Small and mid-sized businesses (SMBs) frequently wrestle with a fundamental question: is it cheaper to hire in-house IT staff or outsource to a Managed Service Provider (MSP)? The answer depends on more than just salary comparisons. This guide walks through a realistic, numbers-based analysis.
The Hidden Cost of In-House IT
Most business owners focus on the obvious cost: the IT person's salary. But the true cost of an in-house IT employee is significantly higher.
Fully Loaded Employee Cost
| Cost Component | Annual Estimate (UK) |
|---|---|
| Base salary (IT support engineer) | £30,000 – £45,000 |
| Employer NI contributions | £4,000 – £6,000 |
| Pension contributions (3% min) | £900 – £1,350 |
| Holiday cover (28 days) | Embedded in salary |
| Sick leave (avg 6.5 days/yr) | £500 – £1,200 |
| Recruitment cost (one-off) | £3,000 – £8,000 |
| Training and certifications | £1,500 – £3,000/yr |
| Software and tools | £500 – £1,000/yr |
| Total Annual Cost | £40,000 – £65,000 |
And this assumes you only need one person. Most SMBs need at least 1.5 FTEs to cover leave, out-of-hours, and specialist knowledge gaps.
Coverage Gaps
A single IT person cannot:
- Provide 24/7 monitoring and response
- Cover their own holiday and sick leave without the business being exposed
- Hold deep expertise across networking, security, cloud, and end-user support simultaneously
Reactive vs Proactive
In-house teams at SMBs typically become reactive—fixing things after they break—because they lack the tooling and capacity to run proactive monitoring and patch management programmes.
What Managed IT Services Actually Cost
MSP pricing in the UK typically ranges from £50 to £120 per user per month depending on the service level. For a 25-user business:
| MSP Tier | Monthly Cost | Annual Cost |
|---|---|---|
| Basic (monitoring + helpdesk) | £1,250 | £15,000 |
| Standard (includes security stack) | £2,000 | £24,000 |
| Premium (full management + vCISO) | £3,000 | £36,000 |
ROI Calculation: 25-User Business
In-House Scenario
- 1 IT support engineer: £42,000/yr (total loaded cost)
- Specialist contractor for projects: £5,000/yr
- Security software licences: £3,000/yr
- Total: £50,000/yr
MSP Scenario (Standard tier)
- MSP retainer: £24,000/yr
- Included: helpdesk, monitoring, patch management, endpoint security, Microsoft 365 management
- Total: £24,000/yr
Annual Saving: £26,000
But savings go beyond the direct cost comparison.
Quantifying Indirect Benefits
Reduced Downtime
The average cost of IT downtime for an SMB is £3,000–£8,000 per hour (including lost productivity, missed sales, and staff idle time). Proactive MSP monitoring typically reduces unplanned downtime by 60–80%.
If your business experiences just 4 hours of unplanned downtime per year (very conservative), avoided downtime value = £12,000–£32,000.
Faster Issue Resolution
Helpdesk SLAs with an MSP (e.g., 1-hour response, 4-hour resolution) are contractually guaranteed. An in-house person dealing with a difficult issue may take days, especially if it falls outside their expertise.
Security Incident Avoidance
The average cost of a data breach for an SMB in the UK is £3.4 million (IBM, 2023), though most SMB incidents cost £50,000–£200,000 when accounting for remediation, regulatory fines, and reputational damage. MSPs typically include security stack management that materially reduces this risk.
When In-House IT Makes Sense
- Your organisation has 100+ users and complex, bespoke systems
- You have strict data sovereignty requirements that prevent third-party access
- You have budget for a full IT team (not just one person)
- Your business operates highly specialised technology requiring dedicated expertise
Making the Decision
Run your own calculation:
- Calculate fully loaded in-house cost (salary + NI + pension + recruitment + training + tools)
- Get MSP proposals for your user count and requirements
- Estimate annual downtime cost and apply an 70% reduction for MSP proactive monitoring
- Factor in security incident probability and average remediation cost
For most SMBs, the math strongly favours a managed services model—not just on cost, but on coverage, expertise depth, and risk reduction.