Managed IT services are a form of outsourcing your IT requirements to a professional provider who can handle your digital infrastructure, security, support, and strategy. Managed IT services can deliver many benefits to your business, such as cost savings, improved efficiency, increased productivity, and reduced risk. But how do you know if you are getting the most out of your investment in managed IT services? How to measure the return on investment and value of managed IT services?
In this article, we will define how to measure the ROI and value of managed IT services using some simple steps and formulas. We will also provide some tips on how to present this information to your stakeholders and decision-makers.
What is ROI and why is it important?
ROI stands for return on investment. It is a ratio that resembles the net profit or benefit of an investment to the cost of the investment. It is usually expressed as a percentage or a ratio. For example, if you invest $100 and get back $120, your ROI is 20% or 1.2.
ROI is essential because it enables you to assess the performance and efficiency of your investment. It also helps you compare different investment options and choose the best one for your business. By measuring the ROI of managed IT services, you can determine whether they are worth the money and time you spend on them, and whether they are meeting your goals and expectations.
How to calculate the ROI of managed IT services?
To calculate the ROI of managed IT services, you need to estimate the net profit from investment and the cost of investment. This can be challenging, as there are many factors that can affect these variables, such as the quality of service, the level of performance, the type of contract, the scope of services, and the intangible benefits. Managed IT Services have a lot of benefits which you can learn here. Here are some steps you can follow to calculate the ROI of managed IT services:
Define your goals and expectations:
Before you hire a managed IT service provider, you need to have a clear idea of what you want to achieve with them and what your expectations are. For example, you may want to reduce IT costs, improve IT performance, enhance IT security, or support business growth. You also need to establish the metrics and indicators that you will use to measure the success of the managed IT services, such as uptime, response time, customer satisfaction, or revenue growth.
Establish a baseline:
You need to have a baseline to compare the results of the managed IT services with the previous situation. You can use historical data, such as IT expenses, IT incidents, IT staff, or IT performance, to establish the baseline. You also need to account for any external factors that may affect the baseline, such as market conditions, business changes, or technology trends.
Measure the impact of managed IT services
How much are you paying for managed IT services? What are the benefits and outcomes you are getting from them? How much revenue, profit, or value are you generating from your IT after outsourcing it? You need to track and analyze the cost and benefit of managed IT services over time.
- Calculate the ROI of managed IT services using the following formula:
Where:
- Net Profit from Investment = (Total Benefits – Total Costs)
- Cost of Investment = Total Costs
For example, if you spend $10,000 per month on managed IT services, and they help you save $15,000 per month on IT costs, and generate $5,000 per month in additional revenue, your ROI would be:
Consider the intangible benefits:
Apart from the tangible benefits, such as cost savings or revenue growth, you also need to consider the intangible benefits that the managed IT services provide, such as peace of mind, reduced stress, increased innovation, or improved reputation. These benefits may not be easy to quantify, but they can have a significant value for your business and your customers.
Calculate the ROI:
Once you have estimated the net profit from investment and the cost of investment, you can plug them into the ROI formula and calculate the percentage. You can also compare the ROI of the managed IT services with the ROI of other investments or alternatives to see how they stack up.
What factors affect the ROI of managed IT services?
Several aspects can influence the ROI of managed IT services, such as:
Initial investment:
It is important to evaluate the prices of managed IT services carefully, including the upfront cost and continuing expenses, such as service fees and care costs. While it may seem costly to invest in managed IT services, it is important to evaluate the potential savings and productivity improvements that can result from enhanced IT performance, decreased downtime, increased efficiency, and decreased staffing costs.
Service level agreement (SLA):
The terms of the SLA can impact the ROI and the quality of service delivered. The SLA should specify the scope, duration, frequency, and quality of the services provided, as well as the roles, responsibilities, and expectations of both parties. The SLA should also include the key performance indicators (KPIs), the service level objectives (SLOs), and the penalties or rewards for meeting or missing them. The SLA should be aligned with your business goals and expectations and reviewed regularly to ensure that the managed IT services are delivering the desired results.
Provider quality and reputation:
The quality and reputation of the managed IT service provider can also affect the ROI and the value of the services. You should choose a provider that has the expertise, experience, and resources to handle your IT needs and challenges. You should also check the provider’s credentials, certifications, references, and reviews to guarantee that they are reliable, trustworthy, and experienced. You should communicate with the provider regularly and provide feedback to ensure that they understand your needs and expectations and that they are responsive and proactive.
Conclusion
Managed IT services can offer a positive ROI and value for your business, as they can help you to gain a competitive advantage. However, How to measure the return on investment and value of managed IT services, you need to define your goals and expectations, establish a baseline, measure the impact, consider the intangible benefits, and calculate the ROI. Are you looking for a reliable, responsive, and secure IT partner that can help you grow your business and achieve your goals? If so, you need Uprite IT Services, the leading provider of managed IT solutions in Houston. Uprite IT Services has been empowering Houston businesses with 10 to 250 users for over 20 years with proactive, responsive, and secure managed IT solutions that drive growth and success.
