In today’s competitive landscape, small and medium businesses (SMBs) are laser-focused on cost-efficiency, and especially attuned to streamlining expenses in overlooked areas, like IT.
IT infrastructure management, for many SMBs, is a complex and expensive battle. Juggling costs of equipment, software, and personnel can be overwhelming without a dedicated or proactive IT department, and many businesses have faced ballooning IT costs as a result.
This is why businesses are increasingly turning to managed service providers (MSPs) to proactively manage their IT infrastructure, secure their data, and optimize for cost savings.
But while cost reduction is understandably one of the top drivers behind choosing managed IT services, you need to do your research and consider the different pricing models of MSPs in order to get more value from your investment. This guide, updated for 2024, is here to help you.
Why Managed IT Services for cost savings?
As a SMB owner, you have likely already investigated the in’s and outs of what managed IT services are and the various capabilities they bring to your IT infrastructure management.
Understanding why other small and medium businesses are partnering with MSPs is also an important topic to help inform your own journey and expectations around what a MSP can bring.
The shift from internal IT management to MSP is driven by several key factors:
Rising IT complexity
The ever-evolving tech landscape, which now includes cloud, data analytics, cyber security, data compliance and artificial intelligence (AI) demands constant vigilance and expertise, making it challenging for in-house teams to keep up.
Hidden IT costs
Beyond salaries, hardware, and software, there are many hidden costs like downtime, security breaches, and reactive repairs that can significantly impact budgets.
Cyber attacks
Staying ahead of ever-sophisticated cyber threats requires comprehensive cybersecurity solutions, including threat detection, incident response, and proactive monitoring which are costly for smaller teams. MSPs and their expertise can offer peace of mind and advice on where best to spend.
Talent shortage
Finding and retaining skilled IT professionals that can proactively manage IT infrastructure is a growing challenge, leaving many SMBs struggling with resource gaps.
Time
Managing IT can be a significant distraction from core business activities. By partnering with an MSP, SMBs recognize they can offload IT tasks and dedicate their resources to activities that directly contribute to their business goals.
SMBs who have not addressed these challenges by hiring a MSP face potential downtime, security vulnerabilities, and ultimately, higher costs. This has led many to investigate their options in partnering with an MSP for their expert resources, proactive maintenance and economies of scale, leading to significant cost savings compared to managing IT internally.
This year, Gartner Research predicts that, across most industries, the growth rates for spending on both managed services and application and infrastructure implementation will outpace the increase in spending on internal IT staff, which is projected at 3% for 2024 and beyond.
For many businesses globally, not just SMBs, it is clear IT outsourcing and investing in external IT experts (MSPs) is a practical solution for optimizing costs around their digital infrastructure.
Learn more: The Ultimate Guide to Managed Services 2024
What are the pricing models for Managed IT Services?
While managed IT services offer a compelling path to cost optimization, it’s important to remember that no ‘one-size-fits-all’ solution exists.
Both service packages and their associated costs will vary depending on your unique business needs and requirements. A MSP will also need to assess your IT environment and evaluate any long-term digital transformation objectives.
The size of your business and your total outsourcing budget also factor into final MSP pricing.
Your ideal starting point is to understand the different tiers and pricing models of managed IT services to find a partner who can manage costs around your budget and IT needs best.
Generally, you’ll find managed IT services offered in three tiers (pricing in USD):
Basic
This level typically covers remote monitoring and maintenance, ensuring smooth day-to-day operations. Expect costs based on the number of devices managed (typically $50 – $100 per individual device, per month), number of servers managed (typically $200 – $250 per server, per month) or the number of users who require a MSP’s IT services and support (typically $150 – $250 managed IT services cost per user, per month) according to Gartner Market Guide for Managed Security Services.
Standard
This tier builds upon the basic tier, often including 24/7 support, security patching, and basic troubleshooting. Costs may involve a per-device/user component, along with a fixed monthly fee for additional services (typically $500 – $1,000 per device per service, per month). Usage pricing for specific cloud based MSP service packages is also common (typically starting in the range of $750 – $1,500 per month and increasing from there based on usage).
Advanced
This comprehensive tier of managed IT services offers strategic IT consulting, proactive cyber security solutions, and disaster recovery (DR) and business continuity (BC) planning on top of fully managed monitoring, maintenance and support. Costs typically involve a higher fixed monthly fee or a hybrid per-user/per-device model (typically ranging from $500 – $1,500 per month) according to Clutch.
In addition to the three core MSP pricing tiers are other alternative charging models. Certain MSPs price their services based on usage (you pay for how you use their services), or based on a per-incident basis (you pay for their help when a problem arises), or based on monitoring only.
