Comparing Apples To Apples: The Predominant IT Service Models Explained

October 1st, 2013 by admin

Business People

Before you can accurately compare the fees, services, and deliverables of one IT services company to another, you need to understand the 3 predominant service models most of these companies fit within. Some companies offer a blend of all 3, while others are strict about offering only one service plan. The 3 predominant service models are:

Time and Materials. In the industry, we call this "break-fix" services. Essentially you pay an agreed-upon hourly rate for a technician to "fix" your problem when something "breaks." Under this model, you might be able to negotiate a discount based on buying a block of hours. The scope of work may be simply to resolve a specific problem (like removing a virus), or it may encompass a large project like a computer network upgrade or move that has a specific result and end date clarified. Some companies will offer staff augmentation and placement under this model as well.

Managed IT Services. This is a model where the IT services company takes the role of your "IT department" and not only installs and supports all the devices and PCs that connect to your server(s), but also offers phone and on-site support, antivirus, security, backup and a host of other services to monitor and maintain the health, speed, performance and security of your computer network.

Software Vendor-Supplied IT Services. Many software companies will offer IT support to their customers in the form of a help desk or remote support for an additional fee. However, these are typically scaled-back services, limited to troubleshooting their specific application and NOT your entire computer network and all the applications and devices connected to it. If your problem resides outside of their specific software or the server it's hosted on, they can't help you and will often refer you to "your IT department." While it's often a good idea to buy some basic-level support package with a critical software application you use to run your business, this is not enough to provide the full IT services and support most businesses need to stay up and running. When looking to outsource your IT support, the two service models you are most likely to end up having to choose between are the "managed IT services" and "break-fix" models. Therefore, let's dive into the pros and cons of these two options, and then the typical fee structure for both.

Managed IT Services Vs. Break-Fix:Which Is The Better, More Cost-Effective Option?

You've probably heard the famous Benjamin Franklin quote, "An ounce of prevention is worth a pound of cure." I couldn't agree more — and that's why it's my sincere belief that the managed IT approach is, by far, the most cost-effective, smartest option for any small business. The only time I would recommend a "time and materials" approach is when you already have a competent IT person or team proactively managing your computer network and simply have a specific IT project to complete that your current in-house IT team doesn't have the time or expertise to implement (such as a network upgrade, installing a backup solution, etc.). Outside of that specific scenario, I do not think the break-fix approach is a good idea for general IT support for one very important, fundamental reason: you'll ultimately end up paying for a pound of "cure" for problems that could have easily been avoided with an "ounce" of prevention.

Why Regular Monitoring And Maintenance Is Critical For Today's Computer Networks

The fact of the matter is computer networks absolutely, positively need ongoing maintenance and monitoring to stay secure. The ever-increasing dependency we have on IT systems and the data they hold — not to mention the type of data we're now saving digitally — has given rise to very smart and sophisticated cybercrime organizations and who work around the clock to do one thing: compromise your networks for illegal activities.

In most cases, their intent is to access financial information and passwords to rob you (or your clients), create fake identities for credit card fraud, etc. In other cases, they may want to use your computer network to send illegal spam, host pirated software, spread viruses, etc. And some do it just for the "fun" of being able to make computer systems inoperable. These criminals work around the clock in teams, constantly finding and inventing new ways to get around your antivirus software and firewalls; that's why you have to remain ever vigilant against their attacks.

Of course, this doesn't even take into consideration other common "disasters" such as rogue employees, lost devices, hardware failures (which are the #1 reason for data loss), fire and natural disasters and a host of other issues that can interrupt or outright destroy your IT infrastructure and the data it holds. Then there's regulatory compliance for any business hosting or touching credit card or financial information, medical records and even client contact information such as e-mail addresses.

Preventing these problems and keeping your systems up and running (which is what managed IT services is all about) is a LOT less expensive and damaging to your organization than waiting until one of these things happens and then paying for emergency IT services to restore your systems to working order (break-fix).

Should You Just Hire A Full-Time IT Manager?

