How to Estimate the True Cost of Managed IT Services

Estimating your true cost of ownership (TCO) for managed IT services starts with a clear understanding of your baseline costs, followed by price factors from SLAs, compliance, endpoint mixes, cloud storage, and data egress. This guide breaks down the upfront and hidden costs of MSPs, including tips for using managed IT service calculators and building TCO models.

Baseline MSP Costs

Baseline costs refer to the prices listed on an MSP's service pages or proposal, such as:

• Monthly subscription fees
• Remote monitoring and management (RMM)
• Bundled software licenses
• Mobile device management (MDM)
• Endpoint detection and response (EDR)
• Cloud backup software

Some MSPs may charge one-time setup costs or ongoing consulting fees separate from the monthly subscription price.

Service Level Agreements (SLAs)

Once you have a solid cost baseline, identify all other cost drivers to build an accurate TCO model, starting with your SLA tier and the cost of 24/7 IT coverage.

Remember that standard contracts typically offer local time coverage, which is 8 hours per day, five days a week. If you want full coverage, you'll need to pay a premium. The additional cost of guaranteed high-priority incident response often determines the premium price.

Compliance Scope

If you operate a healthcare-related service, for example, your IT operations must comply with strict PHI protection regulations, such as HIPAA. SOC 2 and PCI-DSS are two more examples of security compliance frameworks for data handling. Working within these environments requires additional compliance tools that increase your total costs.

Endpoint Mix

An endpoint mix refers to the variety of connected devices used to manage operations, from laptops to company-issued smartphones. The number of devices and their functions help MSPs determine the types of managed IT services, policies, and prices needed. The level of expertise is another cost factor, as managing Linux systems often carries a premium, for example.

Cloud Storage and Data Egress

MSPs use cloud backup storage to retain your company's historical data. Since they comply with privacy regulations and handle increasing data volume, the cost of cloud storage and the fees applied to the movement and retrieval of data, known as data egress, change over time. Therefore, these prices aren't fixed.

Using a Managed IT Pricing Calculator

To help build a TCO model for your MSP budget, you can use a managed IT service calculator from Corsica to estimate your IT service spend. But this is not a traditional calculator; it aims to reduce cost unpredictability by calculating several inputs, including:

• Company size
• Total number of SaaS apps that need IT support
• The total number of company servers
• Annual support and network requests
• New workstations added
• Monthly vCIO consulting hours
• Number of critical security incidents

The Corsica calculator can be used with other estimation methods, such as cost-tracking apps and spreadsheets.

You should also consider the amount of managed IT coverage needed for your operations, like standard time windows or full coverage. Compliance regulation environments can also be broken down into cost variables.  

Tips for Building a TCO Model

Building a TCO model is a smart way to prevent IT budget overruns, which boosts stakeholder confidence in managed IT investments. 

Start by visualizing all IT needs. This will serve as your definitive cost baseline. Follow this up by totaling the number of company workstations, mobile devices, virtual machines (VMs), and physical servers across all company locations.

Next, assess all of your network infrastructure components, such as active firewalls, wireless access points, and software-defined WAN (SD-WAN) appliances. Aggregate all software and SaaS needs, including productivity suites and line-of-business applications.

If your company relies on co-managed IT, calculate the full cost of internal IT overhead. Include base salaries, benefits, payroll taxes, workspaces, and training in your calculations. Use a tracking software to find the exact percentage of time spent on each IT task, categorizing tasks into maintenance versus revenue-generating projects.

Downtime is another major cost consideration and a primary reason for investing in MSPs. Combine lost employee productivity and missed sales revenue to find your Cost of Downtime (CoD) per hour, and add it to your TCO model.

Find the True Cost of Managed IT

Present a clear IT budget to company stakeholders by building a trustworthy TCO model. Start by establishing a firm cost baseline before moving on to costs influenced by your SLAs, compliance frameworks, endpoint mix, and cloud storage needs. Use a managed IT calculator for more precise cost estimations. 

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