As a business grows there are major decisions to make regarding how to best support technology needs. In the beginning, a company likely starts with only a few users and applications that are easy to internally manage. But, once the business starts to grow, the leadership needs to make a major decision: build it or rent it. Let me explain.
There are few businesses that exist today that don’t rely on technology in some form. There are tasks that need to be completed to ensure employees remain productive and business applications are kept up to date and secure. Businesses have two options to ensure their IT environment is completely supported. Internal employees can provide necessary support and maintenance—build it—or a business can outsource to a company that provides IT services—rent it.
For many businesses, the decision comes down to what makes the most sense financially. In the beginning, businesses likely perform these tasks themselves, as the workload is light and funds are limited. However, as revenue grows, it does not always make sense for the president of the company to dedicate their time to supporting user technology needs when they could spend their time advancing the business.
The big question remains: How much do managed IT services cost? Put another way, is it more affordable to manage technology needs internally or externally?
Build It or Rent It Explained
Let’s work through the various costs to consider when making this decision to better understand what goes into each option.
Company Type: Architecture Firm
Company Size: 30 Employees, 1 PC/employee
Technology Layout: All cloud-based applications, in a single office, but have a mix of remote and in-office employees.
Background: The president has been managing the onboarding/offboarding of new employees, from setting up accounts in their applications to training users on how to use the applications and sourcing and setting up computers. Now having grown to 30 users, these tasks occupy 30% of her time. She is looking to find the best solution for the company but wants to ensure the systems are fully secure. Her first thought is to hire an experienced IT Support Engineer to support all the technology needs, but she will also need to purchase the tools this individual will need to perform their duties and protect the company’s IT environment. These tools include:
- PC Monitoring & Patching tools ($5/device/month)
- Antivirus/Antimalware solution ($2.50/device/month)
- DNS Filtering Solution ($2.50/device/month)
- Security Training Solution ($2/user/month)
- Documentation Solution ($19/company/month)
- Microsoft 365 Training Solution ($4/user/month)
- Network Monitoring Solution ($15/company/month)
On top of these tools, the company will pay the salary of an IT Support Engineer capable of running these toolsets and supporting user needs.
With this fully outsourced plan, the company would have an entire team of support engineers to manage their applications, support their users, and assist with building out their technology plan. All the tools a company would need to purchase to build their IT support system are included in the managed IT services cost. According to CompTIA, over 46% of companies that leverage managed services have cut their annual IT costs by over 25% or more.
This model makes it easy to predict costs as there is a set cost per-user. A Managed Services Plan also keeps a business’s costs adjustable as the employee count changes as opposed to the fixed cost of one internal employee.
According to Glassdoor, the average IT Support Engineer Salary is $70,752 (plus insurance, 401K, etc.), and if a company is looking for a more experienced Systems Administrator, the average salary is $101,594. We’ll use the IT Support Engineer for this example. Below are the costs for this company to build it in-house.
|Solution||Price||Quantity||Monthly Cost||Annual Cost|
|Anti Virus/Anti Malware||$ 2.50||30||$ 75.00||$ 900.00|
|DNS Protection||$ 2.50||30||$ 75.00||$ 900.00|
|Email Filtering||$ 5.00||30||$ 150.00||$ 1,800.00|
|Security Training Solution||$ 2.00||30||$ 60.00||$ 720.00|
|Documentation Solution||$ 19.00||1||$ 19.00||$ 228.00|
|Monitoring Solution||$ 5.00||30||$ 150.00||$ 1,800.00|
|Microsoft Office 365 Training Solution||$ 4.00||30||$ 120.00||$ 1,440.00|
|Network Monitoring Solution||$ 15.00||1||$ 15.00||$ 180.00|
|IT Support Engineer||$ 5,895.00||1||$ 5,895.00||$ 70,740.00|
|Total Costs||$ 6,559.00||$ 78,708.00|
With this approach, the IT Support Engineer would be a dedicated resource who would focus 100% of their time on the business. But, that individual may not have all the capabilities necessary to manage all the business’s IT needs such as networking experience, upgrading existing solutions, implementing new solutions, long-term technology planning, etc. Additionally, this new employee requires management, which still provides a time burden—though smaller—for leadership. The last consideration is how to cover a gap of service when the employee inevitably takes vacation or sick days.
It is important to weigh the benefits and risks of hiring internally versus outsourcing IT.
So, what about renting it? Many Managed Services Providers (MSPs) have a per-user pricing structure where businesses can “rent” the tools and team members needed to address all a business’s support needs. PEI provides an all-inclusive plan for clients that costs $150/user/month that scales up as a company grows and down as a company needs to reduce its employee counts.
Using this plan, let’s look at the annual cost of managed IT services:
|Solution||Price||Quantity||Monthly Cost||Annual Cost|
|Managed Services – $150/user/month||$ 150.00||30||$ 4,500.00||$ 54,000.00|
Options to Outsource IT
This example focuses on a fully outsourced IT plan, but there are other options that may be a better fit for your company—especially if you already have an internal IT department. If your MSP is less involved in your technology environment, your cost of managed IT services will be lower. The size of your IT department influences the plan you choose and the price you pay.
Full IT Department: Consider an Application Management Plan
Mid-Size IT Department: Consider a Co-Managed Plan
Small or No IT Department: Consider a Fully Outsourced Plan
Each plan offers benefits to your company and relief to your IT department, but it is up to you to decide how much support you need from a Managed Services Provider. The smaller your IT department and the more support you need, the higher the cost of your plan. So, the Fully Outsourced Plan outlined above is the more costly Managed Services option.
To Outsource or Not to Outsource
Building your IT support system internally provides your business with an in-office presence that will be 100% dedicated to your company, but it comes with additional toolset and salary costs that add up quickly.
Renting your IT services comes at a predictable and lower price with no additional costs for tools and salaries. If you are willing to give up an individual solely focused on your company for a Managed Services Provider, your business will benefit from cost savings, and a team of experienced engineers who will ensure the security of your IT environment. You also agree to flexibility for your business to grow and downsize without fear of gaps in your coverage.
There are advantages to both approaches, but if you want to learn more about how your business could benefit from Managed IT Services, contact us at firstname.lastname@example.org to set up a free consultation with our team. We’ll be happy to provide a more accurate estimate of the cost of managed IT services after evaluating your unique needs.
Martin Feehan, PEI