We often get asked, “Isn’t an IT Managed Service Provider more expensive than hiring an IT Manager?” And the immediate calculation is to compare the potential manager’s salary to the annual invoices of the MSP.  But a better question is about return on investment: which approach wins over the other?  The true return is not always obvious and so we’re diving into a few hidden but real aspects that have a direct relation to dollars in both scenarios.

What is the typical annual investment? 

Let’s analyze an average 25 person company with no in-house IT person.

The costs of managed services vary depending on the services included, location, whether the price is per user or device, but generally it can range from  $100 to over $300 per user per month. With this in mind, we are going to choose an average figure of $150 per user per month, which translates to $3,750 per month for a company with 25 devices, totalling  $45,000 per year for fully managed IT services. 

The managed services should include things like a Service Level Agreement, which details the performance guarantees the service provider is making related to the contracted services. These performance guarantees may include infrastructure uptime and availability, included services, minimum compliance standards and more.

An IT Manager will not come with a Service Agreement, but you will need to pay a salary, payroll taxes and benefits regardless of performance.

When comparing  the average annual salary of a single IT professional of $62,000 per year according to PayScale, the costs alone make the case for outsourcing strong. 

But expenditure alone isn’t the full picture, or even the most important factor to consider — it’s the return the organization receives that we really should explore further.

The Real Cost of Downtime

MSPs have tools to ensure that clients’ networks are running consistently and smoothly. Before we explain what these tools and advantages are, here is how to value lost productivity in a worse-case scenario.

Cost of Downtime (per hour) = Lost Revenue + Lost Productivity + Recovery Costs + Intangible Costs

For example, if a professional services firm is hit with ransomware and suddenly billable hours are at a standstill (lost revenue), administrators can’t send important emails (lost productivity), and the reputation and recovery has no clear end in sight (recover costs and intangible), the total costs become substantial.

Partnering with an MSP would not guarantee perfection, but it would usually mean better protocols would exist to reduce downtime risk and systems to recover faster. Primarily because MSP are highly tuned to industry best practices. This aligns with the idea that MSP have greater exposure to a broader base of technology than any one individual or even an IT department can have.  With every minute costing the average business $5,600, according to a study by Server Cloud Canada, every second counts in the red.

Conversely, an in-house IT manager is one pair of eyes that multitasks on monitoring the network, providing end-user support and doing the best he or she can in everything. This puts a lot of stress on one person and also means only one thing can be worked on at a time, possibly leading to costly mistakes.

The Returns of Technology Alignment

Similar to downtime, calculating the returns on increased productivity are hard to calculate. However, in an article by the Harvard Business Review, in a survey of 202 working professionals, conducted prior to Covid-19, 40% of the respondents reported experiencing more than 10 interruptions per day, with 15% reporting more than 20 interruptions a day

This is another area where an MSP has an advantage because a qualified team can often minimize interruptions. A team can tackle vendor negotiations, has exposure to more business applications, and finally, more time to catch technology issues ahead of time.

Finally, MSPs tend to be better at long-term planning, but once again, how do we put a dollar figure on this? Having long-term goals for your IT needs that align with your business’s goals are not just nice things to have, they are critical to survival.  

How much can Managed Security “return”? 

It’s hard to put a value on security but we can put a price tag on a security breach. According to IBM and The Ponemon Institute, the global average for a data breach across all industries is $3.86 million dollars. That figure in the US is more than twice at $8.64 million dollars per data breach.. 

It takes an average of 280 days to resolve a security breach meaning that a ripple effect is created by the breach that continues to affect the business. While investing in security will not achieve a return immediately it will definitely help in preventing a potential breach or recovering quicker in the event of one. Companies that were able to detect and contain the breach in under 200 days experiences on average $1.1 million dollars less in overall costs. 

An MSP can audit, evaluate, and identify where potential security gaps are present in a business.This allows the MSP to take action towards improving current security, increasing monitoring, and establishing protocols to ensure a data breach is less likely to occur and in the event of one the response time is quicker and better organized potentially saving hundreds of thousands from being lost.