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The Cost of IT Outsourcing in 2024: How to Budget and Tell if You’re Paying Too Much

January 25th, 2024 | Managed IT Services

As the old adage goes, you get what you pay for, and this couldn’t be more true when it comes to outsourcing your IT.

Comparing prices is the first thing on a business’s agenda when selecting an outsourced service. Contrary to popular belief, outsourced IT services are not a commodity and their price varies from market to market. One size does not fit all, and neither does one cost. The cost of an IT service provider depends on the level and variety of services it offers; however, not all providers employ the same billing model. These variations can make it difficult to compare the costs of the service providers you’re considering. When comparing costs, it comes down to the value the IT service provider brings to your organization and the profits it may help you generate. Here are some guidelines to help you better understand the IT outsourcing market.

The average cost of IT outsourcing services

There are a variety of pricing models IT service providers use, but the most common is typically the flat-rate, all-inclusive method of billing. IT companies that use this system usually charge anywhere from $110 to $200 per user, per month. Managed IT services providers with more integrated line-of-business applications and customer facing applications tend to be priced at a higher rate. Remember, you get what you pay for; a higher cost managed service provider (MSP) is more likely to supply your business with the support and resources it needs to operate efficiently. The average cost of IT outsourcing services

Managed service provider (MSP) cost and value of service

The price of IT services is synonymous with the provider’s operational maturity level (OML). An IT service provider’s cost is a reflection of how well the business functions, and it’s likely that a provider advertising a low-cost fee offers low-level services to its clients. A cheaper outsourced IT services provider often lacks the back-end processes necessary to ensure its operation’s stability and longevity. A survey released by Kaseya found managed IT service providers (MSP) with more expensive offerings generally exhibited higher rates of growth. However, the value of the IT company does not rely solely upon its cost, but the provider’s confidence in the services they deliver.

Cybersecurity add-on services may drive the cost of IT outsourcing higher

IT service providers are beginning to incorporate cybersecurity elements into their outsourced IT offering. Complete IT outsourcing with advanced security services will drive the cost per user per month to the upper end of the range, around $200. Cybercrime is a major threat and effective security tools and services are not cheap. Expect the security component of your IT outsourcing bill to continue to rise as the threat of cyberattacks grows.

Signs you’re paying too much for IT outsourcing services

Your outsourced IT services provider should work with your business to reduce unexpected IT costs and provide the best service for the fee entailed. Your IT service provider should be delivering advisory services to strategize for your future IT expenses and provide business reviews to assess the performance of their services and your IT environment. If your service provider isn’t doing either of those things, you’re probably paying too much for too little service. In addition, if you’re being charged $200 or more per month, per user, you’re likely paying too much. The IT services provider should maintain consistent fees and deliver consistent results while fulfilling the level of services promised in the scope of work and the service level agreement (SLA).

Budgeting for outsourced IT services

Often, businesses claim there’s insufficient room in their budget to afford IT outsourcing. However, with the costs that accompany employing a full-time, on-site IT person, as well as the hidden downtime expenses that accrue throughout the year, companies can typically reduce internal expenditures and potentially save money by outsourcing their IT department. Business downtime is not restricted to periods of server crashes or router malfunctions but includes any span of time when the performance of your employees is negatively affected by your technology. When your staff is being constrained by web and application loading time, printing delays, and recreating documents, they are essentially throwing away company time and money that could be used to generate business growth and innovation.

If your in-house IT person is on sick leave or vacation and cannot be present to monitor your IT environment, or lacks the skills or resources of a managed IT services provider, your business is likely at risk for loss. These costs can total, or exceed the amount your organization would spend on managed IT services, and the savings justify investing in a managed service provider (MSP). Some IT services providers receive commissions from selling third-party vendor technology and often charge more than the technology and services are worth. Be sure to compare the provider’s price with other technology vendors to prevent your business from being overcharged.

The benefits of fixed-fee IT services payment model

A service provider with a higher operational maturity level (OML) will provide a fixed-fee to its clients. An all-in, fixed-fee pricing model provides your company with a consistent budget and places more accountability on the managed IT services provider to prevent network issues and engage in proactive planning. If the provider fails to effectively monitor your network, it will be responsible for mending any errors that occur at no extra cost to your business. If your company has 30 users and the managed service provider (MSP) charges $4,500 a month, but another provider offers their services for a block fee of 20 hours upfront, they may appear to offer a lower rate. However, this charge is variable and not a realistic cost. It likely fails to include the expense of proactive services and the consulting necessary to create a comprehensive IT strategy that aligns your technology with your business goals.

Some managed IT services providers market what’s disguised as an all-in, flat-fee, but omit most services in their price. These providers are not guilty of false advertising, but an uneducated buyer may not understand what the costs entail, or how often they will need certain services. For example, the MSP may offer a fee of 50 dollars per user, per month, but charge additional fees for on-site support or new computer delivery. Essentially, your business should be wary of low-cost MSPs, but note the true value of the managed IT services provider stems from the quality of the monitoring offered and the expertise it can deliver.

Are you getting what you’re paying for?

If you’re still unsure what you should be paying for a managed IT service provider we can help.