How Much Does It Cost to Outsource IT?

Don’t you hate it when you ask about prices and companies don’t provide clear-cut answers? 

We do too. As an IT outsourcing company with over 20 years experience, Intelligent Technical Solutions (ITS) believes prices should not be a secret. 

Understanding the cost of outsourced IT is crucial for making informed decisions, ensuring budgetary alignment, and maximizing return on investment (ROI). 

Whether you are a small business seeking cost-effective solutions or a large corporation needing scalable and customizable services, you deserve to know how much you need to spend before you spend it. 

So, in this article, we’ll shed light on the financial aspects of outsourcing IT. This article will specifically talk about the following: 

• The options for outsourcing IT 
• The cost of each option 

The cost of each option is discussed differently: prices for services with predictable billing (like co-managed and managed IT) are presented on a per-user/per-month basis, while services with unpredictable billing (like direct outsourcing and break-fix IT) are discussed in a per-contractor hired context.  

By examining these options and the cost of each one, you’ll have valuable insight into the financial implications of outsourcing IT and make the best decision for your company. 

What are Your Outsourced IT Options? 

Option #1: Co-managed IT 

Co-managed IT is a service where a third-party IT provider, also called a managed service provider (MSP), partners with your in-house IT to support your IT infrastructure. 

You are afforded the comfort of having staff on-site and can control how many in-house technicians you need. There’s no pressure to hire more and more people. 

Then, your co-managed IT service provider will supplement your team member’s skills. They’ll take over the tasks your staff doesn’t specialize in. 

The goal of co-managed IT is to help your staff to do what they do best. 

This, in turn, saves you time, money, and a whole lot of stress. Allowing IT staff to focus on things they enjoy will result in more efficiently serviced customers, a more well-maintained IT infrastructure, and less downtime for your employees. 

Cost of Co-Managed IT 

Co-managed IT costs vary depending on different factors. But it’s a monthly bill that costs 20-40% less than a managed IT plan from an MSP. 

So let’s say it costs $130/user per month for the basic plan from a managed IT provider. You can expect co-managed IT to cost around $90 to $110/user per month. 

But you should also factor in the cost of your internal IT staff: their salaries, bonuses, training, and workstation upkeep. By adding the price of maintaining your internal IT to the co-managed IT monthly cost, you’ll get the total amount of your IT costs with co-managed IT. 

Option #2: Managed IT 

Managed IT is a service where you outsource your entire IT department to an MSP. 

You remove all the pressure of hiring, training, managing, and paying an entire department. The MSP will oversee everything while involving you in decision-making. 

The goal of managed IT is to lessen the mental load of handling your IT while providing immense value. 

Cost of Managed IT 

Managed IT costs are highly dependent on unique factors per company. But unlike co-managed IT, you only have to worry about one monthly bill from your MSP. 

Most managed IT plans range between $130-$250/user per month, depending on which company you contact and what services you need. 

Option #3: Direct Outsourcing 

Instead of getting an MSP or an agency, you can hire people as independent contractors or freelancers. Working with freelancers from around the globe can push down IT costs but comes with the expected risk of hiring the wrong person for the job. 

You’ll also have to consider time zones, communication issues, payment options, and performance concerns. They also can’t serve as on-site staff. 

The main goal of direct outsourcing is to push down costs; if you’re prepared to handle the risks associated with lower prices and constantly off-site staff, then direct outsourcing may be a good choice for you. 

Cost of Direct IT Outsourcing 

Costs vary widely when outsourcing your IT directly to freelancers and independent contractors. You need to consider location, expertise, onboarding, and offboarding expenses. 

Depending on your needs and their rates, it can cost anywhere between $800 to $3,000/month per contractor* hired. 

*Averaged from different websites and job postings for remote IT contractors worldwide (e.g., Indeed, UpWork, and LinkedIn) 

Option #4: Break-fix IT 

The last option for businesses is break-fix IT.  

The break-fix IT model involves calling technicians when something breaks within your system and getting them to fix that problem for you - hence the name break-fix.  

And that’s the best part of this option: you only call them when needed. Hence, they’re generally more affordable than the other options. However, if you need them to fix something substantial, it can increase costs.   

Cost of Break-fix IT 

Break-fix IT costs are unpredictable, as the bill depends entirely on your problem. 

But they’re usually on-site staff billed on an hourly basis. Minor issues can cost around $20-$50/hour for one technician (depending entirely on where and who you hire), with extra costs such as hardware replacement, software licenses, and long-term technical support not included. More significant problems will cost a lot more.   

What Factors Affect the Cost of Outsourcing IT? 

When preparing your budget, what factors should you consider? Here are some things you should watch out for: 

Choice of Service Provider 

Different providers have varying pricing models, expertise levels, and reputations, which can impact the overall cost of outsourcing IT services. Renowned or specialized providers may charge higher rates due to their expertise and track record. 

Services Needed 

The nature and extent of IT services you need will impact the cost. Suppose you outsource various IT functions, such as software development, infrastructure management, or customer support. In that case, the price will likely be higher than outsourcing a specific task or a limited set of services. 

Project Complexity 

The complexity of the IT project or outsourced task plays a significant role in cost determination. Projects requiring specialized skills, advanced technologies, or extensive customization will be more expensive than simpler tasks. 

Contract Duration 

The duration of the outsourcing contract can affect the cost. Longer-term contracts often come with discounted rates or other financial incentives, whereas short-term or project-based engagements may have higher hourly or fixed-rate charges. 

Ready to Choose the Best Outsourced IT Option? 

At the end of the day, you want to get the full value of the price you pay for IT services. And while cost is a crucial consideration, it should not be the sole determining factor in outsourcing decisions. 

Quality, reliability, security, and the ability to meet specific business needs are equally important considerations that should be weighed alongside the sticker price. 

As a third-party IT provider, we’ve prepared multiple resources to help you find the best outsourced IT option for you: 

• IT Cost Calculator [Free Service] 
• Why MSPs Seem Expensive and What You're Getting for Your Money 
• Managed IT Service Provider vs. Break-Fix and In-House IT  

But if you have more questions, schedule a meeting with our experts today to get immediate answers that can influence your decisions for the better.