Cost for Managed IT Services

 

What is a Managed IT Service Provider?

A managed service provider (MSP) is a third-party company that provides managed IT services to businesses. They handle the technical aspects of the customer, from planning and designing their infrastructure, to managing and operating their systems and network. MSPs will bring your business a host of benefits; they can save you time and money by providing expert support, so you don’t have to hire an in-house IT staff. They are also great for businesses who want to focus on their core competencies and not be distracted by the intricacies of managing their own IT infrastructure, or constantly fixing IT issues when they unexpectedly arise. Another benefit is that MSPs have the inside scoop on available technologies and services, and can help their customers align their goals with their budget limitations, providing a cost-effective tech solution, such as software licensing.

What Does Managed IT Services Entail?

Before delving into the cost of managed IT services in Australia, it is essential to understand what managed IT services mean. Managed IT ideally means that you hire an outside company to monitor and manage your IT resources. Many small and medium-sized businesses (SMBs), opt for these services because they lack the resources to employ a team of IT professionals. Larger companies and enterprises don’t have a big problem hiring IT experts. Besides the savings, managed IT services allow businesses to pay only for what they need. These services could either be fully-managed and partially managed. Businesses with an in-house team often opt for partially managed services (we call this Co-Managed IT) to take care of specific tech needs. In this case, you get to choose what you want your provider to monitor, and when you need them to support you. Partial management provides support for regular tasks ranging from backup administration to tech security. You could offload other jobs, including desktop support, helpdesk support, and server management. In this way, your internal IT team will have more time to focus on projects that drive business growth and innovation that is specific to your company. Fully managed IT services, on the other hand, are efficient and economical for SMBs. An expert service provider can help you determine the tech support you need to maintain smooth operations. Businesses with limited resources to handle their tech challenges can find reprieve from this option.

What Services do MSPs offer?

Most managed IT providers offer a wide range of IT services that include:

• Remote/onsite IT support
• Cyber security
• Managed desktop
• Unified communications
• Cloud services
• IT Consulting
• Microsoft 365 services
• Backup and Disaster recovery
• IT Strategy
• Service Desk
• Network management
• Internet services
• Product licensing (e.g. Microsoft 365, Adobe) Some MSPs are specialised to certain IT offerings, such as database management, office removal and refitting, or IT staff procurement. Yet other MSPs offer their services to specific industries, such as education or retail. However, most MSPs will deliver all the IT services that every business needs to optimise their efficiency, productivity, and security.

What is a Service Level Agreement (SLA)?

In simple terms, a service level agreement (SLA) is a written agreement between you and the service provider that details most of the following:

1. The services you will receive
2. How much the service will cost
3. When you will be billed
4. The timeframe in which you must pay the fee
5. How long it must take to complete the services
6. Response times
7. The quality of work that will be delivered
8. What happens if there are delays or unmet commitments

What Factors Influence MSP Pricing?

The price of managed services will be influenced by a variety of factors, including:

1. The complexity of your IT environment
2. The services you require
3. The level of service provided
4. If you need onsite or remote services
5. If you have an in-house IT team

What will I (You) pay for IT services?

While it is difficult to calculate an exact price before knowing your specific needs, network complexities, devices, and users, the price of managed IT services in Australia will range between $75 to $300 per user. This broad range will be narrowed down when you provide your specific business requirements while negotiating with an MSP. MSPs will offer you specific packages or tiers of IT services, which you will generally be able to scale up or down depending on your ongoing business IT needs. These tiers will vary in prices.

The price can also differ depending on a whether the MSP bundles their pricing into per user pricing or keeps their licensing separate.

i.e.

Per User Price: Managed IT Services + SaaS Back Up + Endpoint Detection + Anti-Virus = $70 per user / Month

License Cost: 1 x Managed IT Services = $50/ month, 1 x SaaS Back Up = $8 / month, 1 x Endpoint Detection = $12 / month & 1 x Anti Virus = $10 / month.

What Are the Pricing Models?

That is a great question…

Unfortunately, every single MSP could have a different model.

