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Understanding the Costs of Managed Services

Last updated: 10 Aug 2023

Managed Service Providers (MSPs) have become popular for businesses seeking to outsource their IT management. Businesses need to grasp the costs associated with working with an MSP to harness their partnership’s full potential. By understanding these expenses, businesses can make well-informed decisions, optimize their investments, and maximize the benefits of collaboration with an MSP.

This blog provides an in-depth guide to the usual charges when working with MSPs, hidden costs, to help businesses navigate the MSP landscape.

What are Managed Service Providers?

Managed Service Providers (MSPs) are external organizations that provide a variety of IT services and assistance to businesses. Their expertise covers numerous IT functions such as network management, server upkeep, data security, data backup, and more. By delegating these responsibilities to an MSP, businesses can concentrate on their primary objectives while the MSP handles their IT requirements.

What are the Associated Costs of Working with an MSP?

The costs of working with an MSP can be broken down into several categories:

Fixed Monthly Fees

Numerous MSPs offer monthly flat rates, enabling businesses to create a stable budget plan. These flat rates cover various IT support services, allowing companies to efficiently allocate their expenses while ensuring constant access to vital IT resources. This method ensures organizations can effectively distribute resources while maintaining dependable IT support.

Pay-as-You-Go Services

Some MSPs provide versatile pay-as-you-go pricing structures, allowing businesses to scale their IT services according to fluctuating demands. This model offers several advantages over traditional pricing methods, enabling companies to tailor their IT support to their specific requirements. Consequently, businesses can achieve significant cost savings, particularly if they experience variations in their IT needs since they need to only pay for the services they utilize. This flexibility ensures that resources are allocated efficiently, empowering organizations to adapt swiftly to evolving circumstances.

On-site vs. Remote Support

MSPs may offer different pricing structures for on-site and remote support. On-site support typically involves higher costs due to travel expenses and additional labor, while remote support can be more cost-effective. Organizations should meticulously evaluate their specific needs and objectives to identify the most appropriate choice that aligns with their operational requirements.

 

By considering factors such as budget constraints, IT infrastructure complexity, and the level of support needed, businesses can make decisions that will streamline their IT approach, boost productivity, and facilitate overall growth.

 

Hidden Costs When Working with MSPs

While partnering with an MSP can offer significant benefits, businesses should be aware of potential hidden costs that may arise:

Vendor Lock-in

Some MSPs may require businesses to commit to long-term contracts or use proprietary technologies, making it difficult to switch providers if needed. Thoroughly review contract terms and understand any potential restrictions before signing on with an MSP.

Unclear Service Level Agreements (SLAs)

SLAs outline the level of service an MSP will provide, including response times and performance metrics. If these agreements are unclear or not well-defined, businesses may struggle to hold their MSP accountable for subpar service.

Here are some additional expenses you might encounter when partnering with an MSP:

1. Setup and onboarding fees: Some MSPs may charge a one-time fee to set up and configure your IT infrastructure and services according to your needs.

2. Service add-ons: The basic service package provided by the MSP might not cover all your requirements. Therefore, you might need to pay extra for additional services or customized solutions.

3. Overage charges: If your business exceeds the usage limits specified in your service agreement, you may incur overage charges or be required to upgrade to a higher-tier plan.

4. Contract termination fees: If you decide to terminate the contract with your MSP before the agreed-upon term ends, you might face early termination fees.

5. Software licensing costs: While MSPs often include software licenses in their service packages, you might still need to purchase separate licenses for specific applications not covered by their offering.

6. Compliance and certification costs: If your industry requires adherence to specific regulations or certifications, you may need to invest in additional security measures or audits to ensure compliance.

7. Data migration fees: You may encounter data migration costs if you switch MSPs or move your data to a different platform.

8. Training costs: Although MSPs usually provide support, businesses might need to train their employees to use new systems or software effectively.

9. Travel expenses: If your MSP needs to visit your location for on-site support or consultations, you may be responsible for covering their travel expenses.

10. Emergency support fees: Some MSPs charge extra for after-hours or emergency support, adding to your overall costs if such situations arise frequently.

It’s crucial to thoroughly review your service agreement and clarify any potential hidden fees with your MSP before signing a contract. This transparency will help you avoid unexpected costs and ensure a successful partnership.

