The Shift in Business Technology Spending: Breaking Down Managed IT Services

The world is moving to the monthly subscription. You might’ve noticed this with your music streaming service (instead of buying the CDs or MP3s yourself and storing them on your computer) or with chagrin when you upgraded your smartphone and learning that you have to pay a monthly fee for it instead of buying it outright.

Well, that’s happening in the business world too, to a degree.

Many of what has been traditionally a capital expenditure (CapEx), such as software licenses, has become a recurring expense, or operating expense (OpEx). Before, you might have bought the Microsoft Office Suite outright and kept that perpetual license as long as was appropriate (or longer … we won’t judge). Today, with Office 365, you can pay per user on a recurring basis instead and enjoy lots of benefits like free upgrades and feature additions at no extra cost.

Scaling How Much You Buy

As with anything, this new model has its pros and cons. The main reason most businesses benefit from it is the simple scalability of it all. Business growth can be volatile, and being able to provision licenses to users as needed, or stop paying for licenses you don’t need whenever you want can seriously save some money.

In earlier times, when you bought a perpetual license of Microsoft Office, it was yours. You couldn’t turn it back in for a partial discount if the user quit and you didn’t need it anymore. With cloud-based services like Office 365, you can essentially do that today.

Bearing the Burden of an IT Department

But with size and complexity comes issues, as always. As organizations increase in size, their IT needs become more nuanced, specific and unwieldy. Just having a few seats of Office 365 and Windows 10 Pro won’t cut it anymore – you probably need a skilled, live human (or a few) to help you manage and maintain your business’s technology. In some cases, you may need a specialist … and ongoing training and other support for your staff. Are you seeing the dollar signs add up?

Additionally, having to drop everything you’re doing to address a technology issue is a huge drag. Smashing your broken copier with a Louisville Slugger is probably not the way to go. Or when your internet goes down again, whose turn is it to yell at Spectrum?

Add in the volatility of business growth and then you could end up either understaffed and underperforming or looking at layoffs. You can’t just unsubscribe from your systems administrator. What are you, a monster?

Okay, that’s mostly a joke. But really, IT staffing becomes a challenge when you reach a certain size. This is where managed IT services come into play.

Normalizing Your IT Costs

For a flat rate on a recurring basis (usually monthly), an IT company can manage and monitor your applications, servers, devices and users. This, like your Office 365 subscription, gives you a predictable cost curve when you’re growing and budgeting. And, when you’ve got a situation that might require specialist intervention, your managed services provider can bring in their higher-cost resources and keep it off your books. You assume much less risk in terms of your IT department and can easily scale up or down as you go.

Making Heads or Tails of Your Managed Services Terms and Conditions

The key to getting the most out of your managed services agreement is understanding what you’re buying at the get-go. While the basis of managed IT services is a fixed, flat fee, many contracts include exemptions. For example, there may be a fee if your managed services provider has to come onsite, or if you pass a certain number of service hours. We’ve seen companies paying up to double what their agreement cost when it came to the exemption costs.

So, when you’re shopping for a managed services provider, there are a few things you should bear in mind and ask. How is the fee calculated? Is it per unit or device or person and what does that specifically entail? What are the hours of operation – is it a standard 8 to 5 or 24/7? What happens if there’s an after-hours call? Is there a special rate charged?

Ask what’s included in the contract. Does it include patching and basic maintenance or only helpdesk support? Are upgrades included? What about new Operating System versions or hardware upgrades? Are onsite visits part of the contract or an additional fee?

Using managed services to stabilize your technology costs and improve your technology maturity can be a great motivator for business growth, but you have to make sure the agreement between your provider and you benefits the both of you. Here’s a story about a client of ours who weighed their costs and options and found it made sense to switch to managed services.

If you have questions about managed services and if it’s the right move for you, send us an email or give us a call at 502-240-0404!