I will outline the common pricing models you will see in the industry. Please note that majority of the time your internet, networking equipment and some other stuff is on a separate agreement and may not be included in your “Managed Services Agreement”

1. Per User Pricing: Per User pricing is the most common. It allows businesses to understand from a hiring and firing perspective how much each head costs them in the business for their IT requirements. It also allows an MSP to have a simple model to scale their services with a client. This can go wrong occasionally due to some users having additional devices that don’t fit in the budget or aren’t being managed. Majority of MSPs who run their business solely on Per User pricing have found out work-arounds for this now though.
2. Per User + Licensing: My personal favourite. The one believe to be the most transparent for all parties. Managed Services which involves support tickets, setting up new users, broken printers, etc. are all covered under the Managed Services fee per user. Separately all the licensing is paid for on a per device basis depending on what is being used. To allow for a successful partnership between the MSP and the client, I believe this model is best as it is clearly visible what should be charged and what should not be charged for.
3. Block Hours (Recurring): My least favourite of the options. This is a really bad way to sell Managed IT Services. Selling “pre-paid block hours on a monthly recurring model doesn’t make sense to me. The block hours generally expire at the end of a month and the client has to pay for additional hours if they ever go over the allotted amount of hours in a month. If you are signed up to this model, I would suggest a review of your IT provider.
4. One Off Hours (Project Based): I have thrown this in as it is common, but not really a Managed Services Offering. You don’t have a monthly committed spend and you just pay your IT provider as they help you with something that is broken on a once off basis.

In summary, I think the top two are the best options and favour the second one myself, although I may be a little bias.

With Managed Services you need to understand that an MSP has the best interest of the client as well as themselves with a Managed Services Agreement. Because their is unlimited support included in the agreement, the MSP should proactively be making sure that the client has no issues. This is because for any hours of work that is not budgeted in the cost will eat into any profit margins that an MSP will make.

Managed Services Agreements work well because it aligns both parties on a common goal.

1. The client’s systems should always be running at optimal efficiency

How Much Should IT Management Cost?

Numerous factors directly impact managed IT provider pricing. These can vary significantly based on the level of support and customisations required. A deep evaluation of specific needs and budget constraints is needed. That’s why there’s never a direct answer to how much managed IT services cost – they differ for every business. When it comes to managed IT pricing, there is no one-size-fits-all approach, however, understanding managed IT services pricing models can be a tremendous help. For instance, some providers offer a flat monthly fee, while others offer a tiered pricing structure based on your required services. Have a clear understanding first of what you need and iron it out with your outsourced IT provider on what services you can include on the quoted price (along with additional costs that may arise). This approach is so you and your managed service provider can work together effectively towards your business goals without getting blindsided by unexpected expenses down the line.

At Enabla Technology we work with prospective clients on a “Roadmap” that we collaborate with them on to show potential projects in the next 12months. We feel that this helps them get to know us better but also show them that we have understood their needs in our initial calls. Overall, it gives the prospect an opportunity to see what the possible project costs are in the next 12 months and whether they want to do those things or not, at least it becomes an open conversation.

What is the average profit for Managed IT Services?

The average profit for managed IT service agreement depends on various factors, such as the size of the MSP, the scope of services provided, and market conditions. Profit margins can range between 10 and 40%, with some MSPs achieving higher margins through efficient operations and value-added services.

As mentioned earlier above, the profit margins are baked into agreements to allow for staff costs for fixing of password resets, internet faults, etc.

Profit margins can dwindle very quickly for an Managed IT Service Provider if they don’t have a proactive management approach to their IT Support offering.

Are They Possibly Hiding Anything?

MSPs tend not to hide anything in their agreements, but their is a lot of writing in those agreements to protect themselves in an ever so rapidly changing technological environment.

Things I suggest to look out for is on some of the hardware quotes that may or may not be in the Managed Service Agreement is… “Who owns the Hardware?”. Sometimes we take on clients that thought they owned the networking equipment and server, but they were just renting it from the incumbent provider.

How do MSPs differ from other types of IT support?

MSPs (Managed Service Provider) are different from other types of IT support in a few key ways. First, MSPs proactively manage and monitor your company’s technology infrastructure. This means they’re constantly on the lookout for problems and they can often fix them before they become big issues. Second, MSPs usually charge a flat monthly fee instead of charging by the hour. This makes it easier to budget for your IT needs and it gives you predictability when it comes to your IT costs. Finally, MSPs typically offer a wide range of services, which means they can be your one-stop shop for all your IT needs & business technology. This can save you time and money by consolidating all your IT support into one company.

What are IT Support Rates (Project Work) per hour?

If you would prefer not to enter into a contract or secure ongoing IT support, then there is always the option to hire IT support as and when it is necessary. IT support rates will typically be charged on an hourly basis. IT support rates per hour can cost anywhere between $150 and $250 per hour. These figures don’t necessarily include certain influential factors like:

• Weekend rates
• Public holidays
• Emergency upgrades
• Travels fees & expenses
• IT support call-out fee
• Out of hours IT support rates

Evaluating the Value of Managed IT Services

Managed IT services can lead to significant annual savings, with small businesses potentially saving around $20,000 compared to hiring a full-time IT team.

Companies that switch to managed services have reported reductions in IT costs by as much as 30%, allowing for more effective resource allocation across their operations.

