What are Managed Services? If this is your first time hearing “Managed Services”, you may be frustrated by how vague the term is. We are here to tell you that you are not alone. With the rise of subscription-style services for everything from batteries to meals, you can now add IT services to the list of “subscription” services.
Managed Services usually relates to Managed IT Services. I know, this is still confusing. Keep on reading and we will explain what Managed Services are, why they’re important, and other essential details to give you a well-rounded understanding of this frustratingly vague term.
What are Managed Services?
Managed Services are a form of IT outsourcing where your business works with a third-party agency known as a Managed Services Provider (MSP) to manage some or all of your IT needs. This is often done to cut costs and free up your internal IT team. Managed IT Services can take many forms depending on the needs and composition of your organization.
One common misconception about Managed Services is that MSPs replace your existing IT department, but that does not have to be the case. MSPs can boost your IT team by taking over everyday maintenance and monitoring tasks. This allows your IT team the time and flexibility to focus on strategic projects that will drive your business forward. Depending on the size and capabilities of your IT department, you can choose a Managed Services model that is the best fit for existing IT strategy. Some of the most common Managed Services models are the co-managed, fully outsourced, and advanced skill augmentation models.
Co-Managed IT Services
Under the co-managed model, a Managed Services Provider works in conjunction with your existing IT team to provide additional management and administration for your IT environment. This can help an over-taxed IT team from falling behind on important maintenance tasks or losing focus on more strategic initiatives.
Fully Outsourced Managed IT Services
Fully outsourced managed services are a good fit for companies who don’t have an internal IT team. Under this model, the Managed Services Provider handles all of your IT needs from a user helpdesk to more sophisticated monitoring and maintenance. Some companies with an internal IT team may still choose the fully outsourced model, keeping their internal team focused on larger upgrades or IT projects while the MSP handles all ongoing maintenance.
Advanced Skill Augmentation Services
If you already have a full internal IT team, and you only need help with managing and supporting your business’s most advanced applications, this plan is probably the best fit for you. One benefit of working with an MSP is that you gain access to more advanced skill sets. Even if you already have an internal IT team, you can use an MSP to ensure you are getting highly experienced engineering talent to address specialized applications or systems that are difficult to manage—such as SCCM or your cloud architecture.
To recap everything thus far, Managed Services Providers are agencies that deliver outsourced IT organization, management, and maintenance. How involved and hands-on your MSP is within your business depends on the capabilities of your provider and what services you need to best support your IT environment.
Alternatives to Managed Services
We are not going to tell you that Managed Services is the only way to manage your IT environment. There are other options, but the alternatives are less proactive in preventing problems within your IT environment, leave gaps in your IT talent, and are often more expensive.
The two most common alternatives to Managed IT Services are the break/fix model and building an IT team internally.
The Break/Fix Model
“Don’t fix something that ain’t broke.” We’ve all heard this in one way or another, and for years this was how business owners approached technology. With the break/fix model you wait for something to break, then call a technician to fix it.
When it comes to your technology, wouldn’t you want to get ahead of problems before they arise? Managed Services is a newer method of IT management that stands as a direct alternative to the outdated break/fix model. It is both predictive and proactive. Instead of only working on your organization’s technology environment when something breaks and disrupts your business, MSPs perform work proactively and on an ongoing basis to prevent your technology from breaking in the first place. By effectively circumventing the break/fix cycle, an MSP is saving your business from costly downtime.
Building IT Internally
If you want in-person support for your IT environment, then you may want to build your IT infrastructure internally. This includes the salary of a Systems Administrator or Support Engineer, and the expense for the applications and systems they will need to do their job. The costs add up quickly, but we will talk about price later.
The benefit of building your IT team internally is that you will have an individual in-house who is solely focused on your business and immersed in the culture of your company. However, in choosing this in-house presence, you are likely missing out on more advanced engineering talent and other services that come with Managed Services. It is up to you to weigh the benefits and risks of Managed Services against those of an internal IT team to decide which is the best fit for your business.
Types of Services
Managed Services can include a number of services, and a good Managed Services Provider will help you determine exactly what you need so you are not paying for unused services. Some common technologies that can be managed include:
- Networks and Infrastructure
- Cloud Infrastructure
- Software as a Service
- Data Backup and Recovery
Being able to manage these different types of technologies is great, but a Managed Services Provider should do more than just manage your technology, they should be invested in supporting your business by offering services such as:
- A Help Desk
- Virtual CIO Services
- And more
You want a Managed Services Provider who is going to make sure your technology is working properly but is also committed to driving your business forward. That provider should be able to support advancements in your IT environment, not just manage what you already have.
