Whether or not managed services saves money depends greatly on who you ask; it also depends on many other variables. However, this is an important question and I believe that not enough has been said or written on the topic. I say this because no other profession (with the possible exception of health care, and that really is an issue of insurance and not the fees of the provider) really focuses on costs as much as IT outsourcing/managed services.
First, managed services is more expensive compared to what? This is the crux of the issue. I hear from a lot of MSPs that clients, at some point during the negotiation process, tend to bring up the issue of price and it almost always is a comparison to other providers. While this may seem natural, I cannot find another example in other professions where the "professional" is defending their fee compared to other providers. Professionals set their fees based on experience, focus (i.e., vertiical understanding), as well as other factors. But, no matter what the fee, the professional doesn't justify it...the fee is what it is. If I went to a Wall Street law firm and expected them to be priced the same as my local attorney, I would be in for a rude awakening.
MSPs need to set price expectations with their clients and prospects early on to save time. If a client is only interested in a price discussion, they probably don't understand the value you possess. Some clients just need to season for a time before they fully understand what it means to manage IT effectively.
Second, the real question that nobody addresses is the cost of managed services compared to the internal IT department, or in the case of the small business, nobody doing it at all! Under this scenario, I suppose one could argue that paying a MSP to manage IT versus not paying anyone is going to cost more. However, the issue is first one of should IT be managed at all, regardless of who does it.
Ask most MSPs and they will tell you that organizations without an internal IT department have no real IT management or security process in place; it is a reactive and dangerous environment where threats (and the damage already done) are dealt with after they are discovered instead of before. To compare no management with the services of a MSP is neither accurate or fair.
It is entirely possible, if not probable, that managing IT (whether outsourced to a MSP or doing it internally) will have a cost higher than a reactive model. If you accept this, then the next question is what is the cost of not managing IT compared to the cost of letting things to unmanaged, waiting for the inevitable failure, breach, or data loss, that costs more than just money, your corporate reputation!
IT outsourcing, or managed services, was never about saving money. This profession was created long ago for the purpose of bringing what was nearly impossible (due to cost) effective IT management through human assets, expertise, and technological tools. Sure, any organization large or small can manage their own IT. The question is will they, can they, and can they afford to? MSPs can answer all these questions for you.
Written by Charles Weaver, CEO of MSPAlliance
