Do You Know the True Cost of IT Support for Your Business?
What should I pay for IT Support? At first, this seems like a very straightforward question, but it soon becomes very complicated.
The cost should be the amount of the invoice your IT managed service provider sends you, but as always, we encounter the problems that the word ‘should’ entails…we often end up paying more than we should, for worse service than we should get.
This is the mistake most people make when looking at what they pay for IT support. To calculate the true cost, it’s important to factor in any performance issues that might be sapping the users or the organization as a whole.
When you factor in these indirect costs, your total spend for technology may skyrocket above that invoice amount.
The best way to break down these indirect costs is to separate them into 5 different categories:
Operator/User Issues. Any time an operator/user has a problem, multiply that time by 3 and then apply it to your payroll burden. The 3 factors we must look at are; calculating the time of the problem, losing productivity before getting back on track, and time spent trying to find a resolution.
Downtime. When systems fail, you have to consider their purpose and impact. If it’s the shipment labeling system, what’s the cost of the labor spent fixing the problem? Furthermore, what’s the cost of delays in shipment? Your mail system might delay users from working on projects or communicating with clients. To determine your organization’s vulnerabilities download a Cost of Data Loss Worksheet here.
Business System Issues. If your main line of business system has problems such as printing, downtime, and user interruptions – your operation could come to a complete stop. Time spent resolving these issues and lost worker productivity rack up fast and the time spent fixing these problems can never be recovered.
Viruses/Malware. Anytime a user detects a virus, there is going to be a significant impact. In the best case, the virus is limited to that user, but oftentimes it turns out to be something far worse; it could be a bot that shuts down part or even all of your network. Expect it to take hours to recover back to normal operation.
Personal Use. Most businesses want the employees to work when they are at work. Yet, a majority of users will use their work systems to conduct personal business. Facebook, Amazon, etc. These time-wasters can be limited or prevented.
So, why is this a big deal?
Many organizations trying to maximize profits and reduce costs will erroneously manage a support relationship based on the direct cost of the support.
They end up paying too little for support thinking they are getting a good deal, but due to the poor quality of support they bought, they have much higher indirect costs. The organization suffers even though they think they are saving that hard-earned cash.
So how do you calculate the real cost of your IT support?
When planning an IT strategy, many business owners wrestle with whether to hire a dedicated in-house IT staff or choose a third-party partner. For most, it comes down to cost and budget concerns. (Check out our article on IT budgets here). We’ve found that a lot of small-business owners assume that a managed services provider (MSP) will be exponentially more expensive, as well as lacking the transparency associated with in-house employees.
But is that really true?
Let’s examine the costs of having an IT support staff versus hiring an MSP.
In-house costs
Someone with a systems engineer skillset and three to five years’ experience would be an appropriate hire to meet the needs of the average business.
How much would that salary typically be?
Within the Washington DC market (in 2021) you’re looking at a ballpark figure of approximately $95,000 per year. However, that’s just a base salary. There are a lot of overhead costs associated with each person on payroll, including (but not limited to) taxes, insurance and benefits, and per-head IT costs. This works out to around a 20% to 25% markup on that base salary.
This brings the total for in-house support to about $115,000 to $119,000 per year.
Managed services provider
Let’s take a look at the pricing model you can expect as an eGuard Tech Services client:
For example, an average-sized small business client has about 20 users. We always recommend our Total IT Care plan (click here for more information on our plan options), which would range between $2700 to $3000 per month. Unlike with in-house staff, there are no additional subscription costs involved with hiring an MSP.
This brings the total for managed services to no more than $36,000 per year.
Note: You may encounter some additional fixed costs with MSPs, associated with things like new hardware or an office move. But with MSP pricing being around half that of in-house, it’s unlikely you would ever exceed the cost of a full-time staff member when using an MSP.
The bottom line
Judging by numbers alone, it seems that having a third-party IT resource makes the most sense for business owners. But what exactly are you paying for with an MSP versus your own support staff? Do the benefits of having someone on payroll outweigh the costs?
We understand that sometimes, having someone on staff is beneficial. These individuals can be more hands-on, are able to contribute to the overall company culture, and have a higher level of business involvement than an MSP. They may be even more valuable if they can be leveraged across departments. However, relying on an in-house employee essentially boils down to putting all your IT eggs in one basket. Ultimately, an MSP will offer a much more extensive level of support for a fraction of the cost.
Still not sure if managed services are for you and your business? Download our free checklist “The 10 Absolute Must-Haves to Look for In Your Next Managed Services Provider” to learn more.
