How to Calculate the ROI of Managed Services

How to Calculate the ROI of Managed Services

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Lets talk about something that sounds complicated but is actually pretty straightforward: figuring out the ROI (Return on Investment) of managed services.

How to Calculate the ROI of Managed Services - managed it security services provider

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In plain English, were asking: are we getting our moneys worth from outsourcing our IT or other business functions? Are those monthly bills actually translating into tangible benefits for our company?


Its not just about saving money (though thats definitely a piece of the puzzle).

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Its about looking at the whole picture and seeing how managed services are impacting things like productivity, efficiency, and even your overall business growth.


So, how do you actually calculate this ROI?

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Well, the basic formula is this: (Gain from Investment - Cost of Investment) / Cost of Investment. Easy enough, right?

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The tricky part is figuring out those "Gain" and "Cost" numbers.


Lets start with the "Cost of Investment". This is probably the easiest to nail down. Its simply what youre paying your managed service provider. This includes your monthly fees, any upfront setup costs, and any charges for extra services you might use (think emergency support or specialized projects).

How to Calculate the ROI of Managed Services - managed services new york city

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Make sure youre accounting for everything, not just the base price.


Now for the "Gain from Investment." This is where things get a bit more nuanced. Its not just about cold, hard cash. Its about identifying the value that managed services bring to your organization.

How to Calculate the ROI of Managed Services - managed service new york

    Here are a few key areas to consider:


    Reduced Downtime: How much does it cost your company when your systems are down? Think about lost productivity, missed deadlines, and potentially even lost revenue.

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    Managed services are often proactive, preventing problems before they happen (or resolving them quickly when they do). Estimate the cost of downtime before and after implementing managed services, and the difference is a gain.


    Increased Productivity: Are your employees spending less time dealing with IT issues and more time focusing on their core tasks?

    How to Calculate the ROI of Managed Services - managed service new york

      This is a huge benefit. Try to quantify it. Maybe you can track how much time employees are spending on IT-related tasks before and after. Or maybe you can estimate how much more work theyre able to accomplish now that theyre not constantly interrupted by tech problems.


      Improved Security: A data breach can be devastating.

      How to Calculate the ROI of Managed Services - managed service new york

        Managed security services can help protect your business from cyber threats, reducing the risk of a costly and damaging incident.

        How to Calculate the ROI of Managed Services - managed services new york city

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        Its difficult to put an exact dollar amount on avoided disasters (thankfully!), but consider the potential cost of a breach (fines, legal fees, reputational damage) and factor in the reduced risk.


        Scalability and Flexibility: Managed services allow you to scale your IT resources up or down as needed, without having to hire and train new staff. This agility can be a significant advantage, especially for growing businesses. Consider the cost of hiring additional IT staff versus the flexibility of managed services.


        Reduced Internal IT Costs: Are you able to reduce your own internal IT staff or reassign them to more strategic projects? This is a direct cost savings. Even if you dont eliminate positions, freeing up your existing IT team to focus on more strategic initiatives can be a significant gain.


        Once youve identified and quantified these gains (as best you can), add them all up.

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        This is your total "Gain from Investment."


        Now, plug those numbers into the formula: (Gain from Investment - Cost of Investment) / Cost of Investment. Multiply the result by 100 to express it as a percentage. That percentage is your ROI.


        For example, lets say your "Gain from Investment" is $50,000 and your "Cost of Investment" is $20,000.

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        Your ROI would be (($50,000 - $20,000) / $20,000) 100 = 150%. Thats a pretty good return!


        Remember, calculating ROI isnt an exact science. It involves making some educated guesses and estimations.

        How to Calculate the ROI of Managed Services - managed services new york city

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        But by carefully considering all the costs and benefits, you can get a good sense of whether managed services are a worthwhile investment for your business. Dont be afraid to revisit your calculations periodically as your business evolves and your needs change. Good luck!

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