As a business expands, advancing technologies cause it to invest more and more to pay for IT. These investments are smart and generate profit, but at a certain point continued in-house investment starts to produce diminishing returns and even losses. Smart companies know when they have reached this tipping point and start looking for options to cut their expenses, maintain growth, and provide superior IT support and planning. There are factors they should be aware of to determine if they are at their tipping point.

Understanding the Value of Your IT Department

What is the value of your IT? You may think that your IT department as an expense, but if it is done correctly, it actually increases your revenue. Your IT enables efficiency and productivity in all sectors of your business – this generates more profit.

Ask yourself this… if your IT department allowed your systems to slow down by 10%, how would that affect your customer service, sales, procurement, warehousing and fulfillment, and financials? Your IT has a very real monetary value to your business.

Determining the Cost of Your IT Department

There are three types of cost – direct, indirect and hidden – to an IT department. Direct costs are hardware such as physical servers, electricity, and HVAC. In-direct costs are salaries, benefits, and the training expenses of those who fix and maintain your hardware and software. Hidden costs are harder to calculate. They incur when there are slowdowns in the system or actual downtime.

It’s been estimated that the total cost of ownership of just one computer over three years is more than $15,000. When you purchase a computer, you’re not just buying the hardware, you’re also paying for upgrades, maintenance, and support of the systems it operates.

This chart details the average expenses per year for a medium-sized company with 250 employees. Take note, as costs rise, they can outpace your return on investment.

Cost per year of IT Department

Comparing In-house to Outsourced Costs

A quick comparison between in-house and outsourced IT support illustrates that a company of 250 employees can easily save 40% in their support costs. Add to this the reduction in cost a of infrastructure migration to cloud services would bring and the savings will be more.

in-house outsourced IT comparison chart

Knowing When to Switch to a Managed Service Provider

Knowing when to switch to a managed service provider (MSP) for IT support is simply a numbers game. There is a simple equation that will tell when it’s time to outsource your IT.

The Time to Switch Equation:
(IT Valuei – Costi) < (IT Valueo – Costo) = Outsource your IT

This means if the value of your in-house IT network minus what it costs you in salaries, benefits, training, and physical infrastructure is less than its value minus cost of outsourcing, it is time to outsource.

What to look for in a Managed Service Provider

The most important things to understand before selecting a managed service provider are your needs and their capabilities.

  • What are certifications do they hold?
  • Do they have offices near you?
  • How many technicians are on staff?
  • Can they offer a fixed-rate plan?

Managed service providers have different levels of proficiency which we refer to as their Operational Maturity Level (OML). There are five levels, level 1 being beginner and 5 being the most innovative.

Ideally, you would choose a managed service provider who is a level above what your current needs are so that as your company grows, they are ahead of the learning curve and ready to recommend and implement new technologies. When choosing a managed service provider, swing for the bleachers, don’t be satisfied with first base.

What Your Managed Service Provider Should Be Doing

A higher-level managed service provider will be familiar with your business and sitting at the table for strategic technology planning sessions. They will do more than just patch your networks and fix things when they break. Your service provider will be an integral part of devising a roadmap for your future technologies. Their specialized access to advanced technical knowledge will be a mile wide and a mile deep.

What higher OML MSPs offer:

  • Access to experts with broad product knowledge
  • Strategic Road Map Planning
  • Systems and Technology Management
  • Scheduled Onsite Service
  • Help Desk Support
  • Emergency Support Coverage

A great MSP gives your business management team the answer to the question, “What do we need to compete and grow?”.

How Much Should You Pay for a Managed Service Provider

One of the greatest benefits of using a managed service provider to manage your IT is that many offer a fixed per month rate. There are no surprises, you know every month what your IT expenditures will be and can budget accordingly.

That being said, be careful, it is easy to jump at the lowest rate you are quoted. The age-old caveat, “you will get what you pay for” applies. Lower rates often mean lower service levels. Expect to pay between $100-$150 per desktop per month depending on the services you need, and the total number of supported desktops.

Benefits of a Fixed Rate Model

  • Ease of mind, support is available 24/7
  • Easy budgeting and no end of month surprises
  • The overall cost of ownership for technology is less
  • Great for businesses with well-defined goals who require specific deliverables
  • Dedicated team motivated to be efficient and productive
  • Little supervision is required from the client
  • Less paperwork with a single service provider

OUR ADVICE: Invest in a managed service provider (MSP) with a higher operational maturity level (OML) and you will see greater returns on investment (ROI).

Related blog: Benefits of Using an MSP for IT Support

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