The Benefits and Risks of Managed Services
If you aren’t convinced that Managed Services are at least worth consideration, it’s because you haven’t compared the benefits and risks of working with a Managed Services Provider.
Let’s start with the risks and drawbacks of working with a Managed Services Provider.
- You will give up some control of your environment to your MSP who is likely to move your business onto their platforms and toolsets.
- MSPs are not physically in your office which means you will need to wait for a resource to come on-site for any hands-on troubleshooting .
- The lack of in-office presence can lead to a lacking relationship between an MSP and internal employees.
Keep in mind, a good Managed Services Provider will work with you to bridge these gaps and function as an extension of your company rather than an outsider. Now, let’s take a look at the benefits of working with a Managed Services Provider.
- For smaller businesses, the cost of an MSP will be considerably lower than hiring a full-time employee.
- A monthly contract covers the cost for managing and supporting your environment, so you get access to your MSP’s tools and resources.
- MSPs have a large IT team with an extensive range of skills across different technologies which means they have your IT environment covered.
- Many MSPs offer high-level CIO consulting so you will have guidance in making strategic IT decisions.
- Most MSPs have a 24/7/365 coverage model so you know you are always covered.
- Some MSPs are implementation partners and can help you with IT projects. An added bonus: they already have a deep understanding of your business. For example, PEI is a Microsoft Gold Partner and can implement a proof-of-concept so your team can trial ideas before purchasing.
Despite all the benefits of Managed Services, to make the switch to a Managed Services Provider usually boils down to one key element: price.
Pricing and Delivery of Services
We’ve already covered the different Managed Services models (co-managed, fully outsourced, and advanced skill augmentation), and as you could probably guess, the more involved your provider, the higher the price. Your business structure will also impact the price of Managed Services depending on your business needs and the number of employees and PCs you need to cover. That being said, let’s compare the costs of building your IT team internally versus the cost of an MSP.
The table below breaks down the annual costs of building an internal IT team for a company of 30 individuals. It includes the salary of an IT Support Engineer and tools they will need to support a company’s IT.
|Solution||Price||Quantity||Monthly Cost||Annual Cost|
|Anti Virus/Anti Malware||$ 2.50||30||$ 75.00||$ 900.00|
|DNS Protection||$ 2.50||30||$ 75.00||$ 900.00|
|Email Filtering||$ 5.00||30||$ 150.00||$ 1,800.00|
|Security Training Solution||$ 2.00||30||$ 60.00||$ 720.00|
|Documentation Solution||$ 19.00||1||$ 19.00||$ 228.00|
|Monitoring Solution||$ 5.00||30||$ 150.00||$ 1,800.00|
|Microsoft Office 365 Training Solution||$ 4.00||30||$ 120.00||$ 1,440.00|
|Network Monitoring Solution||$ 15.00||1||$ 15.00||$ 180.00|
|IT Support Engineer||$ 5,895.00||1||$ 5,895.00||$ 70,740.00|
|Total Costs||$ 6,559.00||$ 78,708.00|
Now, let’s look at what a fully outsourced Managed Services plan would look like for this company using the average cost of $150/user per month.
|Solution||Price||Quantity||Monthly Cost||Annual Cost|
|Managed Services – $150/user/month||$ 150.00||30||$ 4,500.00||$ 54,000.00|
In this example, Managed Services saved the company over $20,000 a year.
Another way to consider the price of Managed Services is in relation to the cost of a Systems Administrator. According to Robert Half Technologies, a Systems Administrator 2021 midpoint salary is $98,000 in Denver, CO ($124,000 in New York, NY). Once you factor in the additional costs of training, benefits, and other employee-related expenses, the monthly cost of your Systems Admin is over $10,000. For the same monthly cost of $10,000 you could cover 66 employees if you outsource to an MSP that charges the same rate of $150/user per month.
For most small to mid-size businesses, Managed Services is an easy way to cut costs while also providing extra benefits to their company. The choice ultimately comes down to your size and business needs, but you shouldn’t be so quick to assume Managed Services are more expensive.
Pricing Models for Managed Services
There are three primary pricing methods when it comes to Managed Services. In the examples above we used the per-user model, but you can also consider a per-hour, or a monthly flat-rate model.
