Information technology (IT) is the backbone of many modern businesses. The advantages of the internet and modern computing are just that massive. We also live in a world where you want the most control over your data. So building your own IT team sounds enticing.

That said, the costs of an in-house IT department are substantial, especially for small to medium-sized businesses (SMBs). You should be aware of these costs, especially when compared with a managed service provider (MSP) before committing to an in-house team.

Keep reading to learn the hidden costs of having your own IT team.

Understanding In-House IT Costs

These are the three main costs associated with building an in-house IT department.

1.    Salaries and Benefits

The biggest cost of an in-house IT department is the salaries and benefits you provide to your IT team. Since IT professionals are highly skilled, they expect high wages that reflect their value.

You also can’t have a small IT team since you need a diverse skill set to be effective. For example, you’ll need professionals with expertise in network management, cybersecurity, and other areas.

Along with salaries, you’ll also have to provide non-financial compensation, like benefits, retirement plans, and employee-related costs. These add up and massively increase the total expenditure.

You can’t organise an effective IT team without making these substantive financial investments. In contrast, you don’t pay salaries to your MSP, nor do you provide any non-financial compensation, either.

You only pay their monthly or annual retainer fee.

So as a business, you should consider the long-term viability and cost-effectiveness of building an in-house team instead of outsourcing to managed services.

2. Training and Certification

You need to continuously train your IT team and ensure they acquire new certifications to stay up-to-date with technological developments. IT has a very dynamic landscape, so your professionals always need to know the latest developments.

Not only is ensuring your IT team stays updated difficult, but it’s also expensive. The costs of training programs and certifications can be extremely high. You also lose productivity from employees spending time training instead of working.

Without this continuous training, your employees can’t function sufficiently.

A managed service provider also has to stay up-to-date on the latest developments to be effective. The advantage of a managed team is that you don’t burden the financial responsibility for their training and certifications.

Instead, your MSP is responsible for keeping up-to-date with the latest technological developments themselves. They also assume the costs of training and acquiring new certifications themselves.

3. Infrastructure and Tools

An effective in-house IT team needs access to sophisticated infrastructure and tools to perform their role. These tools include hardware like servers and storage systems, as well as software licences for essential business applications.

The cost of these assets is substantial. In the case of software, it can also be continuous as many modern software are only available on subscriptions.

These costs also compound over time as you’ll have to pay for maintenance, upgrades, and replacements to ensure performance.

Owning and managing your infrastructure has its benefits though. It gives businesses control over their IT environment. They can also customise their infrastructure for their specific needs.

That said, most SMBs are unlikely to substantially benefit from this when compared with large organisations with complex needs. So you should evaluate whether full control over your IT infrastructure is beneficial enough for your SMB to justify it.

4. Reactive Troubleshooting

Most in-house IT departments perform ‘reactive troubleshooting’. When an IT-related problem happens, they identify and fix it i.e. they react to problems after they come about.

This approach is usually fast but it still brings downtime and productivity loss. Your business can also suffer lost revenue, reputational damage, and employee frustration during these downturn times.

Even worse, you could experience a serious security breach, which would further increase these costs.

Another problem is that reactive troubleshooting only solves problems after they happen. In contrast, a proactive approach would be identifying potential problems and preventing them before they can happen.

Most Managed IT service providers follow such a proactive approach. With a proactive approach, you avoid the hidden costs with reactive troubleshooting and build a more efficient IT environment.

The Managed Services Advantage

These are the advantages of outsourcing to a managed service provider instead of building an in-house team.

1.    Predictable Costs

Managed IT service providers typically charge a flat monthly fee to manage your IT infrastructure. The benefit of this approach is that you can predictably manage monthly and annual IT-related expenses.

Their fee will cover all relevant IT services without unexpected charges.

By following the flat fee model, your business can devote more resources to other business activities. You’ll also be able to plan for future growth and expansion without uncertain IT expenses.

Outsourcing to a managed IT service provider will also increase your organisation’s financial transparency and control.

Suppose you pay a $300 retainer for your MSP, which adds to $3,600 in annual IT-related expenses. You won’t have any additional or unexpected costs unless your business expands and re-evaluates the services it needs from its MSP.

With an in-house team, you might spend $2,000 monthly on IT expenses, including salaries, equalling $24,000 annually. But you’ll also incur unexpected expenses.

For instance, if one of your team IT personnel leaves your company, you’ll now spend an unexpected extra $2,000 annually hiring and training a new team member.

2. Scalability and Flexibility

Managed IT services are more scalable and flexible than in-house ones. An in-house team will likely struggle to meet a growing business’s needs because they’ll require more personal and resource investments.

In contrast, managed IT services are designed to be flexible. When your business expands, they simply increase the resources they devote to you from their available teams.

Managed service providers also have more experience with organisations of various sizes. So they can effectively adjust to your growing needs and offer customised solutions.

So a managed service provider can easily accommodate changes in your workload, number of users, or technological requirements without disrupting your operations.

If you choose a managed IT service provider, you can scale your IT infrastructure seamlessly while growing your business. You won’t be hindered by the resource, experience, and personnel constraints of an in-house team.

3. Proactive Maintenance and Monitoring

Proactive maintenance and monitoring is the newest IT management approach. It involves proactively identifying potential problems and correcting them before they cause harm.

The benefits of a proactive approach are that you’ll avoid the downtime, financial costs, and productivity loss associated with reactive monitoring.

Managed service providers are significantly more effective at proactive maintenance than in-house teams. This is because in-house teams typically lack the experience and knowledge that outsourced teams do.

This is because outsourced teams provide their service to many different clients in different circumstances. So they have more exposure to potential problems and can better anticipate them.

Managed teams also have access to better-quality monitoring equipment than most in-house IT teams receive.

Another advantage of a managed team is that they have more incentive to proactively fix your problems than an in-house team. An outsourced provider’s goal is to ensure your IT infrastructure performs to your expectations with the least problems.

That way, they’re able to efficiently manage multiple clients’ needs and establish a predictable workflow with you.

In contrast, an in-house IT team does not necessarily have an incentive to proactively solve problems.

So outsourcing to a managed service provider means you’ll have access to better quality talent with better equipment and the incentive to fix your problems before they occur.

4. Access to Expertise and Advanced Technologies

Outsourced IT professionals have access to experience, expertise, and technology far beyond what in-house teams can afford. This is because managed service providers operate as specialists for multiple clients simultaneously instead of being devoted to a single company.

This allows them to accumulate more experience and learn to handle more diverse circumstances. Since they’re specialists, outsourced teams also have an incentive to invest in more advanced technology.

They also do it without the financial constraints of an in-house IT department. A traditional IT department likely won’t get the best technology available because it would be deemed an unoptimal allocation of resources.

In contrast, since outsourced teams are devoted to a single role, they have every reason to invest in the best technology.

So an outsourced IT professional will always provide you with better expertise and have access to better technology.

You can recreate their expertise and technology in-house, but it would cost far more than simply outsourcing to existing MSPs.

Making the Decision

Having your own IT department has its allures. You’d have complete control over your network and data. You’d also not have to depend on outside entities. However, the sheer cost of building an effective in-house IT team exceeds what an MSP can provide.

MSPs can provide better expertise, and better technology, and employ a better management philosophy–all at a lower cost. If you’re considering hiring an MSP, click here for a free consultation with PowerbITs.