In today’s fast-paced business world, having a robust and reliable IT infrastructure is vital for success. Many small to mid-sized companies struggle with the decision of whether to hire internal IT staff or outsource their IT needs to a Managed Services Provider (MSP). In this blog post, we will demonstrate how outsourcing IT to an MSP can be a more cost-effective solution for companies with 50 computer users, a network with 20 virtual machines, and complex server and switch environments.
The Cost Comparison
Let’s consider an example company with 50 computer users, managing a network comprising 20 virtual machines on a 3-host server environment, core switches, shared storage, six access switches, and 5 wireless access points. The cost of engaging an MSP for managing this entire IT environment is approximately $125 per user per month.
On the other hand, if the company were to hire an internal IT manager, the base salary would be $125,000 per year. Let’s delve into the cost-effectiveness of each option.
| Cost Component | Internal IT Manager | Managed Services Provider (MSP) |
|---|---|---|
| Monthly Base Cost | $10,417 ($125,000/12) | $6,250 (estimating $125/user/month) |
| Benefits and Payroll Taxes | Additional cost | Burden falls on MSP |
| Training & Professional Dev. | Varies | Burden falls on MSP |
| Cost Savings | NA | ~$50,000/year |
Opportunity Cost
Outsourcing IT to an MSP allows the company to focus on its core business activities and strategic initiatives. However, someone from the leadership team will have to be the liaison between the MSP and the company. This position must make IT and software-based decisions that are both inside and outside the scope of the outsourced IT provider’s capabilities.
The opportunity cost of outsourcing to an IT manager is that someone will need to be designated to spend their time with the MSP and make strategic technology decisions for the company.
The opportunity cost of hiring an internal IT manager may be that of cost savings and using the cash for more strategic priorities, like leasing a new office space to expand a business opportunity.
Cost Savings
When comparing the two options, the cost savings of outsourcing to an MSP become apparent. Engaging an MSP eliminates the need to invest in hiring, training, and providing benefits to an internal IT manager. Additionally, the MSP’s comprehensive package includes all IT services, maintenance, and support, without the added expense of purchasing costly hardware and software separately.
Payback Period
The payback period for outsourcing IT to an MSP can be instant when compared to hiring an IT Manager. Within a few months, the cost savings from avoiding internal hiring and the efficiency gains from expert management of IT infrastructure can cover the investment in MSP services.
To understand the benefits of Managed Services Providers better, check out these resources:
- The Five Differentiators for Managed Services Providers
- 5 Benefits of Outsourcing IT Managed Services
- Managed IT Services: 8 Trends for 2023
- Managed IT Services RFP Examples, Tips, and Best Practices
- Managed Services: Top Trends Impacting MSPs in 2023
- IT Managed Services Market 2023 – Latest Sales Figure Signals More Opportunities Ahead
Conclusion
When considering the financial implications, opportunity cost, cost savings, and payback period, outsourcing IT to a Managed Services Provider emerges as the more cost-effective and efficient option for businesses. By entrusting their IT needs to experts, companies can focus on growth, innovation, and overall business success. It’s no wonder that outsourcing IT to an MSP has become a favored choice for companies seeking a competitive edge in today’s technology-driven world.