Tips for Evaluating MSP Costs

When evaluating the costs of working with an MSP, consider the following tips:

1. Compare pricing models: Assess the different pricing structures MSPs offer, such as fixed monthly fees, pay-as-you-go services, and per-device models. Determine which model best aligns with your business’s needs and budget.

2. Review SLAs: Ensure the MSP provides clear and comprehensive SLAs outlining service levels, response times, and performance metrics. This will help you hold the MSP accountable and guarantee you receive the level of service you expect.

3. Assess hidden costs: Be aware of potential hidden costs, such as vendor lock-in, unclear SLAs, and poor communication channels. Factor these expenses into your decision-making process when selecting an MSP.

4. Request references and reviews: Ask the MSP for references from current clients and check online reviews to assess their overall reputation and track record.

Assessing the Overall Value of Hiring MSPs

When considering whether to work with an MSP, weighing the potential costs and benefits is essential. A successful partnership can increase efficiency, cost savings, and access to expert knowledge. Nevertheless, businesses must also be aware of potential hidden costs, such as vendor lock-in, unclear SLAs, and poor communication channels.

Maintaining an in-house IT department can be costly, particularly for small businesses. The expenses of running an internal IT team include:

  • Hiring and training skilled professionals.
  • Providing competitive salaries and benefits.
  • Investing in hardware and software.
  • Ensuring regular updates.
  • Managing ongoing maintenance costs. 

 These financial commitments can quickly add up and significantly burden small businesses with limited resources.

Outsourcing IT services presents a more cost-effective alternative, especially for small organizations. By partnering with a managed IT service provider, businesses can benefit from the expertise of a dedicated team at a fraction of the cost of maintaining an in-house department. Outsourcing IT enables businesses to focus on their core competencies and allocate resources more effectively. It eliminates the need to spend valuable time and effort managing IT tasks, allowing entrepreneurs and employees to concentrate on driving growth and achieving strategic objectives.

In addition, managed IT service providers can offer scalable solutions that grow alongside the business. As a company expands, its IT will change, and outsourcing ensures that the necessary resources and support are available whenever required without incurring additional costs for hiring and training new staff members.

To determine the overall value of partnering with an MSP, businesses should consider the following factors:

  • Alignment of goals and expectations: Ensure the MSP understands your business’s specific needs and objectives and can tailor its services accordingly.
  • Clear communication: Establish open communication channels and ensure the MSP is responsive and proactive in addressing concerns.
  • Strong working relationship: Building a solid relationship with your MSP can help ensure smooth collaboration and ongoing success.

Addressing Common Concerns of Businesses

When considering hiring an MSP, businesses may have some common concerns, including data security, control over IT infrastructure, and the level of customization available. To address these concerns, it’s essential to select an MSP that:

  • Prioritizes data security by implementing robust cybersecurity measures and adhering to industry standards.
  • Allows businesses to maintain control over their IT infrastructure while benefiting from the MSP’s expertise and support.
  • Offers customized solutions tailored to the specific needs and objectives of each business.

Tips for a Successful Partnership with an MSP

To ensure a successful partnership with an MSP, businesses should follow these best practices: 

  • Set clear expectations regarding service levels, response times, and performance metrics.
  • Maintain open communication channels and regularly discuss any concerns or issues that arise.
  • Review performance metrics and SLAs periodically to ensure the MSP meets its commitments.
  • Foster a strong working relationship built on trust, transparency, and collaboration.

When evaluating MSP costs, it is important to consider factors such as pricing models, service level agreements, hidden costs, references and reviews, and overall value. By following best practices and fostering a strong working relationship with an MSP, businesses can ensure a successful partnership that results in significant cost savings, increased efficiency, and access to expert IT knowledge.

Working with an MSP can help businesses focus on their core operations while leaving the IT management to experts. By conducting comprehensive research and making informed decisions, organizations can pinpoint the ideal MSP that meets their distinct needs and significantly contributes to their overall success.

BlackPoint IT can help your business achieve its goals while minimizing IT costs and mitigating risks. Our services cover network administration, server maintenance, cybersecurity, data backup, and more to cater to your IT needs, letting you focus on your core operations. Contact us today, and let’s explore how we can work together to elevate your business. 

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