Per-User Model: With this model you will be billed for each user on your Managed Services plan. This will include support for each user’s equipment both in the office and company-owned equipment they use at home.
Per-Hour Model: With this model you will be billed for the time your Managed Services Provider performs work for you. This can also be looked at as a time-and-materials type of pricing model.
Monthly Flat-Rate Model: With this model you will be charged a recurring rate each month that includes all services covered in your Managed Services Agreement. If you need any services performed outside of those covered in your agreement, there is always the option to pay extra.
Delivery of Managed Services
In an increasingly remote world, it’s no surprise that most MSP services can be delivered virtually. Providers use virtual agents to monitor your devices and detect when something is broken or vulnerable to threats. Technicians can then remotely access your computers and servers to fix any problems or to perform preventative maintenance.
Some MSPs also rely on automation to deliver their services and troubleshoot when problems arise. This means that an MSP automates some of their routine management services to take mundane tasks off their IT team’s plate. This allows their engineers to spend time on more important projects and tasks in your environment.
Both virtual delivery and automation help providers keep their costs down and operate more efficiently, which helps you save money and better your business’s IT environment.
Picking a Provider that is Right for You
Arguably the most important thing to look for in a Managed Services Provider is how well a provider’s services and offerings align with your business needs. However, finding the right provider is not always as easy as it sounds. You want to thoroughly evaluate any potential providers before you sign a contract.
One big consideration is whether you prefer to work with a local or national provider. A local provider will be more readily available to physically troubleshoot any errors in the office while a national-level provider will veer towards more remote support. When it comes to engineering talent, a national-level company can pull from a wider range of engineering talent while local providers may be more limited. Both local and national MSPs have their benefits and drawbacks, but it is up to you to decide which would be a better fit for your business goals.
There are a few other considerations when choosing an MSP. Let’s look at a few questions from our blog 12 Questions to Ask Your MSP Before You Sign on the Dotted Line.
Do Your Engineers Have Experience with a Vast Breadth of Technologies and Infrastructure Types?
You want to make sure that your MSP has a balance between breadth and depth when it comes to their IT knowledge and experience. Breadth refers to the range of technologies a provider can work with while depth refers to how well engineers know each of the technologies they work with. You want a balance between the two to ensure your MSP can work with a variety of technologies and knows each of the technologies well.
What are Your Service-Level Agreements?
Service-Level Agreements (SLAs) set expectations for both you and your provider as to how long you can expect to wait when you need help and what level of service you will receive. SLAs vary between providers, so make sure you know what you need in terms of response times before meeting with potential MSPs. If your business cannot wait two hours for a response when problems arise without it affecting your bottom line, you will want to make sure your MSP has an SLA shorter than two hours.
How Involved are You Willing to be with my Business?
This question is very important, especially for small businesses looking to fully outsource their IT department. A good MSP will be available to weigh in on your technology decisions and may even offer vCIO services. If you are talking to potential MSPs, be aware of the questions they ask you. Do they ask about your business goals, or is their focus on pay day? Find a provider who is invested in your business, not your wallet.
Signing the Contract
Once you’ve found the right MSP for you, the next step is signing a contract. This legally binding document will establish a foundation for the relationship with your Managed Services Provider, so you want to know what to look for in a Managed Services Agreement. This includes anything from services and onboarding to confidentiality and termination of your contract. A Managed Services Agreement is a key document that will establish clear expectations between you and your MSP. It also serves as standard for evaluating your provider to ensure you are getting the services you pay for.
Where to Go from Here
You probably feel like you’ve just been bombarded with information about Managed Services, so let’s look back at a simple definition:
Managed Services are a form of IT outsourcing where your business works with a third-party agency known as a Managed Services Provider (MSP) to manage some or all of your IT needs, and this is often done to cut costs and free up internal IT teams.
The right Managed Services Provider and plan are dependent on your business needs and your budget. Weigh the benefits and drawbacks of Managed Services for your business and take the time to carefully evaluate potential providers and your contract. Make sure your provider is invested in supporting your business, and not just getting their next paycheck.
If you still have questions, we are happy to clarify all things Managed Services. You can contact us online today or reach us at (303) 786-7474.
About PEI (www.pei.com)
Since 1988, PEI has grown into a top provider of Managed Services in Denver. With more than 30 years’ experience deploying advanced engineering solutions centered on collaboration, cloud computing, networking, cyber security, and Managed Services, we help local and national businesses use technology to solve their business problems and are committed to driving digital transformation for small and midsize businesses.
Anna Ross, PEI