What is Co-Managed Services vs Fully Managed Services?
The type of managed IT services you receive within each of the three pricing tiers commonly fall into two categories, with a third specialized category for very specific deployment scenarios. Understanding their differences is crucial when aligning them with advertised pricing tiers, and ensuring you find the perfect partner for your needs.
Co-Managed Services:
Consider this as a shared responsibility model. Your team handles some specific IT tasks internally, while the MSP tackles others. This often aligns with the Basic Tier of MSP pricing, focusing on remote monitoring, maintenance, and basic security patching, priced based on devices or users.
Fully Managed Services:
Here, the MSP takes the wheel, handling all your IT needs – from servers and networks to security and user support. This aligns more with the Standard and Advanced Tiers, offering comprehensive services with fixed monthly fees or value-based pricing.
Managed Infrastructure:
This service focuses solely on managing your IT infrastructure (servers, network devices, etc.), leaving applications and user support to you. Think of it as a more specialized version of the Basic Tier, potentially reducing costs compared to fully managed services.
The best type of managed service and pricing model ultimately comes down to the technical expertise, budget, and desired level of control your organization decides on.
For example, the co-managed support model suits businesses comfortable handling some IT tasks in-house. For SMBs, this may or may not be a typical scenario (it’s why many of you are investigating IT managed services in the first place), but if you have one or two in-house experts or you have certain tasks or sensitive data that only you can handle, this model is ideal.
The fully managed model in comparison offers full peace of mind and expertise, particularly for complex IT environments. You are paying more (a fixed monthly fee or specific service package) to guarantee services such as 24/7 support, for fully comprehensive strategic consulting and solutions. This is particularly common for SMBs who require a managed security solution.
Managed infrastructure, finally, provides a focused solution for very specific needs.
Remember, it’s important to discuss your requirements with potential MSPs you are considering. They can help guide you towards the right pricing tier and service model, ensuring you receive optimal value and cost control for your unique IT journey.
What are the most important considerations for MSP pricing?
Navigating the diverse pricing landscape of managed IT services can feel overwhelming. But only if your business and leadership team rush things. Take a step back and consider these key factors to choose the option that unlocks the best value of IT expertise for your business:
1. Scope creep:
Scrutinize the service inclusions of MSPs within each tier and pricing model. Be wary of hidden costs or “add-ons” that might inflate your budget later. A good managed IT services partner will be upfront about all of these details.
2. Scalability:
Consider your future growth and IT needs. This makes it easier for your managed IT services partner to better align their management of your infrastructure with your objectives. Opt for models that allow easy scaling up or down as your business evolves.
3. Contractual terms:
Pay close attention to contract lengths, termination clauses, and service-level agreements (SLAs) to ensure they align with your expectations and budget.
4. Support availability:
Understand the level of IT support (24/7, business hours, etc.) included in each pricing tier or pricing model and assess if it meets your critical needs or expectations. If your business cannot afford to be left without support at any given time, it’s likely you will need to consider a higher tier pricing model (fully managed services) over a basic one (co-managed services).
5. Security features:
Compare the cyber security solutions offered in each tier from the MSP to ensure they adequately address your industry and compliance requirements. If you are unfamiliar with what cyber security entails, we recommend reading The Ultimate Guide to Cybersecurity (2024).
6. Vendor reputation:
Research the MSP’s industry experience, expertise, and customer testimonials (such as via any published customer case studies) to gauge their reliability and ability to deliver promised value.
7. Negotiate:
Don’t be afraid to discuss your budget and specific needs with potential providers. They may be able to offer flexible pricing options or tailor a service package that fits your unique requirements. It’s always worth asking.
8. Compare apples to apples:
Ensure you’re comparing quotes between managed IT service providers that include similar services and coverage levels. Lower costs from one MSP doesn’t necessarily mean it is inclusive of the services from a similarly priced competitor.
By keeping these considerations in mind, you’ll be well-equipped to navigate the pricing maze of MSPs, and find a solution that optimizes your costs and empowers your business growth.
Why invest in managed IT services?
Managed IT service providers not only assist in managing and delivering your IT services, but help you optimize your spend so you can focus on what you do best – your business.
It’s understandable, then, that you want to get the best value for your money and understand the in’s and out’s of what kind of support and expertise is included in MSP solutions.
SparkNav is a managed IT service provider that focuses on strategic cost management for sustained growth. We recommend reviewing our IT cost management services to help you control expenses, streamline your IT spending and optimize your efficiency and stability.
