• How To Calculate ROI On A Managed IT Services Contract

Technology is difficult to manage and it's getting harder. As resource-constrained companies grapple with more sophisticated IT options and security threats, they naturally consider managed IT services as an option. These services offload big chunks of the IT workload to a professional service provider, freeing up the business to concentrate on making money.

It sounds appealing, but some executives aren't quite ready to make the leap. They're focused on the bottom line and want to see a cost-benefit analysis before committing. Here's how to help them weigh up the return on investment (ROI) from a managed IT services contract.

Start with what you're already paying

Any ROI assessment must start with an evaluation of your existing costs.

Let's begin with the human capital. Your IT employees incur a range of costs, some of which will rise over time. Salaries increase at least every couple of years (and more frequently if you want to keep valuable staff happy). Staff will also incur other benefits. These include the core ones - workplace pensions, income protection, and holiday allowance - but also others ranging from gym and transportation subsidies through to employee wellness programs. Then there are training costs to consider.

Aside from the cost of your IT workers you must also consider the hardware cost. The servers and networking equipment running your applications all incur a capital expense and require configuration and maintenance, as do the client endpoints.

These costs range from deploying and configuring security software through to swapping out faulty drives or in some cases replacing hardware altogether.

Finally, the software running on that equipment incurs a licensing cost.

The hidden cost of self-managed IT

Wait, though - you're not done yet. There are some extra costs your business is already incurring, or which may occur in the future, that aren't predictable. You must factor in these when making your decision.

As an example, consider the cost of employee attrition. Every time an employee leaves, it costs time and money to find, screen, and onboard a replacement. These costs typically runs into thousands of pounds. It's difficult to forecast employee turnover, especially during tough economic times when furloughs turn into layoffs. When times pick up again, recruiting new staff can represent a significant cost.

Conversely, you might find yourself having to hire temporary contract staff during high-pressure periods when you have to deliver IT systems to tight deadlines.

A managed services provider shields you from these problems, handling the human resources risk on your behalf.

Then there's technological capacity. If your company takes on a new IT-related project, you might find yourself paying more for extra computing power to meet your needs.

A competent managed IT services provider will be able to scale up technical resources quickly while keeping costs predictable and reasonable.

Some costs might not have shown up yet, but when they do they could be catastrophic. One example is the cost of a security or privacy breach. Managed security services can plug the security gaps that you don't have time to watch for yourself, saving you untold costs in the future.

Unlocking new value

Not all of your costs will disappear in a managed IT services scenario. You're likely to retain at least some of your in-house technology skills. Nevertheless, you should be able to replace many expenses with a single managed contract that will give you an easily digestible monthly fee.

Finally, don't forget to factor opportunity costs into your ROI. If your technology employees spend all their time fighting fires, they won't have the time to work on more strategically important projects. Handing off IT tasks to a managed service provider frees up their time for projects that can cut costs or even increase revenues.

A managed IT services contract could even bring digital transformation projects within your reach, opening up new product and service revenue streams for your business. That might be an intangible factor in your ROI, but it could create some very concrete financial benefits further down the line.


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