Managed IT Services: Understanding Costs and Pricing

There are many reasons why your enterprise might look at managed IT services as a potential solution. It’s a safe bet to assume that one of those reasons is cost savings. There’s no doubt that managed IT services can save money for enterprises. Considering today’s significant skills shortage, managed IT services are certainly more cost-effective than hiring IT teams and experts. 

Going beyond cost-related advantages, managed IT services can help businesses streamline their IT environments in many different ways, ranging from simple use cases to advanced projects. The long-term benefits of managed IT services can have a profound impact on enterprises. 

Organizations purchase managed IT services from managed service providers or MSPs. Depending on your needs, these managed IT service providers will either take complete control or partial control of your IT department and solve your critical IT issues. The managed services market will reach $372.6 billion by 2028, rising at a compound annual growth rate of 6.2% since 2023. 

This blog post addresses an important aspect of managed IT services, one that confuses many companies: cost. 

IT services’ costs and pricing models can be confusing because they depend on many different factors. Without a clear IT services pricing guide, businesses may struggle to understand how third-party services fit into their IT budget.

In this article, we will untangle the costs of third-party IT management and give you clarity so that your enterprise can make an educated decision on what IT services pricing model is the right choice. Let’s dive right in. 

Understanding Managed IT Services

Before we get into the details of MSP pricing models, let’s get on the same page with managed IT services. There are many managed IT solutions available in the market, and it’s crucial to remember that not all of these are the same. 

To understand this better, let’s break this section into 3 parts. 

1. What are managed IT services? 
2. What do managed IT services include?
3. What are some different managed IT service models? 

By answering these questions, it will be easier to understand what MSPs charge and why they do so. 

What are managed IT services? 

Managed IT services involve a third-party service provider taking care of some or all of your IT needs. They provide a broad spectrum of products and offerings, most of which focus on optimizing your IT infrastructure and processes. Unlike in-house models, with managed IT services, the main responsibility for your IT ecosystem lies with the MSP. 

The managed IT services provider will work with an organization to understand their needs and provide a few service packages to choose from. The price range of these service plans may vary from business to business. Most of these service offerings will include these basic duties: surveilling, stewarding, and improving your IT infrastructure, and providing IT support when required. 

By choosing managed IT services, businesses can benefit in myriad ways. The following are some of the biggest advantages of choosing third-party managed IT services. 

• Streamlined and seamless performance across the IT ecosystem 
• Stronger cybersecurity posture and protection against cyberattacks and data breaches (Note: According to The Independent, data breaches affected more than 364 million people in 2023!) 
• Access to a broader range of IT skills, expertise, tools, and capabilities 
• Reliability and redundancy to maintain uptime and business continuity
• Optimized (and transparent) costs and pricing models, ideal for small businesses and mid-sized enterprises with limited budgets
• Flexibility to easily scale ad hoc irrespective of the number of users or number of devices

What do managed IT services include?

The following are some of the most important and valuable services provided by an MSP: 

Inventorying IT Assets

Today, IT environments operate and evolve faster than ever before. Therefore, one of the most important services that MSPs provide is inventorying, tracking, and managing all your IT assets. This includes hardware like laptops, desktops, and printers, software and applications, networks, servers, and data. 

Optimizing Cloud Environments

Most businesses have shifted to cloud-based environments in some form or another. MSPs will help businesses manage their cloud environments to ensure optimal performance, compliance, and security. 

Providing Security Services

Although basic managed IT service plans don’t include advanced cybersecurity capabilities, there are always some fundamental security tools such as antivirus software, firewalls, and endpoint security. 

Backing up Data

MSPs know that technical complications and cyberattacks are inevitable in today’s world, which means that disaster recovery and data backups are essential. Therefore, MSPs will always ensure that they back up your data in case of emergencies. 

Offering Remote Support

If anyone in your organization requires IT support, MSPs will provide a helpdesk so you can easily reach them. For more advanced issues or hardware challenges, MSPs will provide on-site support. 

