How to Budget for Managed IT Services

budget for managed It services
If you’re considering managed IT services, figuring out how much they’ll cost you is one of the most important factors in your decision.

Managed IT services are a great option for many small- and medium-sized businesses looking for IT support.

These businesses see a clear value in managed services, but we know from talking with hundreds of business owners that ultimately the decision to sign up for a managed IT services contract comes down to the cost.

As a managed services provider, we understand IT is an investment and a necessity for your businesses. 

To help you budget for investing in the monitoring and maintenance of your IT environment, we have a few budgeting suggestions: 

  1. Anticipate a managed IT services contract taking up the majority of the budget
  2. Plan ahead and save for after-hours emergencies
  3. Know you’ll need to replace or upgrade IT equipment with frequency
  4. Change your contract to accommodate new needs
  5. Consider ways to reduce your contract price

Using these points as a guideline, you can create a rough estimate of how much managed IT services will cost your company.

Anticipate the contract taking up the majority of the budget

When budgeting for managed IT services, you’ll need to take into account the cost of a contract.

Your contract includes:

  • A one-time fee of $500 per site for an audit
  • A one-time fee of $750-$2,000 per site for a physical firewall
  • A recurring fee of $85-$100 per user per month for a software suite and back-up storage

Managed IT services are billed monthly. This is beneficial from a budgeting standpoint because it allows you to allocate the cost as an operating expense instead of a capital expense

The contract will take up the majority of your IT budget, but there are other factors you need to consider when building your budget.

Plan ahead for after-hours emergencies

While managed services contracts give you access to support 24 hours a day, seven days a week, and 365 days a year, most contracts don’t include payment for after-hours service. 

No one hopes their mission-critical IT systems will fail and cause an IT emergency. It does happen, though, so we advise our customers to be prepared and plan ahead for them. 

A good rule of thumb for deciding if something is an emergency is if it ceases your operations and there is no workaround. 

For example, if you are a manufacturing company and your server goes down at 8 p.m. without a back-up, production comes to a halt. This constitutes an emergency because waiting until the next day to make the request will cost you at least 12 hours of lost production.

To plan for scenarios like this, you should annually budget 5% of your monthly cost.

Assume you’ll need to replace or upgrade equipment

The equipment in your IT environment doesn’t last forever. 

budgeting for managed services
Your hardware requirements will change over time, and purchasing new equipment falls outside of your managed services contract.

If something malfunctions or is simply no longer meeting your needs, you’ll need to replace your devices.

IT engineers can help you replace or upgrade your equipment, but your managed IT services contract does not cover the purchase of new equipment.

To have money available for hardware purchases, anticipate setting aside 10% per year of your annual managed services contract price.

Change your contract to accommodate new needs

While you will be locked into your managed IT services contract for at least 12 months, it’s unlikely your IT needs will stay the same. 

For example, implementing new devices is covered under your contract, but adding new users is not.

Your managed services budget should reflect any plans for expansion because new users initially fall outside of your contact.

For every new user you anticipate, it’ll cost at least $250 in labor per user to set up. If you need to provide that user with a workstation or other devices, take that into account as well.

Ways to reduce your managed services contract price

Everything up to this point has been ways your yearly managed services costs will increase, but there are ways to reduce your cost as well. 

1.    Limit your users

Managed IT service providers charge $85-$100 per user, but that doesn’t mean every person in your company has to be a user.

If there are employees who do not use company devices or access company files, you may not have to include them in your user count.

2.    Long-term contract

Agreeing to a 3- or 5-year contract is another way to reduce the cost of managed IT services.

In most cases, you’ll be locked into a 1-year contract with your managed service provider, but agreeing upfront to stick with them longer can save you up to 15 to 20% annually. 

3.    Remote-only agreement

If managed IT services are still out of your budget, you might consider a remote-only agreement.

You won’t have regularly scheduled on-site appointments with managed IT services engineers, but you’ll pay 20% less than a traditional contract, as on-site support is billed per incident.

Paying for a managed services contract

The cost of managed services is not only unique to your business’ size and needs, but it’s also dependent on many other factors.

The contract, after-hours emergencies, additional users, and new equipment are all things you should consider when calculating the total cost of managed IT services.

You should also think of your user count, contract length, and type of contract as ways to possibly reduce the overall cost.

These points provide a good guideline, but they are not an exact estimate of how much you’ll spend on managed IT services. Your annual costs may be more or less.

The best way to get a more exact estimate customized to your businesses’ needs is to schedule a free appointment with us to talk about contract options.

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