Understanding IT Service Costs: A Common Query

One of the most common questions we get from new prospective clients calling our office is “What do you guys charge for your IT services?”

Price vs. Value: Making the Right Choice

While price certainly needs to be one consideration, it’s extremely important you make an informed decision and choose the right IT services company instead of using price as the main deciding factor.

This seems obvious, but the reality is that most CEOs don’t really know what questions to ask or what to look for when choosing one IT company over another and therefore put too much weight on the quote.

The Pitfalls of Bargain Hunting in IT Services

What you want to avoid is getting lured into a lowball quote from an IT company that is in financial trouble, cutting corners to lower their fees to get you as a client, but then unable to afford to hire experienced, knowledgeable techs, dedicated account managers and the security tools they need to ensure YOU are actually getting the security, stability, and service you need.

So, how much is “too much” and what are the signs that someone is underpriced?

Eye-opening Statistics on IT Service Pricing

Recently, an industry report from Service Leadership, the leading financial benchmarking organization in the IT services industry, revealed that a whopping 28% of MSPs (managed services providers, or IT services companies) were unprofitable, and nearly half of all MSPs were under 10% net profit.

The Hidden Costs of "Cheap" IT Services: What You Need To Know

While everyone likes a “bargain,” here are the reasons why “cheaper” is not the advantage you think it is when you choose an underpriced IT company:

  • They are woefully short-staffed because the biggest expense in any IT company is the technical staff. THAT means if one of their techs quits, they’re quickly overwhelmed and unable to support your account, and response time suffers, not to mention critical security and backup maintenance of your network.
  • The staff they hire are at the lower end of the pay scale, which means you’re not getting the most competent people working on backing up your data, keeping your network secure, and handling the critical operations and data your business needs.
  • They are very unlikely to have a dedicated account manager and team to work on your account because they can’t afford to hire them.
  • They are one or two bad months away from going out of business because they have no buffer. That means you could wake up one morning and find yourself without an IT company, scrambling to find a new one.
  • They are not “operationally mature.” Operational maturity means their business has the people and professional processes aligned to provide the highest level of QUALITY services to the end client (you). 

What's the Average Fee? Making Sense of the Numbers

In general, according to Service Leadership, the average “per user” fee for managed IT services is $205.07 to $249.73. Those IT firms with an operational maturity level of below average is $146.08 to $157.49 per “user” (or employee using a computer or device they are supporting). 

As you can see, if someone quotes you $120 a user for managing your network, it might feel like a good deal, but you have to ask yourself how they are able to charge nearly 50% less than IT firms that are operationally mature. The answer is obvious – they’re cutting corners, hiring cheap labor and leaving out critical security and compliance services.

Ensuring You Get the Right IT Support: Questions to Ask

If you want to know what types of questions you should be asking your IT firm (managed services provider), then click here to download our executive guide, “19 Critical Questions Your IT Consultant Should Be Able To Say ‘Yes’ To”.

This report discusses in detail exactly what to look for to get exactly what you need without unnecessary extras, hidden fees, and bloated contracts. But most importantly, it will show you how to get the right support you want in order to lower your risk and eliminate the frustration of dealing with a less-than-competent IT company.