The Six-Figure Costs Savings from Partnering with an MSP

by Jon Teychenne | Sep 19, 2022 | Blog | 36 comments

The Value of an MSP

Recent research indicates that downtime costs have skyrocketed to over $300,000 per hour for large enterprises. In some industries like automotive, the cost of downtime reaches $22,000 per minute. These costs continue to increase as more businesses use technology to drive business and manage user information. The amount of money lost during downtime depends on your business, but undoubtedly network downtime costs money regardless of your organization’s size.

The reasons behind unplanned downtime also depend on the organization. Some organizations are understaffed. Others do not have the right infrastructure in place to support bandwidth and failover, and others might not have the experience to deal with the warning signs associated with software bottlenecks. Regardless of the reason, when application infrastructure fails it causes a domino effect that gradually impacts revenue down to every department. Much of this struggle can be remediated with migration to the cloud and partnering with a software provisioning provider who knows what tools keep organizations performing in a way that positively impacts revenue.

Downtime isn’t the only concern plaguing businesses.

Strategic scalability takes careful consideration to allow for business growth without wasting IT budget dollars. Monitoring applications is necessary for compliance, uptime, and 24/7 security. Having the capital to support new infrastructure is difficult for many businesses, and the salary costs associated with just a small on-site staff can cost seven figures yearly. Even with a budget to support one on-site developer, you need a partner who can create the right strategy to deploy productivity software and infrastructure that allows your organization to scale, stay productive, and grow revenue.
It’s for these issues and more that organizations turn to managed service providers for help. An MSP that supports all department applications and the infrastructure that hosts them will be more fully equipped to provision scalable solutions at a fraction of the cost. Instead of hiring individuals with high salaries to support a single application, organizations can optimize their budgets by partnering with a single software-focused MSP that will deploy critical corporate applications and support them at a bundled rate that cuts salary costs.

The Cost of Managing Critical Application Infrastructure

For organizations with on-premises infrastructure, managing a budget with necessary productivity software and staff is a balancing act. Tipping the scales in the wrong direction could lead to performance issues, downtime, and reduction in revenue due to limitations in technology. Insufficient infrastructure becomes a productivity bottleneck, and it can impact every department. With the right managed services provider, implementation of software such as CRMs, project management software, support applications, and organization software is completely maintained and provisioned without the need for a full on-site staff. Since MSPs that support software do so in the cloud, your organization gets better uptime, performance, maintenance, and scalability across all departments at a fraction of the cost.

Much of these expenses can be migrated to the cloud where organizations pay a fraction of the cost for critical services. With an MSP that supports your corporate applications, the migration and strategy can be planned to directly address specific organization workflows and productivity. You can still keep email and servers in-house, but cut costs tremendously by leveraging cloud services for common corporate software.

These software costs are for a small 25-user business with few resources and don’t include the staff necessary to maintain it. One could hire individuals to support each application, however this can put a burden on your IT budget. Salaries for software developers and IT professionals can vary depending on skills, experience and location. As an example, a mid-level staff member has an estimated cost for an organization of anywhere from $65,000 to $130,000 per year with a median of $90,126. Add on taxes and we will round this to $100,000 per year.

The numbers in the previous table indicate that a small office that requires one mid-level support employee could pay almost $260,000 per year to manage IT costs, that being salary plus software itself. Many organizations may need more support staff for infrastructure. Often organizations look for ways to cut corners, however band aid solutions and cutting corners can lead to greater costs in downtime and performance bottlenecks. This can contribute to many small to midsize businesses struggling with managing infrastructure and continually dealing with IT related setbacks.

Not only is managing software difficult, most enterprise software solutions have numerous advanced features that only an expert knows how to manage. Having an expert on-staff is costly, so organizations look to their current developers for help. In many cases, these developers do not have the expertise to configure cloud applications, and organizations are left with expensive software but using only 10-20% of its features.

Case Study

• Let’s take an example of employing a Database Admin (DBA). According to Glassdoor, a DBA makes an average salary of $70,000 per year. An organization can leverage a software-focused MSP that will manage integration, configuration, and management for a fraction of the cost. In addition to managing your databases, your organization can also get value out of the integration and configuration of numerous other applications packaged together within the MSP’s fees. Instead of spending $70,00 every year for a single professional, the organization saves money across dozens of applications necessary for employee productivity and support.
• Another example can be used for your project management software. You could hire a project manager to set up the numerous applications needed for productivity, but you may spend anywhere from $52,000 to $130,000 on employee costs alone. It can become expensive for one person to support applications such as Jira, Microsoft Dynamics 365, ClickUp, Wrike, Basecamp, Podio, and potentially many others. Alternatively, a software- focused MSP can provision and deploy these applications in the cloud, integrate them with your own workflows and maintain them monthly at a fraction of the cost of a full-time employee.

Combine it all together for a larger business, it’s estimated that a medium to large business could spend around $700,000 per year to manage infrastructure. Using an MSP has the potential of saving over $500,000 a year, ultimately reducing expenditure down to a fraction of what it would take to host and manage it yourself.

Typical In-house IT Costs Based on Organization Size

*Based on numerous studies, the amount of required IT employees to staff ratio ranges anywhere from 1:25 to 1:150. Many factors can play into this, including the nature of the business, the systems in play, and whether or not the internal IT staff handle 3rd-party software or outsource this work while they strictly handle on-premise software and servers. When it comes to managing all the different software applications a business could use, we are arbitrarily calling the ideal ratio 1:50. These rates scale proportionally to the number of IT staff and their need to support managers and higher paid IT executives. References: spiceworks.com; workforce.com; orangematter.com; industryweek.com; serverfault.com; tolarsystems.com

Challenges Faced by Modern Business

Most small businesses struggle to keep up with technology and manage existing infrastructure.

The biggest challenges most businesses have with IT are:

Staying ahead with new technologies. Staying behind puts you at a disadvantage and legacy systems are often inadequate, but continually upgrading is also expensive.

Budget constraints limit infrastructure upgrades, but it can also inhibit organization growth.

Enhancing security along with upgrading infrastructure is something that requires experts that aren’t on staff.