In most cases, it is not cost-effective for companies with under 50 employees to hire a full-time IT person, because you can outsource this function of your business far cheaper and with a lot less work; but you DO want to hire a professional to perform basic maintenance just as you would hire an attorney to handle your legal matters or an accountant to prepare your taxes. And if you truly understand the cost of your TIME and factor in employee productivity, the managed IT services model is considerably less expensive over time than the "break-fix" model.

Why "Break-Fix" Works Entirely In The Consultant's Favor, Not Yours

Under a "break-fix" model, there is a fundamental conflict of interests between you and your IT firm. The IT services company has no incentive to stabilize your computer network or to resolve problems quickly because they are getting paid by the hour; therefore, the risk of unforeseen circumstances, scope creep, learning curve inefficiencies and outright incompetence are all shifted to YOU, the customer. Essentially, the more problems you have, the more they profit, which is precisely what you DON'T want.

Under this model, the IT consultant can take the liberty of assigning a junior (lower paid) technician to work on your problem who may take two to three times as long to resolve an issue that a more senior (and more expensive) technician may have resolved in a fraction of the time. There is no incentive to properly manage the time of that technician or their efficiency, and there is every reason for them to prolong the project and to find MORE problems than solutions. Of course, if they're ethical and want to keep you as a client, they should be doing everything possible to resolve your problems quickly and efficiently; however, that's akin to putting a German shepherd in charge of watching over the ham sandwiches. Not a good idea.

Second, it creates a management problem for you, the customer, who now has to keep track of the hours they've worked to make sure you aren't getting overbilled; and since you often have no way of really knowing if they've worked the hours they say they have, it creates a situation where you really, truly need to be able to trust they are being 100% ethical and honest AND tracking THEIR hours properly (not all do). And finally, it makes budgeting for IT projects and expenses a nightmare since they may be zero one month and thousands the next.

What To Look For In A Managed IT Services Agreement And What You Should Expect To Pay

Important! Please note that the following price quotes are industry averages based on a recent IT industry survey conducted of over 750 different IT services firms. We are providing this information to give you a general idea of what most IT services firms charge and to help you understand the VAST DIFFERENCES in service contracts that you must be aware of before signing on the dotted line. Please understand that this does NOT reflect our pricing model or approach, which is simply to understand exactly what you want to accomplish FIRST and then customize a solution based on your specific needs, budget and situation.

Hourly Break-Fix Fees: Most IT services companies selling break-fix services charge between $100 and $165 per hour with a one-hour minimum. In most cases, they will give you a discount of 5% to as much as 20% on their hourly rates if you purchase and pay for a block of hours in advance.

If they are quoting a project, the fees range widely based on the scope of work outlined. If you are hiring an IT consulting firm for a project, I would suggest you demand the following:

  • A very detailed scope of work that specifies what "success" is. Make sure you detail what your expectations are in performance, workflow, costs, security, access, etc. The more detailed you can be, the better. Detailing your expectations up front will go a long way in avoiding miscommunications and additional fees, later on, to give you what you REALLY wanted.
  • A fixed budget and time frame for completion. Agreeing to this up front aligns both your agenda and the consultant's. Be very wary of loose estimates that allow the consulting firm to bill you for "unforeseen" circumstances. The bottom line is this: it is your IT consulting firm's responsibility to be able to accurately assess your situation and quote a project based on their experience. You should not have to pick up the tab for a consultant underestimating a job of for their inefficiencies. A true professional knows how to take into consideration those contingencies and bill accordingly.

Managed IT Services: Most managed IT services firms will quote you a MONTHLY fee based on the number of devices they need to maintain, back up and support…

  • Security patches applied weekly, if not daily, for urgent and emerging threats
  • Antivirus updates and monitoring
  • Firewall updates and monitoring
  • Backup monitoring and test restores
  • Spam-filter installation and updates
  • Spyware detection and removal
  • Monitoring disk space on workstations and servers
  • Monitoring hardware for signs of failure
  • Optimizing systems for maximum speed
  • On-site support

The following services may NOT be included and will often be billed separately. This is not necessarily a "scam" or unethical UNLESS the managed IT services company tries to hide these facts when selling you a service agreement. Make sure you review your contract carefully to know what is and is NOT included!

  • Hardware, such as new servers, PCs, laptops, etc.
  • Software licenses

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