Cost of Business IT Support

Posted by Stephanie Hurd on Aug 26, 2019, 9:20:38 AM
Stephanie Hurd
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There are four different ways most businesses acquire IT support.

You can:

  1. Hire an internal IT person
  2. Hire an on-demand IT vendor or freelancer when you need help
  3. Pre-purchase blocks of IT support hours
  4. Partner with a Managed Service Provider (MSP)

Each approach to IT support has its pros and cons, and within each approach are various pricing models.


Internal IT Person

There is a huge range of IT salaries based on the specific skills and experience you need. A lower-skilled or less experienced individual requires more guidance and supervision, but a higher-level employee may bring more capacity than your business can utilize.

Entry-Level IT Employee

Small businesses often turn to interns and recent college graduates to fill their first IT role. These types of employees are usually easy to find as your business colleagues typically have no shortage of nieces and nephews studying IT and looking for their first professional opportunity. In many parts of Maryland, you can bring this level of employee on-board for around $25,000 per year and the promise of future opportunity and growth.

Many businesses assume that this type of employee comes to you fresh out of school with the most current, up-to-date skill set. While their skills and knowledge are current, the number of skills they bring is limited. Recent college graduates require years of ongoing training, professional development, technical certifications, and strong mentoring to develop into a seasoned IT professional capable of making independent decisions about IT in a business setting.

The biggest mistake we see businesses make is bringing on this type of individual to work under a supervisor who lacks the technical expertise to offer appropriate management and support. This never works in your favor and is a huge disservice to the employee who doesn’t yet know how to ask for the type of support they need to be successful.

IT Manager

Many times, the entry-level employee described above does a good enough job to keep the doors open, but you have no way to know if a disaster has been avoided due to good luck or good work. You assume it’s the latter and give this person more autonomy and decision-making control as an IT manager. You then back-fill the lower level position with another inexperienced, recent college graduate. With an increased salary between $45,000 and $50,000 per year, you have offloaded day-to-day oversight of an IT resource. Now you have an inexperienced decision-maker paired with an even more inexperienced resource. Eventually, good luck runs out in the face of ransomware, data breach, or compliance violation, all of which have serious consequences to your business without an experienced IT professional capable of protecting you, your company, and your customers.

Chief Information Officer (CIO)

A high-level Chief Information Officer (CIO) is the only type of IT position you can expect to understand the technology in your business and make sound strategic decisions about aligning IT and business. This type of individual typically earns well into the six-figure salary ranges. Here in the tri-state region, you should expect to offer a CIO at least $100,000 to $170,000 per year, but that range increases significantly as you go closer toward the metro DC area where a qualified CIO can easily demand $300,000 per year. CIOs are strategic executives. They require tactical employees to implement strategic direction.

Other Expenses to Consider

Opportunity Costs

In the absence of a CIO leading the strategic direction of an IT team and offering management and mentoring opportunities to junior staff, there are significant opportunity costs associated with managing technical employees. Either you’re taking time away from your responsibilities within the company to manage that person, or you’ve assigned that responsibility to someone else. Either way, there is a cost associated with the management of an internal team member.

Turnover

IT positions are extremely difficult to fill, and even more challenging if you’re not a seasoned technical expert yourself. If you do find a great employee and don’t offer enough work to keep her engaged, she will quickly move on to a position that offers more opportunity and challenge. Turnover typically costs your company about 20-30% of the employee’s salary every time you have to re-fill the position.

Taxes and Benefits

In addition to the employee’s salary, you pay the Federal Insurance Contributions Act (FICA) tax on every employee in your company, as well as the cost of benefits like health insurance, vacation and sick time, etc.

The 2019 FICA tax rate is 7.65% up to the 2019 Social Security wage base of $132,900. The 2019 FICA tax on salaries greater than the Social Security wage base is 1.45% Medicare Tax of the entire salary and $8,239.80 Social Security tax.

The cost of benefits vary based on your benefits plans, but the average benefits package is typically 29% of the total compensation package.

Below is a chart of the total cost of employing each type of IT professional described above, including salary, estimated benefits costs, and FICA tax.