Managing Workstations

MSPs can set up and maintain workstations for your organization. If an organization already has existing workstations, MSPs may be able to optimize them or provide additional monitoring capabilities.

Hardening Applications

The performance and security of your software applications depend entirely on whether they are up to date. MSPs will make sure that they update your software (especially mission-critical applications) and decommission or upgrade all applications that reach end-of-life. 

Surveilling your Network

Keeping an eye on activities and traffic in your network is a good way of understanding IT security and performance challenges. Therefore, MSPs will always surveil your network and iron out any folds that they find. 

What are some different managed IT service models?

Broadly, there are 2 categories of managed IT services: managed IT services and co-managed IT services. Let’s explore how they are different. 

Managed IT Services

Managed IT services is another way of saying “completely” managed IT services, meaning the third-party MSP takes care of all your IT needs. In this model, an enterprise doesn’t need an in-house IT department. Instead, their entire IT department is the MSP. In this model, the MSP is the business’s security leader and is in charge of designing and implementing an IT strategy. 

Co-Managed IT Services 

In some scenarios, businesses may already have good IT infrastructure and personnel. However, procuring services from an MSP might help them optimize their IT environments or navigate complex projects and future plans. We call this model co-managed IT services. In simple terms, some IT responsibilities remain with the enterprise while MSPs take care of others.  

Businesses will have to work closely with their MSPs to identify how to share IT roles and responsibilities in the most productive and cost-efficient way. 

Now that we have a better sense of what managed IT services are, what they include, and what models businesses can choose, let’s get to the main point of this blog post: costs and pricing. 

Understanding the Costs and Pricing Models of Managed IT Services

In the previous section, we explored the various components and inclusions in managed IT services. The diversity of these services and capabilities is why it’s so hard to determine the exact costs of managed IT services.

The fact of the matter is that if you ask 10 different people how much managed IT services cost, you’ll get 10 different answers. While this may seem frustrating, don’t give up hope on getting clarity on prices. You can determine how much it will cost your organization to benefit from managed IT services. However, it’s important to acknowledge the reality that managed IT services have a broad range of cost options.

You may come across low-cost managed IT services as well as those that are exorbitantly priced. How do you know which option is best for your unique circumstances? Let’s break things down by looking at low-end, mid-range, and high-end managed IT service options.

Low-End Managed IT Services

It’s not uncommon to find managed IT solutions with affordable monthly subscriptions.  While these costs may seem tempting, such services are truly the bare minimum and might not offer any meaningful IT support. If you’re outsourcing your IT, you’ll want significant and measurable benefits, and the cheapest offering in the marketplace is unlikely to provide that.

These low-end managed IT services typically include basic IT surveillance. If something untoward occurs in your IT environments, your MSP will let you know. However, at that price, they will not conduct any remediation actions. For that, you will have to purchase a more advanced plan. There’s little logic in paying modest monthly fee if you have to pay other MSPs more in hourly rates for remediation and other services.

Mid-Range Managed IT Services

Mid-range managed IT services are arguably the most popular kind of outsourced IT solution. This range of managed IT services is particularly useful for small and medium-sized businesses. This model is a good blend of affordable costs and robust IT services and capabilities. Most importantly, it allows businesses to transcend break/fix models and benefit from a more proactive approach. 

In this range, many of the components of managed IT that we discussed in the previous section, such as network surveillance, hardware updates, asset management, remote support, and data backups, are available at a fixed monthly fee. Other more advanced services would also be available at additional costs. Some MSPs may offer per-user pricing models and others may offer per-device pricing or à la carte pricing. Businesses should choose a managed IT pricing model based on their specific requirements.

