Managed Services Costs

Think the only costs related to IT are repair ones? Think again. Not only is your company on the hook for labor and equipments costs when something goes wrong with your technology, but you will also have to foot the bill for downtime and the corresponding drop in productivity it causes. You’re probably wondering just how much these costs can add up to and, to be honest, you might not like what you see.

Before we begin, however, it’s important to note a few of the realities that come with the true cost of IT support.

1. Your business needs technology to function.
2. If your technology is broken, it must be fixed.
3. The longer your technology is broken, the more it costs your business.
4. If your technology is slow, your employees are less productive.
5. The less productive your employees are, the more it costs your business.
6. Eventually you will have to pay to get your broken or slow technology fixed.

We fully understand why small and medium-sized business may not be eager to shell out money each month on technology that seems to be working, but the reality is that you will pay for it sooner or later anyway. The question you must answer is whether you want to pay a little now to keep your IT working and running at peak efficiency, to put up with costly downtime for now and then be held ransom later when your IT has stopped functioning altogether?

“You’re better safe than sorry” vs. “If it ain’t broke, don’t fix it”

When it comes to IT support and services, there are normally two schools of thought. One adopts Managed Services, where you have a remote team of skilled technicians constantly monitoring your system at all times looking for problems, and fixing them before they end up causing downtime and other issues that can stop your business from operating at peak efficiency. Of course, while all of this sounds great, you might think it sounds pricey as well.

However, let’s consider the alternative: the traditional break-fix solution to IT problems. This is where you wait until something at your business breaks before calling an IT professional to come out and repair it. On the surface it sounds like a more practical solution, because you are only paying for what you need, but that is only half the story.

For starters, you are going to need a highly skilled and certified technician to come fix your problems. They charge anywhere from $75 to $100 an hour, and you will be paying not only for their work, but also for travel time to and from your office. And not all repairs can be solved by a lone technician. Depending on the issue, you may need multiple people to fix a problem, or a specialist dealing with a certain area of technology. A team of IT technicians is likely to cost anywhere from $100 to $200 an hour, while a technology specialist will charge you somewhere between $100 to $150 and hour.

Let’s say over the course of a year you need 80 hours of normal IT service, as well as 10 hours of specialist service and 10 hours of team service, which comes out to 100 hours in total. That’s 1 hour of IT work per 20 hours of business operations in any given year. While you might think this number is a little high (the actual number will vary depending on how many employees and servers you have on-site, and this is used for illustration purposes only), you also need to take into consideration that you are paying the IT technician in travel times as well as for on-the-job breaks over which you have no control. And, as anyone who has seen a break-fix technician in action can attest, they are not in any hurry to fix or do anything.

A breakdown of labor costs for a break-fix IT technician over the course of a year:

80 hours of normal IT service at $80 per hour = $6,400
10 hours of multi-person IT service at $150 per hour = $1,500
10 hours of specialist IT service at $125 per hour = $1,250
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Total labor cost of IT per year = $8,750

Of course, this number is simply an estimate, and will vary from company to company, but you get the picture. This is a significant amount of money to be spending each year just to have someone show up to fix your problem. Remember, that total doesn’t even take into consideration the amount you will also have to spend on parts and equipment.

Even if you don’t mind the cost of labor, it is important to note three big aspects that a lot of businesses often neglect when it comes to this type of IT agreement.

1. The technician relies on you for payment when something goes wrong, but is also in charge of making sure nothing goes wrong. We don’t want to portray every break-fix IT technician as some sort of unscrupulous character who’s trying to swindle your business out of money, but there is clearly an inherent conflict of interest in this type of arrangement.
2. You have no control over your technology budget, because you have no idea when something IT-related will go wrong. This means your business either has to have enough money in reserve to cover the worst-case scenario from an IT standpoint, or be eligible for a loan to cover your IT expenses.
3. You still have unqualified employees setting up and installing new equipment at your office, such as workstations and devices, with no supervision. This almost always leads to IT problems down the road.

And labor expenses are only the beginning. Without someone looking after your IT on a full-time basis in your corner, your company is looking square into a financial black hole.

Downtime: Your company is being robbed and you might not even realize it

While you pay your employees to work, if your network is slow, sluggish or completely non-operational, they can’t get the job done. When their production is slowed down, you end up losing money. When you lose money - well, you don’t need us to explain why that’s not a good thing.

Welcome to the not-so-wonderful world of downtime, which can be a menace to a lot of small and medium-sized businesses. If you aren’t familiar with the world of IT, you’re probably wondering just what qualifies as downtime.

Many people simply assume that downtime is when an employee is completely unable to work due to an event such as a server crash or the internet being down. While these events do qualify as downtime, they happen to be at the more severe end of the spectrum. That’s because downtime involves almost any and every event where slow technology prevents a staff member from completing his or her task as quickly as possible.

Slow internet requiring employees to wait longer to download files - that’s downtime.
Computers crash and have to be rebooted - that’s downtime.
Applications not working properly - that’s downtime.
Email can’t connect to the server - that’s downtime, too.

