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Managed Services vs In-house IT: A Comparative Analysis

As a small or medium-sized business (SMB), you know the right technology is important for growth and efficiency. 

Investing in IT is important to keep competitive and avoid problems like downtime and security risks. However, managing IT infrastructure in-house can also be a distraction from what you do best – your business. This means there are two options to consider for managing your IT: in-house IT or outsourcing IT to a managed services provider (MSP).

When comparing in-house IT and managed services, SMBs need to evaluate the trade-offs between control, cost, expertise, and scalability. Each approach to IT has its strengths and challenges, and the best choice depends on your specific needs, budget, and strategic goals.

In this article, we will compare both IT approaches to help you make the best decision.

Managed services vs in-house IT: An overview

Most SMB owners will be familiar with what managed IT services are (also known as managed IT services) and the numerous services they provide around IT infrastructure management.

With access to specialized support, predictable IT expenditure, and scalability, MSPs are a highly visible and attractive option. However, the allure of complete control and customized solutions understandably keeps in-house IT in contention. The key, then, is in balancing what each option offers to make an informed decision. 

The main differences between in-house IT and managed services can be split into 5 distinct categories:

1. Cost

Managed services (MSP)

The best managed IT services offer flexible, predictable costs depending on your SMB’s IT environment size, business objectives, and outsourcing budget. 

Small businesses typically pay MSPs based on tiered service packages (basic, standard or advanced) that cover the support, maintenance and management of IT devices, servers or users. There are also three types of managed services (co-managed, fully managed, and managed infrastructure) that define how much of your IT tasks and infrastructure the MSP manages, offering budget predictability and flexibility that is typically important for SMBs. Finally, MSPs also offer management of IT costs as part of their services, which can help you optimize spend and get the most value out of your investment in their expertise in the long-term.

Through economies of scale, MSPs provide access to a broad array of services at a fraction of the cost of maintaining a full-time, specialized IT staff. Their availability, services and support are based on strict service-level agreements (SLAs) that ensure what you pay for is always aligned with your outsourcing budget and business expectations. It is key to be mindful of the scope of services covered in your contract to be clear about the exact services covered.

Managed services are most ideal if your SMB is looking to streamline IT expenses, leverage predictable fixed expenses, and avoid the overhead costs associated with in-house teams. MSPs also mitigate the need for large upfront investments in IT infrastructure, as MSPs typically offer access to advanced technology platforms as part of their services. 

For your SMB, this means being able to leverage high-level IT capabilities without the cost of purchasing and maintaining expensive hardware and software (such as via cloud computing). This all makes it easier for your SMB to budget and allocate resources more effectively towards core business functions.

In-house IT

Compared to a managed service provider, investing in an in-house IT team entails significant upfront investments in hardware infrastructure and software, ongoing costs for salaries, training, and benefits, and potentially unexpected expenses for upgrades or emergencies.

However, while it can be costlier, it does offer direct investment into your internal capabilities, which can appeal to SMB in certain industries who want a level of expertise on-hand for smaller, day-to-day IT activities that may not make sense, in terms of cost, to outsource. 

In-house IT also means you are directly investing in staff dedicated to handling hardware, software and technology-related tasks, which can appeal to SMBs that value (and are able to have) people within the business on-hand to attend to tech demands. However, this can increase the long-term financial burden if your business cannot afford continuous investment, making in-house IT a less viable option over time if you have tight budget constraints.

Expertise and Specialization

2. Expertise and specialization

Managed services (MSP)

MSPs bring a breadth of expertise and specialized skills to the table, offering SMBs access to a wider range of technologies and industry best practices than might be feasible with an in-house IT team. 

This access can be particularly valuable if your SMB is looking to leverage specific technologies such as cloud, data & AI and cybersecurity, or comply with strict industry regulations, without the overhead of hiring specialized staff for each technology area. You also gain confidence in having trained experts able to resolve complex challenges and digital transformation initiatives.

Another key benefit is MSPs stay at the forefront of technology trends, ensuring your business benefits from the latest advancements without taking your focus away from your core activities.

In-house IT

Developing an in-house IT team allows for deep specialization tailored to your SMB’s specific needs. If your sector is agriculture, for example, you can invest in a team focused around technology adoption and tasks best suited to your processes, such as Internet of Things (IoT) and automation.

But while this approach fosters a high level of integration between IT operations and business strategies, achieving and maintaining this level of specialization requires ongoing investment in training and professional development, which can be time-consuming, expensive, and complex. The ability to quickly adapt to changing business needs and keep IT focused on support for your operations can mean you keep things focused, albeit with higher costs and resource commitments.

3. Control

Managed services (MSP)

Partnering with an MSP means some loss of direct control over your IT operations, as decisions and day-to-day management are handled externally. This arrangement requires trust in your MSP to act in your business’s best interests, underscored by clear communication and a detailed SLA. This shifting of control to a specialized partner, however, can be a huge benefit if your SMB wants to focus entirely on core business activities, or has no time to manage IT.

