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How Much do Managed IT Services Cost

the cost of managed it services

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It’s important for managed providers to be able to quote a correct pricing structure, one that works both for themselves and their clients.

Based on the competitive nature of MSP services, the days of quoting a price for each line item or price per service is over. All MSPs now should be pricing per user, all-inclusive.

That said, what’s the ideal price point for your business? The easiest way to analyze a target cost/price is to take a look at your IT servicing costs for the last three years, and divide by the number of users. This should form some baseline for your business when planning to outsource.

It’s also important to consider services which you may not currently be accounting for, or delivering. For instance, all MSP services should include cybersecurity. All of this should be included within a per-user based pricing model because security can no longer be a secondary or ad hoc service. It’s just too important.

The general price ranges, which means the all-inclusive figure — including security — should be anywhere from $140 to $200 per user per month.

The price can also depend on proprietary or additional software. If you have a variety of cloud-based software, identify what support is needed (often coming from the vendor of the SaaS) and include it in the expected contract price.

The key is to expect a per-user price as it’s very simple to understand for financial planning. If you have a new user coming on, it saves you from updating contractual obligations and keeps compliance very clear as it’s only a per-user count.

Further Reading

Managed IT Pricing Models

While the industry may be shifting toward an all-inclusive pricing model, the fact is that there are quite a few existing ones too.

Here are all the pricing models you may come into contact with:

  • Monitoring-only pricing model — provides monitoring on things like anti-virus systems, data backups, and cybersecurity
  • Per-device pricing model — a fee based on the number of devices in use
  • Per-user pricing model — based on how many users a managed IT company will service
  • Tiered pricing model — for example, silver, gold, and platinum categories. The higher the price, the larger the number of services
  • Flat fee pricing model — fixed fee per month (for unlimited support)
  • A la carte pricing model — pay according to the number of times you request support
  • Block pricing / retainer pricing model – pay for a block of time or block of services.
  • Fixed-fee optimum models – fixes the budget of your service, giving you a predictable idea of your IT spending at all times.

However, the advantages of all-inclusive pricing models are that you never have to track money or block hours. It saves from awkward out-of-contract billing which can cause anger and confusion down the road.

Comparing the Price of MSP Services to Building In-House Capacity

comparing prices from managed services providers

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The threshold that a business can effectively maintain their own IT is probably about 20 employees. After that point, the infrastructure and platforms get too complicated. Having to maintain and manage and monitor is just too much to do for one person, and it quickly balloons labor costs with added personnel.

There’s a lot of capital expenditures that a company has to undertake to support their user base, such as anti-virus, anti-spam, and backup. The benefit of an MSP is that they come in with all those tools — they’ve already made the investment that you need to support a company.

You get 10 to 20 times the availability of resources that you would otherwise have with a sole in-house provider. This means higher speed as well as better response times, and experience.

A single individual won’t be able to monitor your equipment and devices in the same manner as an outsourced vendor. Plus, this individual might get sick and take vacation days. With an MSP, you cover your tracks.

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Calculating the ROI of Managed IT Services

Let’s take a real-world example. One of our clients — a law firm in New York — had an existing amount of 500 tickets per quarter for 80 people before they signed up with us.

Now, their quarterly tickets are down to a hundred tickets for 80 people or about half a ticket per user per month. We’ve saved them 400 tickets per quarter. At about 30 minutes per ticket, this translates into 200 staff hours. Ultimately, over 3 years, we’ve saved them $250,000 in terms of enhanced productivity and support costs.

It’s fairly straightforward: as your IT needs escalate, it makes far more sense to contract out to a managed services provider as opposed to trying to tackle in-house.