Do Managed Services Make Sense for Small Businesses?

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If you work for or own a small business, you are likely faced with tough decisions based on limited resources daily. You understand how difficult it is to ensure your bases are covered and with recent advancements in technology, you might be more concerned than ever with building, optimizing, supporting, and defending the technology and infrastructure within your organization.

Let’s face it–IT is expensive. Not only is it expensive to purchase and deploy, but the costs keep adding up because then you need to hire someone to manage it. On top of that, an astronomical increase in security threats to small businesses has left every senior manager or owner of a small business with a general sense of anxiety.

Here are the two sentiments we hear often from small business owners:

  1. I know we need it, but we just don’t have the budget to hire a Managed Service Provider (MSP).
  2. We don’t need Managed Services or IT Support.

Now, let’s be fair.

Not every small business needs a Managed Service Provider.

Your local, cash only laundromat might not need an MSP.

But, once your business grows to over 5 people or about $250,000 per year in revenue, you’re accumulating data at a rate that might surprise you–data that’s vulnerable to breaches or security threats. And, the reliable stream of revenue you’re now counting on will be affected by each of these breaches. Most small businesses do not recover from these occurrences.

The 2018 State of Cybersecurity in Small and Medium Size Businesses conducted by the Ponemon Institute found that the average cost for SMBs to remediate a breach was $383,365 in the twelve months leading up to the report. This is a significant expense for smaller businesses.

Let’s See an Example

In the last few years, subscription services for everything from clothing to dog food and groceries have been growing in popularity. These companies generate a lot of sensitive data each time a new customer signs up–names, emails, physical addresses, payment information, etc. These businesses rely on both their online presence to increase subscriptions and successfully fulfilling these orders on a recurring basis to keep their subscribers.

If their servers are corrupted, crash even momentarily, or are compromised (one or all of these can happen for a variety of reasons–even if they are in the cloud), customer data like payment history could be lost or operations could stop functioning.

Essentially, these companies could be faced with starting over if they lose all their data or going under if they can’t recover their operations quickly enough.

This is where a Managed Service Provider makes sense.

A prepared Managed Service Provider can make sure these servers are backed up and there’s a proper recovery plan in place for emergencies to keep your business running.

So, is an MSP Worth Considering if Your Business is Small?

Let’s get to the question of this article: Does Managed Services Make Sense for Small Businesses?

The short answer is yes.

If your business would be significantly affected by data loss or if your operations can’t recover quickly after going down, a Managed Services Provider is a great first step for protecting your business from disasters.

What follows is a breakdown of a few reasons it makes sense to think about hiring an MSP and some fact-checking on some popular misconceptions about MSPs. The biggest questions revolve around the cost of Managed Services and whether this cost outweighs the benefits.

We’ll start there.

Understanding the Costs and How to Budget for Managed Services

In small businesses, cost is a primary driving factor for decisions. In order to keep a small business running, owners and managers must be constantly running the numbers with a finger on the pulse of cashflow.

This brings us to our first–and probably biggest misconception–about Manages Services: that they’re expensive. While the Managed Services bill for a 2,000-person enterprise might make small business owners balk, these services scaled down for a smaller business can be more affordable than you think.

Without Managed Services, there are three other options for supporting your technology infrastructure:

  1. Hire someone internally to manage systems and provide IT support
  2. Don’t have anyone managing systems
  3. Have someone IT in a hybrid role whose primary position is not technology, but that ‘sort-of’ understands technology

Let’s run through the issues with these alternatives.

Hiring Internal Resources

Hiring an internal resource to manage your environment will cost anywhere from $60,000 – $80,000 a year just in terms of salary at the low end of the scale and can range significantly higher for a highly experienced, more qualified resource.

There are a few nuances to unpack here.

An Expense vs. an Investment in Your Business

Depending on the qualifications of the resource you decide to hire, you might be keeping the lights on but missing an opportunity to drive additional value for your business. IT should not only be a ‘cost center’ in your business. A seasoned IT engineer can help you use technology to reduce costs, increase efficiencies, and add to your revenue stream. Unfortunately, this type of engineer costs quite a bit more than one who’s able to keep systems running but not accomplish much else.

