How much should I pay for IT support? Here at E-N Computers, we’ve answered this question for hundreds of businesses in Virginia, Maryland, and Washington, D.C. during the 23 years we’ve been in business.
When we start talking with a prospective client, we find that many of them are surprised to learn that they don’t really know how much their IT services are costing them. Many of them are paying an IT vendor or consultant every month, but that represents only a portion of their total IT spend.
Others may be looking to hire a dedicated IT person but aren’t familiar with all of the costs that go into running an IT department. This can make it difficult to compare the different IT management options available to you on an apples-to-apples basis.
How much do managed IT services cost?
An all-inclusive managed IT services plan typically costs between $100-$225 per computer-using employee per month. For a typical 40-employee company, this would be about $6000 per month. Costs can vary within this range depending on existing IT staffing, compliance requirements, and other factors
How does this compare to what you are already paying for IT support? How does it stack up against building your own IT department? And what about standard hourly or retainer contracts for break-fix service – are fully managed IT services cheaper in the long run? To find out, keep reading.
IT Support Costs: A Great Business Mystery
Most businesses keep track of their recurring operating expenses in great detail. But the same isn’t always true of their IT spend.
For example, a restaurant could tell you down to the penny how much it spends on food as a percentage of total revenue. But how much of their budget was spent on keeping their IT systems running? Servicing their point-of-sale terminals? Fixing the computers used by the administrative staff to order food, design menus, and run payroll?
For most businesses, these expenses are scattered among several different categories and accounts. Internet service may fall under utilities, while purchasing new computers or network upgrades could be either capital or operating expenses, depending on how they’re depreciated or accounted for. This makes it difficult to get an overall picture of IT spend as a fraction of operating costs or percentage of revenue.
The cost of poor IT service: An even bigger mystery
An even bigger mystery for many businesses is the hard-to-quantify costs associated with relying on inefficient or outdated IT solutions. For example, how much revenue is lost if your warehouse order fulfillment system goes down for an hour? A day? Or how much of your administrative staff’s time is wasted each month searching for files in an outdated document management system?
Again, these expenses could be hidden in different categories – labor, marketing, operating expenses, and capital expenses could all be increased due to outdated or inefficient technology. These costs can even be lurking in accounts receivable, in the form of longer payment cycles and more overdue invoices and write-offs.
Other costs stemming from poor IT service are easier to quantify, because they come from huge expenditures surrounding an emergency situation – often a cybersecurity incident. Here in Charlottesville, Thomas Jefferson’s Monticello suffered a crippling ransomware attack in 2017 that resulted in the organization essentially rebuilding their network from the ground up. For that, they paid an IT consulting bill of $288,000 on top of their regular IT budget. (We learned this by reading the public financial disclosures all nonprofits are required to file annually.)
In these cases, failing to pay for IT up front results in higher costs through daily inefficiencies or massive emergency spend later on.
Facing these challenges, you may be ready to step up the quality of your IT support. At that point, the question comes down to should I build or buy an IT department?
How Much Does It Cost to Build an IT Department?
For many businesses, their first thought is to hire one or more full-time IT specialists to manage their technology resources – in other words, to build an IT department. But how much does it really cost to build a quality IT department?
The biggest expenditure will likely be salary and benefits. IT salaries vary based on location, experience, skill requirements, etc. But on average, you can expect to pay a general-purpose IT technician around $45,000 to $65,000 per year in total compensation.
IT Teams and Specialization
That being said, there’s not really any such thing as a “general-purpose IT technician”. Most competent IT people – the kind you’d want to hire – have long since discovered that specialization is the key to a more rewarding job (and a more rewarding salary).
IT engineers tend to focus on a specific area, for example, infrastructure, networking, email, cybersecurity, or client support. And they prefer jobs that allow them to grow and focus on just one or two of those areas. So, it can be extremely difficult to find a “jack-of-all-trades” IT person to support your business.
In addition, a team approach means more resources and more experience available to help with problems when they arise. No one IT person has seen it all, so having others to bounce ideas off of or have another pair of eyes on a problem means faster problem resolutions and better IT outcomes overall.
IT Leadership is Required
In addition to technical know-how, a quality IT team needs leadership. This includes both day-to-day management, to make sure problems get solved and users are happy, as well as executive leadership to ensure that the IT department is meeting the business needs of the company.
Without good leadership, the IT team can find itself chasing its tail, or constantly implementing “band-aid” solutions without addressing the root causes of recurring problems.
Don’t Forget Tools and Training
Building an IT department involves more than just hiring people to fill roles. Those people need to have tools to use, as well as proven processes for everything from help desk tickets to server upgrades.
To build those processes without reinventing the wheel, many companies engage consultants to help. Consulting fees for IT department processes can range from $1,500 to $3,000 per month. This is what we’ve paid to consultants to help us improve and streamline our processes over the years.