When you're searching for mid-range managed IT services, there are a few things to look out for. For example, mid-range managed IT services will be more comprehensive than the low-end options. Furthermore, you are certain to receive more flexible and customizable IT solutions. Other factors that differentiate mid-range managed IT services from cheaper options include dedicated cybersecurity tools, proactive improvements, and reliable customer service and support. In terms of pricing, you may have to choose between per-user models or per-devices, where the number of your workstations, servers, or firewalls will determine how much you pay.  

High-End Managed IT Services

As you might expect, the average cost of more high-end IT services is significantly more than no-frills offerings. Therefore, it's important for businesses to know why high-end IT services cost more and what's included. To start off, remember that in high-end pricing models, the IT company typically takes care of all their clients’ IT needs. While mid-range managed IT services are the most popular for small and medium businesses, many enterprises may have projects and use cases that demand more advanced and high-end managed IT services.

So what sets apart high-end managed IT services from low-end and mid-range solutions? One of the main reasons why high-end managed IT services are more expensive is because of the track record and success rate of the MSPs. Companies that provide high-end managed IT services will have deep cross-industry expertise, a plethora of successful case studies, and numerous testimonials, reviews, and awards to prove their quality. 

Furthermore, the higher echelons of managed IT services will likely include a complete suite of advanced security tools and capabilities to keep your IT environments safe. High-end managed IT services will also ensure that you maintain a healthy compliance posture and follow the necessary rules and regulations set forth by governing bodies. 

These services typically feature multiple pricing options, all of which will be transparent and simple to understand. Most importantly, high-end services, although they are more expensive, will offer pricing options that suit the exact needs and requirements of a particular business. Therefore, with this range of services, businesses are unlikely to waste money because of inflexible pricing models.

How much will you have to pay for managed IT services? 

Now that you have a high-level understanding of the costs and pricing models of managed IT services, it’s time to explore how much it costs for your organization. 

To get an accurate estimate of MSP pricing for your organization, you should assess the following: 

• Number of endpoints (laptops, desktops, mobile devices, printers) in your organization 
• Complexity of architecture (on-premises, cloud-based, or both) 
• Number of sensitive databases and amount of data 
• Current network architecture and future requirements
• Volume of applications 
• Existing cybersecurity strengths and weaknesses
• Existing tech stack 
• Legacy hardware and software
• Future plans and projects 

To dig deeper after these initial assessments, you need to ask yourself the following questions. 

• Are we happy with our current in-house IT staff? Do we need the help of external IT professionals? 
• Do we require round-the-clock helpdesk support? Do we require onsite support? 
• Are there operational bottlenecks in our IT environments that are slowing the company down? Do certain processes or environments need a complete revamp?
• Are we facing an exorbitant number of security threats? Are there specific security tools that can reinforce our security posture? 
• Do we want to pay for IT management monthly or via a different pricing model? 
• Do we want to continue with a break/fix model or is proactive IT maintenance required? 
• How are we protecting our most sensitive data across our IT environments? Do we need data backup solutions?   
• Where is our organization going to be in 1 year, 5 years, and 10 years? What degree of IT flexibility and scalability do we need? 
• Do we already have a robust IT strategy and just need an MSP to implement that strategy? Or do we need the help of an MSP to both design and implement a strategy? 

By answering these questions, you will be able to estimate your managed IT services costs. If you need help answering these questions, a health check from a reputed MSP is a good idea. 

If you choose the right MSP at the right cost, it can transform your organization, help you succeed in competitive markets, and keep your employees and customers satisfied. 

Conclusion 

In this blog post, we began by understanding the basic concept of managed IT services. We covered what they are, what they comprise, and the differences between completely managed IT services and co-managed IT services. 

We looked at typical costs and inclusions of low-end, mid-range, and high-end managed IT services, and then provided you a guide to assess your needs and estimate the cost of potential third-party IT services. 

While understanding the costs and pricing of managed IT services isn’t always straightforward, learning about why it’s complex is the first step in finding the right MSP and knowing how much it will cost you. 

Once you identify an MSP and commission managed IT services, you can relax because your critical IT needs will be in the hands of experts.