The benefits of outsourcing some or all of your IT needs to a managed services provider (MSP) are clear. But when it comes time to determine the cost of Managed IT Services for your organization, the answer isn’t always so obvious.
The average cost for Managed IT Services can vary depending on your organization’s needs, goals, the current makeup of your IT team and the status of your infrastructure.
To give you a better understanding of how Managed IT Services costs can differ from business to business, here are two examples. We pulled these numbers from actual Loffler Managed IT clients:
What Does Managed IT Services Cost?
How much Managed IT Services cost can range widely from $2,000 per month to more than $15,000+ per month. To understand the true cost of Managed IT Services, you need to understand the variables that drive that cost up and down – number of users, number of employees, number of locations, and length of the SLA (Service Level Agreement). Additionally, individual Managed IT Service providers may have their own models for pricing (e.g., flat-fee per month or hourly), which will influence your cost.
The key to figuring out how much you should expect to pay for Managed IT Services is to understand how these factors relate to your organization:
- Number of Employees and/or Users
- Number of Devices
- Number of Locations
- Remote & On-site Employees
- Length & Type of Service-Level-Agreement (SLA)
- Co-Managed or Fully-Managed IT
- Type of Backup
Factors that Impact Managed IT Services Cost
1) Number of Employees and/or Users
More users mean more devices for your MSP to manage, so take inventory of how many devices per user need to be managed. This will directly influence the price your organization will pay for Managed IT Services.
Price Range for Each User
The amount you should expect to pay per user depends on number of users and what you need managed or upgraded. You can expect to pay between $50 – $150+ per user / month.
2) Number of Devices
In addition to the number of users, you also need to account for the number of servers when determining pricing. Adding more servers to your network creates more complexity to your infrastructure. More complexity means more support hours are needed to manage, maintain and secure your network.
Price Range for Each Device
Again, the amount you pay for each managed device depends on the location(s), number and types of devices you need managed. More complexity means a higher cost. On average, you can expect to pay between $50 – $125+ per device.
3) Number of Locations
The pricing trend should be obvious by this point. The more management you need, the higher your cost will be. The cost for IT management can vary significantly between a small business with one location compared to a larger business with multiple locations.
A Managed IT Services provider should also take your organization’s goals into account. Do you plan on growing and expanding within the next year? Five years? Your provider should help you plan and give you an idea of how IT service costs will increase.
Price Range for Each Location
Giving an exact price range per location can be difficult. We could provide some numbers here, but that wouldn’t be doing you any justice. The most significant factor for determining costs is to figure out the total number of devices you need managed by your MSP. Use this formula to get an idea for your organization:
Device Count = Office Locations + Servers + Desktops & Laptops
4) Remote & On-Site Employees
Employees working remotely provide another layer of complexity to your network. You should also include any mobile devices or tablets in your network when determining device count. The rise of remote work also brought more popularity to the BYOD (Bring Your Own Device) trend. This also adds complexity because of the added security risks.
Price Differences for Remote & On-Site Employees
What you can expect to pay for remote vs. on-site employees will depend on your current IT infrastructure. If your organization is already in the cloud, then you’re a step ahead. If your organization is ready to transition to the cloud in order to meet your collaboration, security and storage needs, then it will cost you more to get that set up. Extra network security measures will increase the average cost for Managed IT Services if you have employees working remotely.
5) Length & Type of Service-Level-Agreement (SLA)
The SLA between you and your service provider explains what you’re getting for your money. The devices you need managed will be documented in your SLA. More managed devices will be reflected in your total cost. The agreed-upon length of the contract can also have a direct impact on the overall cost of IT management in the long run.
How Your SLA Impacts Pricing
Many service providers will offer incentives for signing longer contracts. Signing longer contracts can save your organization thousands, but it is important to thoroughly vet and choose an MSP you trust when signing a multi-year contract.
6) Co-Managed or Fully Managed IT Services
Most MSPs will have options for either co-managed or fully-managed service plans. If you currently have an internal IT team and you want to offload some of their workload, then a co-managed solution could be a great fit.
If your organization currently doesn’t have an IT team on staff, a fully-managed plan is what you need.
How Managed IT Services Plans Impact Pricing
A co-managed IT services plan with less support hours will be cheaper when compared to a fully managed plan. It depends what your organization needs and currently has for an IT team. If you want to be totally hands-off with your IT, then a fully-managed plan is what you need.
Considering the cost it takes to hire, train and retain skilled IT people, a fully-managed plan can save your organization thousands of dollars (and headaches) in the future. It costs around $75K (on the low end) to have a qualified in-house IT person. You could hire a whole team of experts for that or less.
7) Data Backups & Storage
Another factor to keep in mind when looking into Managed IT pricing is how much data you need your MSP to manage and backup. The more data that needs to be managed, the more equipment and support hours that are required, which increases pricing.
Pricing for Backups & Data Storage
A wide gap can exist when comparing prices for data storage. Prices can range from as little as $5 per month to $500 per month. Remember, you get what you pay for when it comes to data storage. Cheaper prices can seem very attractive, but these plans probably won’t come with maintenance, proper backups or advanced security features.
Common Managed IT Services Pricing Models
This pricing model is one of the most common for MSPs. With per-device pricing, MSPs charge a fixed monthly fee for devices they support and manage. This model is popular because of its flexibility and simplicity for MSPs and their clients.
Per-device pricing can become complicated as clients add more devices like tablets and smartphones to their network. Bring your own device (BYOD) policies and work from home can also add complexity to this pricing model.
Like device pricing, this model allows MSPs to charge clients a flat fee based on the number of users. This is advantageous for clients that have users with multiple devices that need to be managed.
Another common pricing model for MSPs is tiered pricing. The cost of Managed IT Services will vary based on the tier chosen by clients, usually based on a basic to premium tier list. This pricing model is often preferred by MSPs and clients because it allows for flexibility. Organizations on a tiered pricing model can upgrade or downgrade based on their current needs and budget.
Managed IT Service Provider Red Flags
Over Promise & Under Deliver
When choosing a service provider for your organization, you want to make sure they have the bandwidth to support you. If a provider only has a team of five to ten people, they likely won’t have the ability to keep up with all the work if they take on too many clients.
It’s important to ask how the service provider load balances clients. For example, at Loffler, we balance our clients among multiple Managed IT Services teams so every client receives the amount of attention they need.
Lack of Experience Working in Your Industry
Every industry is unique in its IT needs. Your service provider needs to understand the ins and outs of your industry to provide the best service. The internal structure of your service provider’s managed services teams can play a large role in your organization’s satisfaction with outsourcing IT needs.
At Loffler, we divide our Managed IT teams into six to eight engineers. Each team focuses on specific industries. So, say you’re with a legal firm that wants to outsource your IT needs. You’d be assigned to Loffler’s Alpha Team because they specialize in IT for the legal industry. That can make all the difference.
Cost is an important factor when deciding if Managed IT Services are right for your organization. As a Managed IT Services provider, Loffler manages IT needs for many clients, so they can focus on running and growing their businesses.
Jeff Gullickson is an Account Executive who has been part of Loffler's IT Solutions Group since 2005. He serves as a trusted resource for clients to find the best fit for their business IT needs.