Should you work as a technology consultant, within the managed services provider (MSP) field or as an internal technology department employee, you will quickly gain an appreciation for the elements affecting daily operations. Every organization, of course, is different. But whether working within the financial services industry or health care, whether supporting a manufacturing company or a bank, multiple factors and behaviors impact the corresponding managed technology services challenges, and subsequently, costs.

Ultimately, the same factors prove common to most organizations. Whether judging by the field experience described above, popular white paper topics or even simple Google searches, a number of elements repeatedly arise as leading cost factors:

· An organization’s size

· The organization’s industry

· The number of required services

· Required response times

· The number of shifts requiring service support and coverage

· The number of sites and locations requiring support

· The amount of data the organization maintains

· The kind of data the organization maintains

· Systems age

· Applications status

· Hardware needs

· The number of servers

· The number of active workstations

· Maintenance preferences

· Disaster recovery needs

· Upgrade requirements

· Project initiatives

With more than 16 years of experience servicing organizations across myriad industries, Louisville Geek believes five factors, in particular, most affect the costs associated with fulfilling an organization’s technology needs:

1. Number of users

2. Required services

3. The organization’s industry

4. Systems and applications age

5. Disaster recovery requirements

Taking a closer look at each element helps better understand why these five factors most influence the costs associated with maintaining any organization’s computers, applications, networks and corresponding engineering and support services.

1) Scale

The primary factor impacting managed technology services’ cost is an organization’s size as measured by the number of users. A firm with eight employees will have quite different costs than an organization with 80. In fact, the number of end users is among the single best barometers by which to determine recurring monthly managed services expenses, but the metric cannot be used by itself.

Because user count impacts everything from cloud services subscription costs to email infrastructure expenses, from the typical number of nodes on the network—an important factor when working to secure systems and data from unauthorized access—to the licenses required for applications and endpoint security, not to mention help desk staffing required to support the user base, the number of users is often used to calculate monthly managed services pricing. The per-user per-month price varies, however, from anywhere between twenty or thirty dollars per user per month all the way up to two-hundred or more dollars per user per month, depending upon the elements included within the managed services contract and whether hardware expenses—such as the costs for laptop and desktop computers—are included.

Thus, the number of users has profound impact on monthly recurring managed technology services expenses. More than the number of individual sites an organization maintains, and potentially even more impactful than the industry in which a firm operates, the number of users accessing applications, entering data, requiring support and equipment and the corresponding security services required to battle network threats and fund anti-malware agents for this installed base proportionally affect an organization’s technology spend.

For, even if an organization works within a financial services sector that’s heavily regulated, if that firm has just 50 users, a firm operating in the same field with 100 employees will experience higher managed technology services expenses. Subsequently, the number of users stands as one of the primary standalone metrics that can almost serve as a barometer by which managed technology services pricing is forecast. But other factors necessarily come into play, too.

2) Services

The number and variety of services an organization contracts a technology consultant to provide are another significant element impacting monthly managed technology services expenses. Regardless of the industry within which an organization works, the number and nature of technology services an organization receives from a managed services provider directly affects corresponding costs. The fact some companies receive laptop and desktop computers and occasionally servers from their technology partners, whereas others don’t, as part of a services plan makes it particularly difficult for organizations to compare the pricing they receive from an MSP using just a cost-per-user or even cost-per-device ratio.

For example, if company A receives help desk support, desktops and laptops, comprehensive security services, network administration assistance and telephony services from an MSP and company B receives only help desk support and monthly desktop and server maintenance, the costs (even when calculated per user) will necessarily be very different. It’s for this reason that giant disparities can exist in the monthly technology services costs an organization pays, per user, even when compared to another organization of roughly the same size operating within the same industry. When companies contract for different services, the expenses vary accordingly.

Depending upon the managed technology services provider and an organization’s specific needs, a variety of services might be included within a monthly managed services agreement:

• Help desk support
• Desktop maintenance
• Server administration
• Telephony support
• Voice and data circuit services
• Microsoft 365 licensing
• Antivirus licensing
• Desktops, laptops and servers
• Data center services
• Disaster recovery services
• Comprehensive security services
• Web site design and maintenance
• Business intelligence services
• Data mining assistance
• Programming and development services

The more managed technology services an organization requires on an ongoing basis, the greater the cost. How service elements and components are structured significantly impacts monthly recurring technology expenses.

For example, if an organization chooses to purchase its own equipment—desktop and laptop computers, network switches, firewalls, servers and storage devices—potentially the single most expensive element (hardware procurement) of a managed services agreement will no longer be wrapped within the costs of a monthly recurring contract. Instead, the organization assumes the burden of managing these hardware expenses itself, a factor that often results in organizations experiencing significant peaks and valleys with their technology spending, as equipment typically requires replacement every four or five years. When this equipment is wrapped within a technology services contract, however, technology expenses become more predictable, as the cyclical financial peaks associated with having to replace capital equipment are eliminated.

Regardless, the fact remains. There’s no separating the two. The actual services an organization requires and includes within a monthly managed services plan plays an important role in determining the overall monthly recurring expenses.

