OAS - EVALUATING THE ROI OF MSPs - MEDIUM SIZE COMPANIES (PART ONE)

Mid-sized firms frequently contend with tight budgets, depending on the industry, can be required to follow stringent regulations, and substantial costs related to downtime or security breaches. To validate investments in Managed Service Providers (MSPs), these organizations need to monitor both quantitative and qualitative Return on Investment (ROI) metrics.

Key Financial Metrics

• Cost savings
• Downtime reduction
• Resolution speed
• Internal IT efficiency

Qualitative Measures

• Employee satisfaction
• Agility
• Enabling innovation

Common evaluation criteria involve comparing the total costs of MSP services against in-house alternatives and assessing their business impact, such as revenue protection and staff time savings.

A managed services strategy typically transforms large capital expenditures (CapEx) into predictable operational expenses (OpEx), which helps minimize unexpected costs. 

In practice, companies track metrics such as:

• IT spending before and after MSP implementation
• Hours of downtime
• Mean time to resolution
• Helpdesk ticket volume

Additionally, they conduct surveys among users and staff to evaluate improvements in satisfaction and business responsiveness.

Quantitative ROI Metrics: 

• Cost Savings: Organizations often analyze total IT expenses (salaries, hardware, maintenance) against fixed fees from Managed Service Providers (MSPs). Clients typically reduce IT budgets by 25% or more, benefiting from stable monthly pricing that avoids unexpected costs. MSPs convert large capital expenditures into manageable subscription fees.
• Downtime Reduction: Proactive MSP support can cut unplanned downtime by 60% to 85%. Studies show an 85% reduction in outages with MSPs versus traditional models. Financial firms, which lose approximately $5,600 per minute during downtime, can achieve significant savings by calculating ROI based on saved downtime hours multiplied by the cost of lost productivity.
• Response and Resolution Time: MSP contracts include SLA targets to evaluate average response and resolution times. Faster ticket resolution minimizes downtime and boosts productivity. 24/7 MSP support is often more cost-effective than hiring technicians. Companies track metrics like Mean Time to Repair (MTTR) and first-call resolution to measure improvements.
• Internal IT Efficiency: ROI is evident in the productivity of internal IT staff. Outsourcing routine tasks allows IT personnel to focus on strategic initiatives. Research shows maintenance tasks can occupy up to 80% of IT time, with 70% of IT leaders stating these tasks hinder innovation. After partnering with an MSP, in-house teams can dedicate more time to projects, with 57% of businesses reporting increased focus on core functions. Productivity gains are quantified by tracking reductions in helpdesk tickets and support hours.
• Internal IT Efficiency: ROI is evident in the productivity of internal IT staff. Outsourcing routine tasks allows IT personnel to focus on strategic initiatives. Research shows maintenance tasks can occupy up to 80% of IT time, with 70% of IT leaders stating these tasks hinder innovation. After partnering with an MSP, in-house teams can dedicate more time to projects, with 57% of businesses reporting increased focus on core functions. Productivity gains are quantified by tracking reductions in helpdesk tickets and support hours.
• Note: Automation savings are often converted to ROI by estimating hours saved × staff hourly rate. For example, if patching automation saves 520 labor-hours per year at $50/hr., that’s $26K saved.

Qualitative ROI Metrics

• Employee Satisfaction: Reliable IT support boosts morale and can be measured through surveys and turnover rates. Research shows that 89% of employees feel improved technology enhances satisfaction and retention. In finance, quicker IT support reduces frustration, contributing to intangible ROI.
• Business Agility: Managed Service Providers (MSPs) improve firms' responsiveness to changing needs, such as scaling capacity. By outsourcing IT tasks, companies gain internal bandwidth, enhancing agility. Time saved in launching new services under MSP support is a key qualitative measure.
• Innovation Enablement: With MSPs handling maintenance, internal IT can focus on innovation. Surveys indicate that 57% to 70% of companies believe managed services enable exploration of new initiatives. Firms report qualitative benefits, like quicker market entry and faster implementation of analytics, as part of their ROI assessment.

Part two - Key Evaluation Criteria and KPIs