Comparing the Costs

Managed Services can reduce the bill dramatically for your business in a few different ways.

The first way is that Managed Services cost less than hiring internal employees. If your business retains one IT resource at $60,000 a year–on the low end of the scale–you’re paying more than double the rate you might find from many MSPs. Even if your environment is large enough for three or four admins–and therefore more complex–your MSP costs shouldn’t be anywhere near $180,000 to $240,000 each year.

On top of the cost savings in terms of salaries, you’re also getting more bang for your buck with an MSP because you’re gaining access to a whole team of engineers with different skill sets to manage your environment.

The third way an MSP can save you money is by being proactive–fixing problems with your environment before they become larger issues that cost significantly more to resolve. We’ll cover this a little later since proactive IT management is valuable in more ways than just cost savings.

Operating without Dedicated IT Resources

Operating without a dedicated resource or team to manage your IT can be very costly. With no IT management, your business is at risk for just about everything–security breaches, severe downtime, maintenance issues, etc.

These vulnerabilities can lead to massive revenue losses or issues that close the business for good.

Many businesses think they’re saving money while still keeping bases covered when they use an employee in a hybrid role to perform their regular job functions and ‘keep an eye’ on the IT environment on the side.

These types of situations don’t offer any benefits over having no IT team at all. Once an issue is significant enough to affect your business, it’s probably too complex for someone who dabbles in IT ‘on the side’ to handle, which means you’re now forced to bring in a third-party IT consultant at a time when your business is on the line, your decisions are rushed, and you don’t have time to find an IT partner that fits in optimally with your business.

You are at the mercy of your own urgency–forced to choose between keeping your business running and keeping money in the bank.

This can be impossible to budget for. Without a dedicated IT team, resource, or MSP to keep track of your environment, you’ll experience unpredictable emergencies when systems break. This is the reactive method of IT support–most often called the “break/fix mentality”–and can be expensive to maintain.

How Managed Services Save You from the Costs Associated with These Alternatives

Instead of waiting until a system is down and then paying a hefty fee to bring that service back online, Managed Services are a subscription service that involve performing proactive maintenance on your systems to prevent unnecessary downtime–emergencies–from happening in the first place.

This means you have predictable costs that you can budget for and reliable technology performance to bolster your business performance.

You get the same bill every month to ensure your services are monitored, working, and protected. There are no hidden fees, making budgeting even simpler. Most small businesses who switch from an hourly rate for IT to a monthly Managed Services rate see their costs drop over time due to the stability that an MSP brings to their environment.

Managed Service Providers also offer multiple plans to customers based on their needs and budget. Some small or midsize business (SMBs) don’t want full Managed Services and just want to pay for IT Support as it comes up, some just want to have MSPs cover their ‘business critical’ applications (email, phones, etc). A quality MSP will help tailor a Managed Services Agreement to fit your organization or budget.

Many providers can offer cheaper monitoring plans for just a few hundred dollars a month. These plans help you understand what’s happening in your environment so that you can make informed decisions about your business. These plans are like having an extra pair of eyes on your environment, monitoring it to ensure it is running smoothly.

In this scenario, your Managed Service Provider can alert you and give you the option to fix the issues yourself to save costs if your team is able. Think of it in terms of your car, the MSP will alert you the lug-nut is loose (which you can fix/tighten yourself) before the wheel falls off and destroys your axel (which you likely have to bring to a mechanic to fix).

MSPs Provide a Team of Resources and Up-to-Date Industry Expertise

The most important element Managed Service Providers bring to the table is expertise. Most IT engineers and technicians at an MSP are seasoned IT professionals with years of experience under their belt.

When you select an MSP, you are getting the combined experience of multiple engineers who have worked on multiple clients in the past. This means they will solve issues faster and more efficiently, which in the IT world means less downtime! If your phones go down or your internet craps out, you likely don’t want an internal IT resource Googling possible solutions on their phone.

Instead, you probably want a team of seasoned engineers who are first, familiar with your environment, and second, have dealt with similar problems before.