The best MSPs provide clearly defined client experiences and transparent communication, with Client Success Managers (CSMs) and tailored technological solutions that help your SMB have confidence in handing over the burden of IT management entirely to a third-party partner.

While MSPs can free up internal resources to focus on core business activities, this option may not suit if your SMB demands internal oversight within overall IT management. For example, certain healthcare and finance SMBs may need to manage systems with sensitive patient and customer data more closely, as they are subject to industry-specific data compliance laws. However, many MSPs in 2024 specialize in compliance, owing to its increasing significance in the current landscape, and can tailor their services around regulatory requirements and work with any internal IT staff you need to have accordingly.

In-house IT

Maintaining IT operations in-house offers control over technology decisions, data management, and security protocols. This control can be critical for businesses in the aforementioned highly regulated industries, or those that prioritize data privacy and security over anything else.

Direct oversight of IT operations allows for potentially quicker decision-making and problem resolution, but this path is only suitable if your business is able to hire the level of expertise necessary to act fast. Additionally, changing market conditions, new technology solutions and compliance laws mean any IT team you invest in must continuously be trained and informed, in order to offer the level of confidence in their control over IT tasks and challenges that arise.

The Cybersecurity that Managed IT Services can provide is of utmost importance to SMB's

4. Security

Managed services (MSP)

Cybersecurity is often a core competency for managed IT service providers. The best MSPs have the resources and expertise across multiple areas, including business continuity and disaster recovery (BCDR), application security, cloud security, and network security, to implement advanced security solutions and proactively protect your systems from threats.

MSPs typically offer advanced security measures, leveraging economies of scale to provide your small business with high-level security solutions that would be costly to implement in-house. They are also often better equipped to stay abreast of evolving cybersecurity threats and compliance requirements. Entrusting sensitive data to an external party requires confidence in the MSP’s ability to protect your information and maintain privacy, so ensure the MSP you choose is certified across the platform or solutions you wish to implement.

Security is undoubtedly one of the biggest drivers for digital transformation and IT investment in today’s market, owing to the rise of cyber threats across multiple areas, and MSPs specifically offer up-to-date knowledge and protection against these constantly evolving threats. Being able to delegate the very complex and time-consuming task of safeguarding business operations and sensitive data to qualified specialists is a major benefit that cannot be understated, particularly if your SMB entirely lacks cybersecurity skills or cannot afford to train staff in-house.

In-house IT

An in-house IT security team can allow for a customized cybersecurity approach, tailored to the specific risks and requirements of your business. This direct control over security strategies can appeal to small businesses that handle sensitive data or operate in highly regulated sectors. 

However, achieving and maintaining a robust security posture demands significant investment in technologies and ongoing cyber awareness training to combat the latest cybersecurity threats, which is not an option for most SMBs.

Maintaining robust cybersecurity requires constant vigilance and investment in security tools. Hiring talent with the appropriate knowledge and expertise, and retaining said cybersecurity specialists can be a big challenge for SMBs with a lot of other non-IT priorities to manage.

5. Scalability

Managed services (MSP)

MSPs offer scalable IT solutions that can grow or contract with your business needs, providing the flexibility to adjust IT resources without the need for significant capital expenditure or the delays associated with recruiting and training additional staff. 

This agility can be a significant advantage in rapidly changing markets, allowing your SMB to respond faster to technology-related opportunities or challenges without being constrained by existing IT capacity.

In-house IT

Scaling in-house IT capabilities to match business growth requires careful planning and investment. While it offers a high degree of control over the expansion process, it can also lead to resource constraints during rapid growth periods or redundancy during slowdowns. 

For businesses with stable, predictable growth, building and expanding an in-house IT department can be a strategic asset, though it requires a long-term commitment to resource management and investment to ensure it beats out the value of comparable MSP solutions.

MSP vs in-house IT: Next steps

IT expertise is one of the most valuable assets your SMB has to drive growth, efficiency and competitive advantage. By assessing the considerations detailed in this comparative guide, you have taken the first important steps to understanding the pros and cons of selecting either a MSP or investing in-house for your IT requirements.

SparkNav is a managed IT service provider that focuses on fully managed IT solutions built around your business goals, and specializes in helping SMBs in all sectors understand why a MSP partnership can help offload your IT burden to the experts. Speak to the SparkNav team today to discover we can meet your budget, transformation and technology requirements.

Robert Griffin
Robert Griffin
As COO, Robert Griffin plays an instrumental role in aligning operational excellence with strategic goals by leveraging his decades of experience in enterprise leadership. With deep knowledge and expertise in security, governance, risk, and compliance (GRC), and AI, his insights are often shared through thought leadership channels, including LinkedIn and blogs. → Follow Robert on LinkedIn.