In today’s fast-paced digital world, small businesses rely heavily on technology to stay competitive. As a small business owner, you understand the importance of keeping your IT infrastructure running smoothly. However, managing your IT needs in-house can be time-consuming and costly. This is where Managed IT Services come into play. In this blog post, we will delve into the specifics of calculating the Return on Investment (ROI) for Managed IT Services, providing you with a comprehensive guide to make an informed decision.
Understanding Managed IT Services
Managed IT Services involve outsourcing your IT needs to a third-party provider, referred to as a Managed Services Provider or MSP. This includes proactive monitoring, network security, helpdesk support, data backup and recovery, and more. By entrusting these tasks to experts, small businesses can focus on core operations and achieve higher levels of productivity.
Identifying the Key Benefits
To calculate the ROI for Managed IT Services, it’s crucial to identify the key benefits that these services offer:
- Increased Productivity: Managed IT Services eliminate the burden of managing IT infrastructure, enabling your employees to focus on core business activities.
- Enhanced Security: With cyber threats on the rise, Managed IT Services provide round-the-clock monitoring and security measures, reducing the risk of data breaches and operational downtime.
- Cost Reduction: By outsourcing your IT needs, you can avoid the cost of hiring in-house IT staff, training expenses, and hardware/software maintenance costs.
Assessing Total Benefits
To calculate the total benefits, consider the following aspects:
- Increased Employee Productivity: Measure the time saved by employees due to reduced IT issues, multiplied by their average hourly wage.
- Improved Security: Estimate the potential cost saved by preventing a security breach, including potential lawsuits, damage control, and reputational loss.
- Reduced Downtime: Calculate the potential loss incurred during system downtime, including lost sales opportunities and decreased employee productivity.
An example of the benefits valuation for a 50 person company would go something like this…
- 2 hours saved per week per employee = 2*50*$28/hour average wage = $2800.00
- Reduced risk of security breach = $327,206.50/average for small businesses per incident, not to mention ongoing damage to reputation
- Cost of 24 hours of downtime = 24*$100/hour average revenue = $2400 per incident
You can easily see how expensive it can be to not have a partnership with an MSP.
Evaluating Total Costs
To calculate the total costs, include the following factors:
- Managed IT Services Fee: Consider the monthly or annual fee charged by the service provider.
- In-House IT Costs: Assess the expenses associated with in-house IT staff, training, software licenses, hardware maintenance, and upgrades
Determining the ROI Formula
To calculate the ROI for Managed IT Services, you can use the following formula:
ROI = Net Profit from Investment / Cost of Investment * 100
Net Profit from Investment = (Total Benefits – Total Costs)
Cost of Investment = Total Costs
An example for a 50 person company paying $6750 a month for managed IT services, using only the increased productivity calculation…
$2800.00*52/12 = $12,133.33 per month
$12,133.33-$6,750.00 = $5383.33 monthly ROI or $64,600.00 annual ROI
After seeing that, you can’t afford not to have managed IT services, right? And imagine the additional return on investment for your business if managed IT services were to prevent a serious security incident or breach!
Calculating the ROI for Managed IT Services allows you to make an informed decision about outsourcing your IT needs. By considering the benefits, costs, and using the provided formula, you can determine the ROI for your small business. It’s important to remember that every business is unique, and the ROI may vary based on specific circumstances. Consulting with Managed IT Services providers will help you gain a deeper understanding of the potential benefits and contribute to a successful IT strategy for your small business.
Disclaimer: The information provided in this blog post is for informational purposes only. It should not be considered as legal, financial, or professional advice. We recommend consulting with experts familiar with your specific business needs and requirements.