This effect is compounded because the longer you stay with a Managed Service Provider, the more in depth your MSP is going to learn your environment. As a true partner, a good MSP will know your organization well and help you understand it just as well.

The Paradox of a Well-Maintained Environment

Managed Service Providers also ensure that you are up to date on industry standards, like having current patches installed and backups ready to go. This takes a lot of care and feeding, but once an environment is consistently well maintained, many organizations soon realize 3-6 months they are having much fewer IT issues.

This is where the paradox come in. The reliable performance of their environment makes them ask if they really need Managed Services anymore. This is equivalent to exercising and dieting for 3-6 months, seeing yourself get in better shape, and then deciding you don’t need to exercise and diet anymore.

Unfortunately, these expectations are unrealistic, without continuing your self-care regimen you’re not likely to maintain your physique.

vCIO, Strategic Planning, and Roadmapping Services

As I’ve already mentioned a few times, a good MSP wants to partner with you to help you understand your business and how technology fits into your business goals.

Many MSPs offer strategic planning services–sometimes called Virtual CIO. Many small businesses don’t have a dedicated CIO to make decisions and build a road map for future technology.

MSPs can help your organization make decisions on technology and while taking into account your budget or other constraints. Many small businesses need to pick and choose initiatives to tackle each year, since a complete environmental upgrade can be too costly or too disruptive. Your MSP can help you prioritize what is most important. Maybe your servers need to be upgraded, your laptops need to be replaced, and the increase of spoofing attacks on your business bring up concerns about security…which is most important? Your MSP will work with you to build out a multi-tiered plan with your budget and best interests in mind.

A trusted Managed Service Provider, like PEI, partners with you to ensure future success for your organization. Small organizations shouldn’t be spending their time looking after their IT infrastructure when it can be cheaper and more efficient to have an MSP manage it.

Scalability While Growing

As a small business, you are usually focused on two things: customer service and growing your business. Growth will always mean adding more technology to your environment: more employees mean more data to store, additional computers, etc.

With Managed Services, businesses ‘pay as they grow’ to accommodate more coverage. With additional technology, your plan can scale up incrementally so you can feel confident that your organization is as fully covered as before.

Small businesses cannot afford to pay for unused services. MSP plans can be tailored directly to your organization to provide the coverage you need and avoid fees for what you don’t. Also, they can help provision your services to find cheaper and more affordable offerings. Not happy with your phone system or your internet bills? Let the MSP shop those services for you to get you better rates.

Finally, MSPs Help Bring Sanity with Stability

As I mentioned before, MSPs make your environment more stable to resolve IT issues before they happen–not just fix them after the fact.

Organizational stability for small organizations can feel a bit unrealistic at times, but with the right MSP, you can count on your technology not throwing you any curveballs.  Peace of mind is very underrated within the small business sector and this is where the MSP comes in. You choose a bank you trust to manage your finances for your organization, you need to choose a Managed Service Provider you can trust to manage your technology.

So, Let’s Recap: Are Managed Services Worth it for Small Businesses?

Let’s walk back and sum it all up for you. Not every small business needs a Managed Service Provider—it would be dishonest of us to claim this was the case. However, if your firm is over 5 people or if you exceed $250,000 in revenue each you, you’re probably at a place where you should consider the benefits.

Here’s Why You Should Consider a Managed Services Provider

  1. Hiring a Managed Service Provider is cheaper then hiring an internal resource.
  2. MSPs have teams of experts available for a fraction of the cost of a single IT resource.
  3. MSPs help build roadmaps and act as a vCIO for small firms looking to grow.
  4. MSP plans scale with organizations: as you grow, your plan scales and keeps you covered.
  5. Plans are tailored to your business, so you are only paying for what you need.
  6. MSPs keep you stable as well as keep you sane!

If you’ve already decided it’s time to consider finding an MSP, but don’t know where to start, you can start with our 12 Essential Questions for Evaluating an MSP.

Or, you can start right here! We have over 30 years of experience as a Managed Services provider, and we specialize in catering our services to small and midsize organization. Get in contact with us online here, by emailing info@pei.com, or by calling 303-786-7474.

Adam Lee, PEI

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