Many small businesses view IT and IT services as a break-fix scenario, meaning they call for help only when the computer issue has made it impossible to continue with their business function. The usual approach is to then pay an “IT Guy” or IT Company for the time they invest to fix these issues. This is a traditional hourly billing or “T&M” (Time & Materials) approach that many organizations still use today.
The new and more cost effective approach is a managed services contract where support for all the computers in the organization is covered under a fixed monthly contract. Some IT companies (like AIO) include additional features such as antivirus protection, system monitoring, software and hardware updates, computer maintenance, and remote backups in the monthly fee. This is unlike the traditional T&M arrangements where nothing is included and everything is billable.
So why do companies opt for the T&M approach? It’s simple; just adding up the annual costs of the T&M support doesn’t paint the full picture. You have to add up all the costs associated with poor performance and down time (including the underlying costs such as lack of employee productivity). A computer network runs more efficiently and has far less down time when all the pieces are managed and maintained proactively; as they would be covered under a managed services contract.
Below is a real example of a recent T&M customer encounter. We have highlighted the issues found and the time it took to resolve them:
| Issue | Hours |
|---|---|
| Hard drive defragmentation | 4 |
| Disk cleanup | 1 |
| Antivirus Update & Scan | 2 |
| Windows Update | 4 |
| Laptop software updates | 3.5 |
| Adobe software updates | 1.25 |
| QuickBooks Update | 2 |
| Perfomance tuning | 2 |
| Total Hours: 19.75 | |
A T&M engagement like this would have cost the customer an estimated $1,900 for almost a half a week’s worth of labor hours in addition to the cost associated with the 2+ days of down time. The down time could have been even more depending on the availability of the tech. This would, in turn, increase the total cost based on based on the average revenue loss that computer represents.
The same laptop covered under a managed services agreement would only cost the customer between $100/month and $150/month (depending on the Service Level Agreement); much less than this one T&M engagement represents. Add to this a Service Level Agreement (SLA) – a guaranteed response/resolution time – something managed service companies provide for in their contracts – and you also get a quicker resolution resulting in far less downtime.
The real cost to the business is the downtime and poor performance which are variables few organizations actually take into account. Managed services clients prosper from the fact that their systems work efficiently and downtime is minimized.
A managed services contract is similar to taking your T&M support costs and spreading them over time while at the same time reducing the amount of possible downtime by increasing the amount of proactive maintenance on the computers and adding additional features such as monitoring, maintenance, and remote backups. It becomes a win for the end user as well as for the customer’s bottom line.