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The Definitive Guide to IT Managed Services
Edition 1 – November 2018

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Chapter 3

Understanding the RoI of IT Managed Services

TAKEAWAY

Choosing managed services does not automatically guarantee notable cost savings – but the return on investment may be greater than it first seems because:
• They can deliver savings for your current state but will provide even more when looking at your desired state
• They provide a risk-free platform and remove the need for “lumpy” increases in your opex or capex
• They enable you to focus you and your team on core business challenges
• An effective MSP can help you transform your IT platform and routines

Many first-time outsourcers enter into agreements expecting to realise significant cost savings. Managed services are not a magic bullet that reduce IT costs but there are savings to be had – if you look in the right places. It makes sense to look at the RoI in three ways

Managed Services – basic like for like cost comparison
Firstly, document what your costs, service levels and hours of coverage are at the moment (current state) and secondly what you need performance and coverage to be in 18 months’ time (desired state) and how much that would cost you internally?

When considering internal costs, ensure you cover all the bases including:
People – salary/NI/travel/benefits/training & development
People – computer/mobile/desk
Equipment – systems and network platforms
Equipment – software and service platforms

Let’s say that the current costs equate to £100k pa supporting your existing employees to a current service level for a 9-5, 5 days a week model.

But your desired state costs include other variables like:
• Recruitment to cover leavers
• Recruitment to support a specific technology
• Company growing at 2 employees a month
• You need to invest in a service management platform

That changes your costs to, say, £200K (desired state).

If you are after a current state, like for like replacement, there should be some cost savings against the £100k per annum.

There will, however, be more savings to be made against your desired state costs of £200k as internal cost growth tends to be non-linear when compared to using an MSP.

Managed IT Services – consequential savings
Equally relevant are the additional savings to be made through having a fixed term contract without any nasty surprises. You won’t need to invest in new service management software, platforms or reporting tools. No training, development or recruitment. In addition, Managed Services provide value in terms of:

Control – defined SLAs, monthly reports, KPIs
Focus – your team can turn more attention to delivering business goals
Security – reduces pressure on the business to keep up to date
Flexibility – to provide scale and agility
Cost predictability – costs that will increase or decrease in line with your growth
Risk management – security, systems, change to requirement – all included

The value of an effective MSP – knowledge savings
Once in a relationship and through knowledge of your infrastructure they can assist your other IT challenges. An effective MSP can help you transform and scale your IT platform and has IT experts to assist in projects or with new technology, when needed. Think of it as an extension of your IT team.

However, RoI is not straightforward to calculate as the business environment doesn’t stay the same. The current state savings  should facilitate the change to a managed services provider but it’s the desired state that delivers the major financial benefit. The strength of managed services is really in the management of variation or change or risk. They bring predictable costs that can flexibly change to meet your changing requirements, aligned to the ability to focus your team on the core business goals.

 

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