Tools – meaning the software used to manage and monitor the network – are another fixed IT expense. This includes password managers, ticketing systems, security monitoring, antivirus, internet filtering, and other tooling. Costs for these tools can range from $15-$35 per endpoint per month, depending on the number and sophistication of the tools used.
The Bottom Line: Cost of Building an IT Department
How much does it cost to build an IT department? Let’s look at the numbers for a 40-employee company. We’ll stick to the low end of the ranges we discussed – a three-person IT team (IT director, infrastructure engineer, and user support technician) earning an average of $50k each, minimal software and tooling ($15 per user per month), and a $1,500 per month consultant to help with processes and procedures.
This adds up to $175,200 per year for a 40-person company, or $365 per user per month.
Of course, most 40 person companies couldn’t imagine spending that much on IT, so they turn to outsourced IT companies and managed service providers (MSPs). How does the cost of hiring an IT vendor compare to hiring in-house staff?
How Much Does Managed IT Service Cost?
For most companies that have between 10 and 100 employees, hiring an outside company to help with IT makes the most sense – in other words, buying a ready-made IT department. But here too we find a huge range in both costs and quality of service provided by IT vendors.
The biggest difference in upfront costs from IT vendors comes from differences in service models. There are three basic ways that most companies offer IT services: a retainer-based model, a retainer-plus-monitoring model, and a fully managed IT service model.
Retainer IT Service Model
The first model is a basic retainer model – you pay per month for a fixed block of hours, and then pay a set hourly rate for work in excess of those hours. A 40-person company may pay around $1000 per month for a block of 10 support hours, and then $125 an hour after that.
While this model often appears to be the cheapest option, costs can quickly add up for things like hardware refreshes, security audits, and network upgrades. Or, these projects may be neglected or put off for “when we have more hours” – which tends to never happen. Additionally, these plans rarely include tools or software, which adds additional costs that can be hard to track.
Retainer Plus Monitoring Model
The second IT service model includes some monitoring and tooling, usually for a higher fee (around $1500 per month), as well as a set number of break-fix hours. This offers some improvement over a straight retainer model, but often comes with limitations that end up causing the same problems.
For example, it could be that only some of your software or systems are supported – while anything else is considered “out of scope” and billed at the hourly rate. Again, this results in key projects and upgrades being deferred for a lack of hours or budget, which ultimately results in inefficiencies and emergency spend later on.
Both of these IT service models also suffer from a lack of automation, documentation, and proactive leadership. They tend to result in “band-aid” solutions and workarounds, rather than the strategic IT decisions that need to be made in order for a modern business to thrive.
Fully Managed IT Service Model
To address the problems inherent in the retainer-based IT service models, some IT service providers (including E-N Computers) have moved toward an all-inclusive managed IT service model. For a flat per-user or per-computer monthly fee, you’ll receive all of the same services typically provided by a large corporate IT department. This includes help desk service, consulting, remote monitoring and management (RMM), as well as the required tools and software.
A fully managed IT service plan typically costs between $100 and $225 per user or computer per month. This range can be influenced by a number of factors. For example, if you have a formally trained IT person on staff already, the cost would typically fall more toward the $100 end of the scale. Industries that require more advanced security monitoring and compliance, such as defense contractors, would usually end up on the higher end of the scale.
While the monthly fees for a fully managed IT plan are generally higher than a retainer plan, they can often be offset by savings in other areas. Let’s look at an example.
Total Cost of Ownership for IT Service
Not just the check you write to your IT vendor
As we mentioned, a fully managed IT plan can seem more expensive than an hourly or retainer model. But we’ve seen again and again how our customers have saved money every month by making the switch.
In this example, an 18-user Lexington, VA nonprofit organization was paying their old IT vendor $1,365 a month. The E-N Compass managed services plan does run about $1,000 more per month – but they were able to immediately realize savings when E-N Computers retired their very expensive legacy phone system and replaced it with a state-of-the-art VoIP system for a fraction of the monthly cost. Additionally, we were able to cut their Internet service bill nearly in half. This resulted in a net savings of over $700 per month or $8500 per year.
Do you know how much you’re paying for IT support? If you’re not sure – or you don’t know if you’re getting value from your IT spend – contact E-N Computers today.
We help organizations with 10-100 employees in Virginia, Maryland, and Washington, D.C. get their IT spending under control by offering fully managed all-inclusive IT support plans.
One organization we were able to make an impact with is Roanoke, VA-based New Horizons Healthcare. To find out how we helped them deliver superior IT service while reducing costs, click here to read the NHH case study or watch the video:
Our E-N Compass managed services plan typically costs around $150 per computer-using employee per month. This includes unlimited help desk support, regular onsite visits for maintenance, remote monitoring, consulting, and more.