Employee Type Salary Benefits FICA Total Annual Employment Cost
Entry-Level Employee $25,000 $10,211 $1,913 $37,124
IT Manager $50,000 $20,423 $3,825 $74,248
CIO $170,000 $69,437 $10,705 $250,141

On-Demand IT Vendor or Freelancer

Some businesses choose to utilize a freelancer or outsourced IT vendor that takes on as-needed work, often called “Time and Materials.” This type of person or company provides support and assistance when you call but can’t guarantee outcomes since they’re not regularly overseeing your network.

On-demand or time and materials work is billed at an hourly rate based on the actual hours worked. You can choose to stop the work if you determine the problem or device isn’t worth investing more than few hours of labor, but you are stuck with the bill for the time worked rather the issue is resolved or not. Additionally, these types of individuals and companies often have a minimum number of hours that they bill, and some may also include travel time into the hours for which you’re billed.

Time and materials hourly rates vary based on the size of the vendor, and experience level of the techs, as well as their ability to deliver remote support. On average, hourly rates range from $75 to $200 per hour for basic troubleshooting and networking projects. Strategic, CIO-level consulting is often billed at $395 or more per hour, which does not include the time and materials costs to implement strategic recommendations.

Pre-Purchase Blocks of IT Support Hours

This type of service is very similar to the on-demand or time and materials option, but many vendors will offer a slight discount for pre-purchased blocks. Blocks can often be purchased in one large block or as smaller blocks that automatically recur monthly.

When you pre-purchase hours, either as a stand-alone block or on a monthly recurring basis, be sure you find out when the hours expire and, in the case of the monthly option, if they roll over month to month for any period.

Discounts for pre-purchased blocks vary based on the size of the block but be careful to note the expiration date of the hours.

Depending on the capacity of the company you’re working with, you can often include add-on services like network monitoring and maintenance to recurring block contracts. This gives your network a bit more oversight and allows your vendor to address issues and potential issues more proactively. The time spent addressing alerts generated from the monitoring service is deducted from your block, so you’ll need to allocate enough hours to address both proactive and reactive issues as needed.

You can expect to pay anywhere from 3-10% less for pre-purchased hourly blocks depending on the number and expiration date of the hours purchased.

Network monitoring services are typically billed monthly by the number of devices monitored. Monitoring alone can range from $20-50 per device, with additional fees or deduction of time from your block to address any identified issues. Server monitoring and maintenance is typically $75-$150 per server and typically includes some sort of regular maintenance.

Partner with a Managed Service Provider

Managed service providers (MSPs) take over monitoring and support of your entire network. They typically require some sort of term contract commitment that could range from one to five years.

Their fees are based on either the number of users in your organization or the number of devices and include any support affiliated with maintaining your existing network. Parts are billed separately unless the device is covered under warranty. Many devices sold by managed service providers are sold with a more comprehensive warranty, an added benefit of working with an MSP.

Projects to expand or modify your network infrastructure (i.e. the addition of a new office suite, or major equipment upgrade) is also quoted and billed separately.

Managed service providers range in size and scope. This article focuses on the MSP business models most commonly serving the small to mid-sized business market.

The cost to work with a managed service provider typically ranges from $99-$250 per user or $25-$100 per workstation and $75-400 per server. Some MSPs also charge additional monthly fees per firewall, switch, networked printer, etc., while others include those devices in overall network management.

Summary of IT Support Costs

Approach Cost Other Costs
Internal IT Person $3,094-$20,845/month depending on function

Management and work-space equipment costs.

Turnover costs of 20%-30% of the salary.

On-Demand IT Vendor $75-$200/hour

Cost of downtime when you can't reach your vendor, or your vendor is unable to resolve a problem.

Cost of additional time and mistakes due to lack of familiarity with network.

Hourly CIO-Level Consulting $395+/hour Additional cost of implementing recommendations.
Network Monitoring $20-$50/device Time and materials to address issues.
Server Monitoring & Maintenance $75-$150/server Time and materials to address issues.
Managed Service Provider

$99-$250/user

OR

$25-$100/workstation

$75-$400/server

Any parts not covered under warranty.

Topics: Technology Strategy, Business Strategy, Purchasing, Outsourced IT Support

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