There are two common models for IT support fees: the hourly break-fix model, and the managed IT services model. You can learn more about the differences and the pros and cons of each in our SMB’s Guide to IT Support Services and Fees.
A managed IT services firms will typically quote you a monthly fee. That fee is based on the number of devices you have that require maintenance, back up, and support. In the Chicago land area, that fee is somewhere in the range of $300 to $500 per server, $50 to $150 per desktop and approximately $20 per smartphone or mobile device.
Most IT services companies who offer a break-fix model will contract for between $125 and $225 per hour, often with a two-hour minimum service call. You can often qualify for a 5% - 10% discount if you purchase a block of hours in advance. You can ask them for quotes on individual projects which will vary depending on the scope of work required.
Nearly two-thirds of small businesses and organizations are expected to buy new IT equipment this year, replacing one in four office computers. Vendors now offer powerful computers at discounted prices, but what will this equipment really cost you in the long run? Whether you purchase a PC, notebook, server or other network hardware, you will likely experience sticker shock once you factor in the total cost of ownership (TCO).
Tight budgets and limited expertise often keep small organizations from making effective IT decisions. However, understanding hidden technology costs can actually help you reduce unnecessary expenditures and reallocate resources to more important business functions. Network Alliance has outlined current industry standards for determining TCO below. Before you invest in new IT equipment this year, we encourage you to evaluate your spending history and implement best practices that will improve your bottom line.
WHY IS TCO IMPORTANT?
Gartner, Inc. (www.gartner.com) defines TCO as the total cost of using and maintaining an IT investment over time. TCO calculations include a combination of direct costs (hardware, software, operations and administration) and indirect costs (end-user operations and downtime). TCO is often overlooked, and unbudgeted, presenting an inaccurate IT spending analysis.
Most organizations believe their direct costs end at the point of purchase. However, research shows that a computer’s base price typically represents less than 20% of its TCO, with technical support, maintenance and labor costs accounting for the remaining 80%. These aftermarket expenses represent the greatest piece of the TCO pie and should therefore warrant the highest levels of scrutiny.
Computers require constant configuring and maintenance. Ongoing costs related to security measures, software updates, computer repair and general support are unavoidable. However, simplifying your IT infrastructure and management processes will increase efficiency, expand productivity and significantly reduce your TCO.
IT SPENDING BENCHMARKS
HOW MUCH DO YOU SPEND ON TECHNOLOGY?
Probably much more than you think. As you can see from the pie chart, an unmanaged or poorly managed desktop PC costs more than $5,000 per year. When factoring in associated network costs, such as firewalls, storage, servers, routers, printers and internet connectivity, estimates exceed $8,500 per PC annually.
Remember that the initial purchase is just a fraction of the total cost of ownership, which means a $1,000 PC could actually cost more than $15,000 over its three-year lifespan. If a 10 person organization upgrades its PCs every three years, it likely spends a minimum of $120,000 managing those computers AFTER the purchase. The same logic applies to buying servers and related network hardware – the real investment begins once that equipment arrives at your door.
Even though more than 50% of TCO comes from indirect expenditures, many organizations focus solely on curbing direct costs. Since tight budgets have already reduced IT spending to a minimum, taking measures to improve end-user operations and decrease downtime can generate significant cost savings in the long run. In fact, Gartner recently found that a well-managed computer is 37% less expensive than the example above, often saving several thousand dollars per PC, per year.
TIPS FOR REDUCING TCO
IT spending is really a balancing act between hardware, software and services. According to Gartner, strong PC management is the key to overall cost reduction. The more money allocated for direct IT expenditures, such as operations and administration, the less money will be wasted on lost productivity and downtime.
Unfortunately, the reverse is also true. Because of declining IT budgets over the last few years, organizations have been forced to hold back on new purchases and temporarily band-aid ailing IT systems. However, pinching pennies on proper infrastructure and management procedures will cost you dearly in the long run. Here are several important ways you can reduce TCO and increase efficiency:
1. Measure your current IT spending so you can effectively manage and control your costs.
2. Build and maintain an accurate inventory of hardware, software and appropriate licenses.
3. Reduce complexity by standardizing equipment, software platforms and configurations.
4. Streamline processes for operating system patches, security updates, data back-up and maintenance.
5. Protect against viruses, spyware, hackers and physical threats.
6. Control user access to applications, settings, network resources, databases, and other IT assets.
7. Outsource key IT functions, such as technical support, data storage and back-up, to trusted, experienced vendors.
8. Provide regular training for both employees and internal IT staff.
9. Consider implementing a “thin client” or “utility computing” model to more effectively manage and protect PCs.
HOW DOES YOUR IT SPENDING MEASURE UP?
Determining your annual IT expenditures and calculating TCO can be complicated. We recommend following these steps for a basic TCO snapshot:10 Reasons an IT Managed
The Costs of Hiring IT Staff
According to the Robert Half Technology website the salary range (as of March 2018) for a Network Administrator in Chicago is between $90,464 and $152,214. That doesn’t include benefits, training, outside consulting, bonuses, or other employee related expenses. Most organizations factor an additional 30% for those extras, bringing the true cost of a full time Network Administrator into the range of between $117,603 and $197,878. If you take the average within the range, your Network Administrator could expect $157,740 per year or $13,145 per month.
Expect an average cost of $157,740 per year or $13,145 per month for a full time Network Administrator in Chicago. Check out the Robert Half Salary Calculator to find out what the cost is in your city.
You might even use cloud-based technology or have a private network for salespeople to check on pricing, inventory, shipping times, etc. If you have a warehouse, the tech you require is even more daunting.
It’s not just managing that amount of technology that can be time-consuming but maintaining all that tech can also be expensive.
Managed IT service providers allow you to outsource all of that work. They provide servers, a network, and other specialized services related to IT.
They handle your system upgrades, ensure you’re safe from viruses and cyber attacks and implement the most effective software for the task. They also act in a remote tech support role and offer on-site support when necessary.
How Do IT Service Payments Work?
Every managed IT service provider works differently, but many offer their service on a subscription basis. The size of your business will have an impact on what type of subscription you choose.
If you’re a small business or a startup with only one server that requires managing, you might opt for a per-user or per-device subscription. You’re still outsourcing your IT to a managed service provider, but you’re only paying for what you’ll use.
Growing small businesses and medium businesses would benefit from an all-in-subscription. An all-in-one covers all of your company’s devices and users by bundling all of the available services a provider has to offer. Sometimes their cost will vary depending on the size of your business.
What Is an SLA and Do You Need One?
A service license agreement (SLA) acts like your contract. It’s imperative that you have one and have it checked over thoroughly.
An SLA outlines what services you’re getting from your managed IT service provider. It might detail how many devices are included in the bundle, the limits on the number of on-site calls and what kind of service you should expect.
Should your managed service provider not adhere to their commitments under the agreement, your SLA should tell you what happens and what you are entitled to.