3) Industry

An organization’s industry often dictates the systems, security safeguards, data protections and even operations recovery windows firms must adopt and maintain. Banks and financial services companies are bound by specific regulatory guidelines dictating policies and procedures, as are organizations that work within the healthcare field. A small manufacturer, though, may operate with freedom and structure IT systems and processes as it wishes. Even then, depending upon the items being manufactured and the materials required, though, regulations may still apply.

The industry in which an organization operates sometimes dictates how data is stored and protected. For example, when working with electronic health records, regulations require changes to each patient record to note the user making the change. It may come as a surprise to physicians that HIPAA requires medical practitioners to provide patients with a copy of the patient’s data upon request within just 30 days. Thus, in the event of a disaster, medical offices may need to provide patients with electronic records relatively quickly when also having to manage other difficulties and disruptions, such as the loss of a physical office in the case of a fire.

Numerous other practices and requirements are dictated by various industry regulations. Those are just a few quick examples.

When reviewing technology expenses—especially the costs associated with securing data, protecting networks from unauthorized access and backing up information in a way that enables operations to be restored as quickly as is required—remember the minimum baselines imposed by industry regulators or other authorities are just that: foundational standards that often dictate the minimum IT standards and practices the organization must maintain. Organizations, for competitive or other reasons, might choose to go still further and impose even more aggressive requirements. Thus, these industry standards have a significant impact on the expenses associated with managing a firm’s technology services, but they’re just one factor to consider.

4) Age

The age, or currency, of an organization’s computers and applications are another principal element influencing technology support costs. The older a computer, server or network component, the higher the likelihood the device will fail, thereby causing unanticipated disruption. These unplanned outages are a nightmare for MSPs and the organizations they support, considering the disruption the outages trigger, the typical necessity for more expensive after-hours or weekend work and having to pay rush charges for required equipment that may not even be available.

As systems age, there’s only so much a technology consultant can do to keep a component running reliably. Power supplies break. Hard disks fail. Motherboards give up the ghost. Servers experience errors. As a result, operations and data become vulnerable to risk.

The same is true for applications. Typically, software developers continually release program updates. These updates often include performance patches and security fixes that address errors, improve efficiencies and resolve vulnerabilities. Developers can only patch software platforms for so long, however, before entirely new versions are required. These new releases typically receive new edition numbers or even new names and often necessitate upgrading various network components, which can include desktops, laptops and servers, not to mention storage arrays. But organizations must remember to download, test and install these updates, a task that’s quickly complicated by the sheer number of different applications in use.

Network equipment experiences the same phenomenon. Routers, firewalls, network switches, security cameras, wireless networking gear and similar hardware components all run using firmware, or software and instruction sets that run upon the physical hardware the manufacturer produces. These manufacturers frequently issue new firmware updates, which can prove critical in helping these devices run smoothly and securely. Yet, such updates and the services upgrades that run on top of these firmware updates must be scheduled and installed and, sometimes, can only be accessed if extended service or support contracts are purchased and maintained.

Because such maintenance requires close attention, monitoring and expertise to track and complete, and because there’s so much to track across multiple applications, workstations, servers and network gear, it’s common to discover applications and firmware that haven’t been updated for months, sometimes years.

Workstations and servers pose another issue altogether. All computers have limited lifespans, yet there’s always a temptation to keep them in service longer to avoid having to outlay capital to replace them. But research, including a long-reported study by The Yankee Group, confirms keeping systems in operation beyond their intended lifecycles ends up costing more than simply replacing these items on a regular schedule. And, unlike regularly scheduling and replacing gear, when older equipment breaks corresponding unplanned outages occur in which no one, often, is able to work and operations come to a halt, creating expensive disruptions.

Thus, the age of an organization’s applications, hardware and firmware significantly impact a managed services provider’s ability to maintain reliable operations and avoid having to routinely provide after-hours and emergency weekend service to help a firm with older equipment or outdated software and firmware recover operations. But there’s yet one more factor that typically influences managed technology expenses.

5) Recovery

Many organizations, when initially meeting with an MSP, state they cannot experience any downtime. In the event of a circuit, server or site failure, the firm needs alternative gear or another location to immediately come online with no human intervention and eliminate any chance of an outage or downtime.

A managed services provider can, of course, usually provide that capacity. However, such redundancy and high availability is expensive, due to the corresponding circuit, site, software and hardware requirements.

Often a managed services provider can meet with an organization’s representatives and construct a practical solution that provides the data redundancy and recovery capabilities the client requires, while respecting the need to minimize costs. But a natural conflict persists between needing to back up information in a way data and systems can be brought back online quickly should a disaster or business-interrupting event occur and the corresponding costs associated with such initiatives.

When preparing a managed services contract for a client, the disaster planning and recovery requirements prove a significant component. The corresponding software applications, hardware gear and even data circuits and cloud services required to provide the proper coverage and recovery all differ by organization and depend upon a variety of factors, including the business’ mission and the industry in which it operates. Careful planning, however, and occasional field testing can help ensure an organization selects and maintains the proper business continuity and disaster planning solutions for its needs and budget.

Summary

Multiple factors contribute to an organization’s ultimate technology support expenses. Hopefully this rundown, and sharing the mindset describing each factor, better assists you in understanding how various business needs and organization requirements typically contribute to the overall structure and resulting costs associated with a monthly managed services contract.

Should you have more questions, we’re more than happy to assist. You can reach a Louisville Geek technology consultant at 502-897-7577 or by emailing [email protected].