How to Calculate The Cost of Managed Services For Your Business

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.

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

Mid-Sized, Downtown Law Firm

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

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

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.