Managed Services vs. In-House IT: Costs and Benefits

Sooner or later, every growing company has to decide who looks after its IT. Building an in-house IT department is a big step. Managed services, meaning the ongoing operation of IT services by an external provider under agreed terms, are the common alternative. This article shows which cost factors to compare and which model fits which situation.

What managed services actually mean

With managed services, a provider takes over clearly defined IT tasks on an ongoing basis for a regular fee. That differs from the traditional break-fix model, where you call an IT company only when something breaks and pay by the hour.

Typical services include:

• Operating and monitoring servers, networks and workstations
• Updates and patch management, meaning the regular installation of security updates
• Backup and recovery
• Email and groupware
• Secure remote access for employees working from home
• User administration and support

The basis is a contract with a service level agreement (SLA). It defines, for example, how quickly the provider responds, when it is available and what uptime it commits to.

The cost of an in-house IT department

When people think about internal IT, they usually think about salary first. That is only part of the picture. Total costs include:

• Personnel costs: salary, employer social security contributions, holidays and sick days
• Recruiting: IT specialists are in demand, and filling a position takes time and often money for job ads or recruiters
• Training: IT security, cloud services and licensing models change constantly, so courses and certifications are an ongoing expense
• Tools: software for monitoring, remote maintenance, backup and ticketing
• Cover: who steps in during holidays, illness or after a resignation?

The last point is especially critical in small companies. A single IT person cannot be available around the clock or cover every specialist area. When they leave, knowledge that was never documented often leaves with them.

The cost of managed services

Managed services are usually billed monthly. Common models are:

• Per user: a fixed amount per employee
• Per device or service: for example per server, workstation or mailbox
• Flat rate: a fixed package for a defined environment

There is no meaningful one-size-fits-all price, because costs depend heavily on scope. Key price factors are the number of users and devices, required response times, service hours, the share of on-site versus remote work, and whether licences and hardware are included.

When comparing offers, pay attention to what is not included. Projects such as migrations, new hardware or work outside agreed hours are often billed separately.

Comparison at a glance

Benefits and limits of managed services

The biggest benefit is predictability. You know what IT costs each month and do not have to worry about cover or training. Providers also work with standardised processes for updates, backups and monitoring that a small company rarely builds on its own.

There are limits, too:

• Dependency: You commit to one provider. Clarify in advance how switching or terminating works and who owns credentials and documentation.
• Less proximity: An external provider does not automatically know your internal processes. It needs fixed contacts inside your company.
• Responsibility stays in-house: Even when you outsource IT, management remains responsible for information security. In the context of NIS2, Germany's Federal Office for Information Security (BSI) explicitly points out that contracts with service providers alone are not enough.

The hybrid model: often the practical answer

In many companies, a combination works best. An internal person knows the processes, acts as first point of contact for colleagues and steers the provider. The managed service provider handles routine tasks such as updates, backups and monitoring, plus specialist topics like network security.

That way, knowledge about the business stays in-house, and the internal specialist is freed from repetitive tasks.

Which model fits when

There is no company size at which an in-house IT department automatically becomes the better choice. A few indicators help, though.

Managed services often fit when

• your company is too small to keep a full-time position busy,
• most of your tasks are standard work such as workstations, email, backup and remote access,
• you need reliable cover and defined response times,
• specialist knowledge, for example in network security, is only needed occasionally.

An in-house IT department tends to pay off when

• IT is a core part of your business model,
• you run many custom systems or your own software,
• fast on-site help is frequently needed, for example in production,
• there is enough work for several people, so cover can be arranged internally.

Checklist for your decision

1. Take stock: List all IT tasks that arise today and who handles them.
2. Assess criticality: Which systems may be down for how long? This determines the response times you need.
3. Calculate full costs: Compare personnel and overhead costs with concrete offers, not just salary against a monthly fee.
4. Clarify scope: Get it in writing what is included and what costs extra.
5. Check the SLA: Look at response times, service hours and escalation paths.
6. Plan the exit: Agree on documentation, handover of credentials and notice periods.
7. Name a contact: Appoint one internal person to manage the provider.

Managed services at Simplify Data

Simplify Data supports companies in Kiel, Schleswig-Holstein and Hamburg, and remotely across Germany. Our managed services include a zero trust network based on WireGuard for secure remote access and managed email and groupware. If you want to find out which tasks make sense to outsource, get in touch. View managed services

Sources

• BSI: NIS-2 FAQ, responsibility with outsourced IT (German)