We could continue with examples of downtime, but it’s likely that you get the idea by now. You’ve like noticed some, if not all of these, things happening at your office, and you probably simply shrug it off as a necessary evil of having technology. The reality is that it can almost always be prevented and that, every time downtime does occurs, it is costing you money in lost wages.

While the exact amount of downtime varies from business to business, it’s estimated that the average employee at a company that does not have an in-house IT department or Managed Services Provider will lose roughly an hour of work per week due to these IT hiccups. It may not seem like all that much on the surface, but over the course of a year it can really add up.

Say your employee works full-time, with two weeks of vacation each year. That means he or she will lose 50 hours of productivity over the course of a year. That’s over a week of work that you end up paying for with nothing to show. If your average employee makes $31,200 a year, or $15 an hour, you end up losing $750 on that one employee each year because of downtime. Now, let’s see how this can impact your entire organization.

$750 x 5 employees = $3,750
$750 x 10 employees = $7,500
$750 x 15 employees = $11,250
$750 x 20 employees = $15,000

And this isn’t even factoring in how downtime can affect your customers. In today’s world where fast and reliable technology is paramount to satisfying clients, chances are you are losing business if your IT is sluggish and unresponsive in the eyes of customers.

Between money spent on labor and that lost due to downtime, your company is suffering and you may not even realize it. At this point it’s probably fairly obvious that the traditional break-fix model is not the way to proceed. However, the most obvious solution isn’t always the best or most cost-effective one either.

Your very own IT technician sounds good but isn’t practical

Most companies who decide to abandon the traditional break-fix model of IT want to jump into the deep end and hire their very own IT technician to serve their business. In theory, it seems like a good idea. If you have someone on-site at all times handling your technology, chances are that costly downtime will be eliminated. While this is true that downtime will become a thing of the past with your own in-house IT person, it should also be noted that most small and medium-sized business do not require this level of support.

Essentially, going from the break-fix model to establishing an in-house IT setup is taking things from one extreme to another. The cost in salary alone rarely makes sense for a small or medium-sized business. An experienced IT technician will earn between $40,000 and $60,000 annually, not to mention other expenses like health insurance and the performance bonuses they will command. And this isn’t the only thing you need to understand when hiring an IT professional. Here are a few other things you must consider:

1. Do you have the tools an IT professional will likely need? It’s not like you are hiring a carpenter who will have his or her own tools of the trade. An IT technician will want you to own or purchase a lot of expensive equipment to allow them to do the job properly.
2. Do you know what you're looking for? Not only will you have to spend time interviewing applicants, but you will likely have to put a significant amount of effort into researching just what you should expect from an IT person. You’ll want someone with a little more on their resume than “fixes computers good”.
3. Can you really afford a full-time IT person? Eliminating downtime is important, but you might be better off investing the money spent on an IT technician in other areas of your business.

Unless your company has over 50 employees or ten servers, hiring a full-time IT person is superfluous. The money you lost previously due to downtime will now be going into the pocket of your new tech support staff. It’s not exactly a win-win situation.

The best of both worlds

What if IT support and services didn’t have to be such a feast or famine proposition? What if there were a way to get the IT support and services you need to keep your company running, but at a reasonable price? At the end of the day, you are going to end up paying for IT one way or another, so maybe that flat-rate monthly option is starting to look a little better now.

With a Managed Services Provider, you’ll receive 24/7 remote monitoring that is designed to prevent downtime. When something does happen and we can’t fix it remotely, we’ll be on-site as soon as possible to make sure it is taken care of. This means that the high labor costs of a break-fix repair technician are removed forever, and the large amounts of money lost during downtime will be greatly reduced.

However, we are able to do this at a fraction of the cost than having your own full-time IT technician would require. In reality, it is the best of both worlds when it comes to reliable technology and affordability. The price of Managed Services from most providers will depend on how many devices you have and the precise services you choose to receive, as well as whether you opt to pay on a monthly or annual basis. Let’s take a quick look at a sample price breakdown for Managed Services - these prices are not for DallasTECHNOLOGY, and are displayed as an example only.

Most Managed Service Providers will provide you with network management, server management, and desktop management. You can either bundle all three together or purchase them separately on an as-needed basis.

• Network Management - $200 per month (will vary depending on company size)
• Server Management - $150 per month, per server
• Desktop Management - $50 per month, per workstation

For a company with 10 workstations and one server, you could expect to pay around $850 a month, or somewhere around $9,000 on an annual basis. For 20 workstations and 3 servers, the costs would come out to $1,650 a month or $18,000 annually. Remember, paying on an annual basis upfront will result in greater discounts than paying monthly, but will also tie you to your provider for 12 months.

If the prices seem high, don’t forget that in addition to getting back all that money lost on downtime each year, you will see more new and returning customers thanks to your company’s reliable IT performance.

A final thought on IT costs

You don’t wait for your power to shut off before paying your electric bill, and you don’t wait for the IRS to come calling before paying your taxes. That’s because the short-term savings gained by not paying are almost always negated by the fines and other fees you’ll have to face up to in the long term. Your IT works the same way; ignoring it in the short term almost always comes back to bite you at the end of the day. And this doesn’t even include the downtime that’s quietly draining your business of its hard-earned money. Remember, you will always end up paying for IT. How you pay for it is up to you.