may come at a higher cost. Some MSPs offer tiered pricing or ala-carte addons that provide after-hours and holiday support for an additional monthly fee. It’s important to note that if you require support outside of regular hours and it is not included in your contract, your MSP may inform you about the additional charges.
Considering these factors in managed IT services pricing can help you make informed decisions about the level of support and services you require for your business
What Are the Benefits of Contracting for Managed IT Services?
Investing in managed IT services offers a multitude of benefits that can enhance the efficiency and bottom line of your business. Here's why opting for managed IT might be one of the smartest decisions you make:
- Cost Savings: While the initial cost of managed IT services may seem high, they generally prove to be more cost-effective over time. You eliminate the need to hire and train multiple full-time IT staff, cutting down on salaries, benefits, and other associated costs.
- Increased Flexibility: Managed IT services provide your business with the flexibility it needs to adapt quickly to changing technological landscapes. Whether you need to scale up during peak times or scale down to save costs, managed services make it easier to adjust.
- Enhanced Expertise: By partnering with a managed IT service provider, you gain access to a team of experts skilled in various IT disciplines. Companies like IBM, Accenture, and HCL offer specialized knowledge that your in-house team might lack, ensuring your technology infrastructure is always up-to-date and secure.
- Focus on Core Business: By outsourcing IT management, your internal team can focus on core business activities rather than being bogged down by technical issues. This leads to improved productivity and allows your staff to concentrate on what they do best.
- Access to Latest Technology: Managed IT service providers prioritize staying abreast of technological advancements. They can implement the latest tools, ensuring your business stays competitive and operates efficiently.
- Improved Security: Cybersecurity is a major concern for businesses today. Managed IT providers like Cisco and Symantec bring robust security measures that protect your data from breaches, malware, and hacking attempts. They continuously monitor your systems and update security protocols, so you stay safe
- 24/7 Support: With managed IT services, you get round-the-clock support, ensuring any issues are addressed promptly. This is crucial for minimizing downtime and maintaining seamless operations.
- Predictable Monthly Costs: Managed IT services usually operate on a subscription model, giving you predictable monthly costs. This not only helps in budgeting but also avoids unexpected expenses.
- Proactive Maintenance: Rather than waiting for something to break, managed IT providers perform regular maintenance and updates. This proactive approach minimizes the risk of major issues and prolongs the life of your IT infrastructure.
FAQs
Can MSPs customize their services based on the client’s needs?
Yes, MSPs can customize their services based on the client’s needs. They may charge extra fees for customized services.
How can organizations ensure they are getting a fair price from their MSP?
Organizations can get quotes from multiple MSPs and compare the services offered and their pricing. They can also ask for references and reviews from other clients to gauge the MSP’s reputation and customer service.
Can organizations negotiate with MSPs on their monthly charges?Yes, organizations can negotiate with MSPs on their monthly charges. However, it’s important to keep in mind that MSPs have minimum fees they need to charge to cover their costs.
TechNoir Solutions is a full-service, nationwide, MSP based out of Chicago. Our goal is to provide the highest level of service and support to our clients.
