How much can you expect to pay for managed IT services?
So many factors affect IT service pricing that it’s impossible to quote a single number, but understanding the common pricing models and the factors affecting price will help you estimate a budget.
Before looking at pricing, make sure you know what services you need and whether they are available under a Managed Services Agreement (MSA). Our guide to What are Managed IT Services? covers the most common IT services Managed Service Providers (MSPs) offer.
Common Managed IT Pricing Models
Most managed services providers (MSPs) bill for services at a monthly rate. Different pricing models use a different cost-basis.
These are some of the most common pricing models to help you understand how to budget for Managed Services from an IT company.
In this pricing model, the MSP charges based on the number and type of devices in your environment. The per device price varies depending on the type of device because each has a different support cost.
Type of Device
Printers and scanners, phones, PCs, and servers could all be charged different rates because they all require different levels of support and expertise.
Pricing can range anywhere from $5/device/month for low maintenance devices like phones, to $200+/device/month for high maintenance devices like servers.
This pricing model makes sense for businesses that don’t have a lot of devices or that just need a few select devices managed.
If you have many devices on your network, you may find this pricing model too costly. Additionally, if you regularly onboard and offboard devices, it can make predicting monthly bills difficult.
This model may not provide as comprehensive of service coverage than other agreement types. A per device contract may be very limited in scope.
Reviewing the MSA carefully is important to understand what services will and will not be covered.
Just like the per device model, the per-user pricing model is variable. Costs are determined by the number of employees at your company rather than the number of devices.
Typical pricing ranges between $125/user/month to $200/user/month.
Per-user pricing models are generally more comprehensive.
Agreements under this model typically include a wide range of services from device monitoring, maintenance, helpdesk support, backups, and more.
Businesses like this model because it’s easy to explain to non-IT leadership. But for businesses with many employees, the per-user model can quickly become too expensive.
Additionally, this model is more difficult to budget for in industries with high turnover.
Tiered pricing has grown in popularity among MSPs. Tiers are usually broken out into a low-priced “Essentials” option, a moderately priced “Standard” option, and a full service “Deluxe” option.
Each tier includes a list of services, with each tier building on the last.
Pricing by Tier
In our research, low tiers typically range between $800 – $1,100/month, mid-tiers typically range between $1,200 – $1,800/month, and high tiers typically start at $2,000+/month.
The services in each tier vary from one managed services company to the next. Tiered pricing options are clearly defined, but can cause confusion if you’re subscribed to one tier but actually need services at a higher tier.
The rigidity of tiered pricing may mean you end up paying for some services you don’t need, while missing out on services you do need.
Comprehensive Agreement Pricing
A comprehensive agreement covers all the IT services you need for a fixed monthly fee from the managed service provider.
Pricing for these agreements is typically based on a hybrid of per device charges, flat service fees, and per user charges. These agreements are customized to fit your needs, so the monthly fee will be different for every client.
Managed Service Agreements
Comprehensive MSAs covering the services most businesses need start around $1,500/month. Even though pricing is based on variable factors, your monthly price typically remains flat for the length of the agreement (usually one year).
These agreements require the most work upfront to identify which services you need from the Managed Service Provider, such as remote support, monitoring services, or onsite support.
There are usually several meetings involved and lots of communication about the contract before it’s finalized. After that initial work, though, comprehensive agreements are usually the best model for you and the MSP. You don’t pay for services you don’t need, you get predictable bills, and both parties are clear on who is responsible for what.
Other Costs Not Included in a Managed Services Agreement
A comprehensive MSA will cover your IT service needs, but there are a few other items that may increase your total IT expenditure.
It’s best to understand what is and isn’t included in your agreement to get a holistic estimate of total IT spending. For items outside of your MSA, your Managed IT Service Provider may be able to help you procure these items at preferential pricing. The following are items that are not typically included in an MSA.
Hardware and Devices
New computers, firewalls, servers and other devices will not be included in a Managed Services Agreement.
However, MSPs have partnerships with major tech manufacturers, so they can help you as a business owner procure devices at discounted rates.
Software Subscriptions & Licenses
Some software licenses may be baked into your Managed Services Agreement, especially if they are flat monthly costs.
However, variable-priced subscriptions (like software charged per user) and one-time license purchases with will probably fall outside the purview of your MSA.
Cloud Service Providers
Consider this example, your company has a subscription to Microsoft 365 purchased and managed by your IT provider.
Microsoft 365 subscriptions are charged on a per-user basis, so if you hire a brand-new team of ten employees, your subscription costs will go up by ten users to provide each of them with a license.
Your Managed Services Agreement likely covers the administration of Microsoft 365, so the management costs won’t increase. However, the cost of the subscription itself won’t be covered under the MSA, so the ten additional licenses would be an additional monthly cost.
Major IT projects like site relocations and cloud migrations will require more time than what is covered under a Managed Services Agreement.
Projects like these require hours of careful planning, execution, and testing to be successful. Like with preferential hardware pricing, Managed Service Providers usually offer discounted hourly labor rates to clients with an existing MSA.
Other IT Pricing Models
Most IT companies have moved to some form of Managed IT Service pricing, but legacy pricing models still exist. It’s helpful to know what other models are out there when comparing MSPs.
Break-Fix support may be the oldest pricing model for external IT support and is common in mobile device management.
It’s simple to understand – when your technology breaks, you call an IT provider, who comes and fixes it. They charge you an hourly rate for the time spent fixing your devices.
The problem with this model is that you only have a professional IT company working on your tech after a problem has occurred.
In the long run, it’s cheaper and more effective to monitor and maintain devices to prevent problems in the first place. Even worse, the break-fix provider makes more money when you have more problems, so your goals and incentives are misaligned.
Our guide to Why Managed IT Services are Important looks at the pros and cons of break-fix vs. managed IT in more detail.
Hourly Block Subscriptions
Subscriptions for a block of IT support hours were a prototype to today’s Managed Services Agreements. You pay a fixed monthly fee for a block of IT support hours you can use however you want during the month.
These plans make sense for a business owner with routine, predictable needs. Problems arise, however, when there is any change to the status quo.
Unused hours may not roll over month-to-month, so businesses may end up overpaying. On the flip side, if a business needs extra hours one month, it can be aggravating to be charged more, especially if you didn’t use all your hours in a previous month.
The lack of flexibility and the difficulty in tracking the hours make hourly block subscription options less than ideal for many businesses. In our experience, both you and the MSP are happier when fees are based on the services you need completed rather than exclusively on the number of labor hours needed to complete them.
LeeShanok’s Managed IT Pricing
Your Managed Services Provider
LeeShanok’s Managed IT Services are priced using the custom comprehensive model. We work with our clients to develop customized service agreements.
This method provides the best level of service and makes sure you have a full understanding of what’s being provided.
A LeeShanok MSA starts at $1,000/month, but most of our clients ask us to provide a greater level of service. Our more comprehensive agreements start at $1,500/month.
These numbers are a good starting point, but our service agreements are customized with the services you need, so we’ll need to have a conversation with you to give an accurate quote.
Thinking about Managed IT Services for your business? Request a consultation with a LeeShanok IT expert below.