Beyond cost savings, managed IT services provide access to specialized expertise and advanced technology that may be beyond the reach of an in-house IT team.

A well-chosen managed services provider can enhance business operations by introducing innovative solutions and staying current with the latest technology trends and best practices.

Evaluating the return on investment (ROI) for managed IT services involves comparing expenses without the service against the cost of the service to determine overall savings.

Considerations for Businesses

When evaluating whether managed IT services are the right solution for your business, there are several key considerations to keep in mind:

1. Business Size and Complexity

The size of your organization and the complexity of your IT infrastructure can greatly influence the costs associated with managed IT services. Small businesses may find that a basic service plan suits their needs without unnecessary add-ons, while larger enterprises may require comprehensive packages that cater to multiple departments or locations. Understanding your specific needs will help you choose a plan that provides the best value.

2. Scope of Services Required

Different managed service providers (MSPs) offer varying levels of service. While some may provide all-inclusive packages that cover everything from network monitoring to data backup and recovery, others may offer a more piecemeal approach. It is important to assess what your business may need today and what you might need in the future. Aligning service offerings with your business strategy can lead to better long-term investment.

3. Cost Transparency

Before entering into a contract with an MSP, ensure that there is clear transparency regarding costs. Understand what is included in your monthly fee, and inquire about any additional charges that may arise, such as support for specific technology, upgrades, or emergency services. This helps avoid unexpected expenses that can quickly add up and disrupt your budget.

Transparency also involves the pricing model utilized by the MSP. Common models include monthly retainer fees, pay-as-you-go options, or tiered pricing based on the level of service. Each model has its advantages and disadvantages. For instance, a fixed monthly fee can provide better predictability and help with budgeting, while a pay-as-you-go model might offer flexibility for businesses with fluctuating needs.

Before signing any agreement, request a comprehensive breakdown of costs to ensure you have a clear understanding of what to expect. This can include initial setup fees, ongoing monthly costs, charges for additional services, and penalties for early termination of the contract. Understanding these elements will empower you to make informed decisions, ensuring that the managed IT services align with your financial capabilities while meeting your operational needs.

4. Hidden Costs

It’s essential to be aware of potential hidden costs associated with managed IT services. While MSPs often advertise low monthly fees, there can be extra expenses that may not be immediately evident in initial discussions. For instance, onboarding costs for new employees or additional fees for specialized support can impact your overall budget.

Additionally, consider the costs associated with hardware and software that may be required for full integration of the managed services. Some providers might assume that businesses have existing systems in place, but if you need to purchase new licenses or upgrade existing technology, these costs can add up quickly.

Moreover, other hidden costs might include:

• Training and Support: Bringing your team up to speed on new technologies and processes often requires time and resources. Ensure to budget for training sessions and potential downtime during these training periods.
• Contract Terminations: If you decide to switch service providers or terminate a contract prematurely, understand the fees associated with such changes. MSPs might have stipulations regarding early termination, which could affect your overall budgetary considerations.
• Service Overages: Many MSPs have threshold limits on included services. If your business exceeds these limits, be prepared for additional costs.

5. Benefits vs. Cost

While it’s critical to evaluate the costs associated with managed IT services, it’s equally important to weigh those costs against the benefits you’ll receive. Managed IT services can provide significant advantages such as increased efficiency, enhanced security, and access to cutting-edge technology without the corresponding overhead needed to maintain an in-house IT department.

Consider the long-term value provided by an MSP:

• Increased Focus on Core Business: By outsourcing IT responsibilities, your team can focus on strategic initiatives rather than day-to-day IT management.
• Improved Security and Compliance: MSPs often provide enhanced security features, ensuring compliance with industry regulations that may overwhelm smaller businesses.
• Scalability: Managed services can scale with your business. As your company grows or your needs change, your IT services can easily adapt and expand, potentially saving costs in the long run.

Conclusion

The cost of managed IT services is contingent upon many factors, including the complexity of your business needs, the level of service you require, and the specific pricing model employed by the managed service provider. By understanding all potential costs—including hidden ones—and evaluating the benefits against these costs, businesses can make informed decisions about engaging an MSP.

Investing in managed IT services may require a financial commitment, but it can also lead to greater efficiency, security, and peace of mind. As with any partnership, doing your due diligence, seeking transparency, and aligning IT services with your business goals will ensure that you find an arrangement that maximizes both productivity and value for your organization.

Consider all aspects and remember—optimizing the cost for managed IT services isn’t just about finding the cheapest rate; it’s about ensuring the right fit for your business’s future growth and stability.

Want to reach out for a quote for our services? For specific inquiries, reach out directly via our get in touch page, email or phone (phone: (02) 7503 2103, email: hello@enablatechnology.com ).