One of the most significant technology decisions growing businesses face is how to handle IT: build an internal team or partner with a managed service provider (MSP). Both approaches have merit, and the right choice depends on your specific situation. Understanding the real cost factors involved can help clarify this decision.

The Basic Models

In-House IT

Building an internal IT team means hiring employees who work exclusively for your organization. They know your business intimately, are available on-site, and report directly to your leadership. This model provides maximum control and dedicated resources.

Managed IT Services

Working with an MSP means partnering with an external company that provides IT support, monitoring, and management. The MSP serves multiple clients, sharing expertise and resources across their customer base. This model provides access to broader capabilities without building them internally.

Understanding the Cost Components

When comparing these models, it's important to look beyond the obvious expenses. Total cost involves several categories:

Personnel Costs

For in-house IT, personnel is typically the largest expense. This includes:

  • Salaries: IT professionals command competitive compensation, varying by role, experience, and location
  • Benefits: Health insurance, retirement contributions, and other benefits often add significantly to base salary costs
  • Taxes and insurance: Employer payroll taxes, workers' compensation, and other required costs
  • Recruiting: Finding qualified IT talent takes time and often involves agency fees or significant HR investment

For managed services, personnel costs are embedded in the service fee. The MSP handles hiring, training, and retaining technical staff.

Infrastructure and Tools

In-house teams need infrastructure to do their work effectively:

  • Monitoring and management platforms: Professional tools for managing networks, endpoints, and security
  • Security solutions: Firewalls, endpoint protection, backup systems, and other security infrastructure
  • Documentation and ticketing systems: Tools for tracking issues and maintaining knowledge bases

MSPs typically include these tools in their service offerings, having already invested in enterprise-grade platforms that they deploy across their client base.

Training and Certification

Technology evolves constantly. Keeping skills current requires ongoing investment:

  • Certification programs: Many IT roles require or benefit from vendor certifications
  • Continuing education: Training on new technologies, security threats, and best practices
  • Conference attendance: Industry events that provide learning and networking

For in-house teams, these costs are borne directly by the business. MSPs spread training costs across their entire staff and client base.

Coverage and Availability

What happens when your IT person is sick, on vacation, or leaves the company?

A single in-house IT employee creates coverage challenges. Expanding to multiple employees addresses this but significantly increases costs. MSPs inherently provide coverage through their team structure.

Similarly, after-hours support requires either on-call arrangements with in-house staff or partnership with a provider who offers extended coverage.

Hidden and Indirect Costs

Beyond direct expenses, both models carry less obvious costs:

For In-House IT

Downtime during gaps: When positions are vacant—whether from turnover, medical leave, or difficulty hiring—productivity and security can suffer.

Knowledge concentration: When critical knowledge lives in one person's head, their departure creates significant risk.

Breadth limitations: Small IT teams can't have deep expertise in every area. Specialists are expensive, and generalists have limits.

For Managed Services

Transition and onboarding: Moving to a new MSP involves time and potential disruption.

Communication overhead: Working with an external team requires clear communication and sometimes patience.

Contractual constraints: Service agreements may include minimum terms or scope limitations.

The Security Dimension

For many businesses, security has become a primary driver of the IT decision. Consider:

Threat landscape complexity: Modern cybersecurity requires specialized knowledge that evolves constantly. Keeping pace is challenging for small teams.

24/7 monitoring requirements: Effective security monitoring needs round-the-clock attention—difficult for small in-house teams to provide.

Incident response capabilities: When something goes wrong, having experienced responders matters. MSPs typically handle incidents across many clients, building experience that small internal teams may lack.

We explored security considerations in our article on why cybercriminals target small businesses.

When Each Model May Make Sense

Rather than declaring one approach universally superior, consider when each might fit:

In-House IT May Fit When:

  • You have highly specialized or proprietary systems requiring deep internal knowledge
  • Regulatory or contractual requirements mandate direct control over IT personnel
  • Your scale justifies a full team with diverse specializations
  • Physical presence is essential for your operations
  • You have strong HR capabilities to recruit, retain, and develop technical talent

Managed Services May Fit When:

  • You need broad capabilities but can't justify multiple specialized hires
  • Predictable, budgetable IT costs are important for planning
  • You want access to enterprise-grade tools without the capital investment
  • Coverage and availability are concerns with a small internal team
  • Security expertise is a priority but hiring specialists isn't feasible

The Hybrid Approach

Many organizations find that a combination works best:

  • An internal IT manager or coordinator who understands the business
  • An MSP partner providing technical depth, coverage, and specialized capabilities
  • Clear division of responsibilities between internal and external resources

This model can provide the best of both worlds: internal business knowledge with external technical breadth.

Evaluating Total Cost of Ownership

When comparing options, consider the full picture:

  • All personnel costs, including benefits and employer taxes
  • Tools, infrastructure, and licensing
  • Training and ongoing education
  • Coverage for absences and turnover
  • Risk of knowledge loss and transition costs
  • The value of capabilities you'd gain or lose

We discussed how to think about technology costs in our piece on the real cost of downtime.

Questions to Consider

Rather than prescribing a solution, here are questions that can help clarify your decision:

  • What IT capabilities do you actually need today, and what will you likely need in two years?
  • How would you handle coverage if your primary IT person were unavailable for an extended period?
  • What security expertise do you require, and can you realistically hire and retain it?
  • How important is predictable monthly IT spending versus variable costs?
  • What's your appetite for managing IT employees versus managing a vendor relationship?

The right answer varies by organization. What matters is making the decision based on your actual needs and realistic assessment of each model's total cost and capabilities.

This article is intended for informational purposes only and does not constitute professional business or financial advice. Organizations should evaluate their specific situations and consult with appropriate professionals when making significant business decisions.