How to Budget for IT Support

This post is the last in a series about budgeting for IT costs. Previous topics include budgeting for equipment and budgeting for people and growth

Budgeting for IT supportThe final piece of building your annual IT budget is to determine how much you should budget for IT support.  CIO Magazine lays out some good rules of thumb in this article.  On average, they found that SMBs spent 6.9% of revenue on IT.  Keep in mind that this is total IT cost – not just support.   


Questions to Ask Yourself

Putting together the right support model depends on what you need out of your IT company.  Here are some key questions to ask yourself: 

  1. Would I rather have a fixed cost or a variable cost? 
  2. How much does it cost for me to have an existing employee do IT support?  In other words, is it a good use of time for the office manager to set up PCs? 
  3. Do I want to handle keeping up with our licensing for the software we use?  What about the renewals of those licenses? 
  4. How much do I want them to be responsible for?  All service desk calls? Just escalations when we are stumped? What about supporting our line of business applications? 
  5. How often do I have large scale projects that need to be completed internally?  Examples may include application upgrades, new PC roll outs, annual security audits, etc. 


Billing Models

After you know the answers to these questions picking a support model becomes less daunting.  The following billing models are pretty standard in most IT companies and work well for small and midsize businesses, depending on the level of support you need.

Flat Fee/All You Can Eat

This is the model you want if you don’t want to do anything.  Essentially, you're asking your IT company to handle everything related to IT.  Typically this is done for a flat, predictable fee based on the number of assets in your environment or number of employees. 

These service typically includes: 

  • Helpdesk services
  • Software licensing and renewals
  • Internet service provider negotiations and renewals
  • Line of Business Application Support (for example, if QuickBooks doesn’t work the way it should, the solution provider is responsible for working it out with the vendor, not you)
  • Proactive maintenance services (to keep things from going down whenever possible)
  • Security patching and security software
  • Firewall management
  • Monitoring your desktops, laptops, servers and other critical IT systems
  • Managing and administering your cloud services

Generally, the only item All You Can Eat plans don't include is large IT projects like an email migration or a custom SharePoint site. This will vary by company. 

Monitoring Only

This is a good compromise if you don’t want to have a full All You Can Eat mModel but don’t want to just sit around and wait for things to break.  In a Monitoring Only style agreement, your IT company will monitor your environment and work to keep things running proactively.  For example, they may monitor your backups and if a backup fails, they will remote into your environment and fix it. 

If you enter this type of agreement, be sure it's very clearly defined what type of work is covered under the agreement and what work is out of scope. If you're not on the same page with your IT company about what's being monitored, you could have an outage you don't know about. 

Blocks of Time

This is the model you want if you want to take on some responsibility for support but would like to have your IT company on retainer to help get you out of a jam.  Most IT companies will sell you a block of hours to be used in a certain period (like 10 hours a month).  In return for you committing to a certain number of hours, the solution provider will typically offer a reduced hourly rate.   

Pay as You Go  

This is the model you want if you want to take full responsibility.  But beware of this model – very few (good) solution providers have a room of help desk engineers just waiting on the phone to ring.

While this model may seem cheaper up front, typically you're only going to call when you are in a real jam (like a failed hard drive with no backup or ransomware), so be prepared for a rather large bill.  You should always ask for an estimate before work begins and ask the company to get approval before going over the initial estimate.  

Pay as You Go models also typically mean slower service. Good IT companies have service level agreements (SLAs) defining how quickly they will start working on your issue for their customers on higher level plans. These don't always apply to Pay as You Go customers, though. If you call in with an issue, you may be in the queue behind several other customers, which could be difficult if it's an urgent issue. 


Questions to Ask Your Provider

These are the most common types of support agreements we see today. There will, of course, be small nuances between how each company packages their services. As you're working through the model that best suits your business, here are a few questions you should consider asking your solution provider: 

  1. What are your service level agreements?  This is the amount of time it will take them to address your issue.  An SLA of 4 hours or less for critical issues is most common.   
  2. What happens if you don’t meet your SLA? Most good IT companies will offer some sort of financial concession if they miss their SLA. 
  3. Do you have a less expensive option if I am willing to take a lower SLA?  Some companies will offer a discount on their service if you are willing to extend their SLA. 
  4. If I cancel my agreement early, what are my penalties?  Many companies require a 12-36 month contract and if you terminate early you will have to pay an early termination fee. At PTG, we're not big believers in this. We don't ask you to sign a long-term contract and you can fire us at any time. Unfortunately, that isn't the norm in the IT industry. 
  5. How do you determine priority for customer issues? Most IT companies prioritize customers based on their agreement type.  For example, a customer with an All You Can Eat agreement is going to be serviced ahead of a customer who is paying for a block of time.  It’s important for you to understand that prior to choosing a particular type of agreement. 
  6. Can I change agreement types?  Often, we will see a customer choose the wrong model.  You should have the option to move up or down the agreement stack based on your needs. This includes changing the numbers of hours in your block or time agreement. 

If you aren’t sure where to start – here is what we tell most new customers.  A well-managed IT environment typically takes between .5 and 1.5 hours per user to manage and maintain. 

Using that as a rule of thumb, you can come to a pretty quick conclusion on which model makes the most financial sense.  A 40-person firm who relies heavily on IT will generally come out ahead in an All You Can Eat model.  A 5-person start-up, however, would generally be best served with a block of time.   

Bottom line – there is no perfect science, but by asking the right questions and assessing your needs, you should be able to land on a model that works for you and your team.  Of course, we are here to help if you would like a second opinion! 

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