A Guide to Budgeting for an MSP Partner

Partnering with a managed service provider (MSP) is a significant investment, especially for businesses focused on streamlining operations, optimizing IT and reducing costs without compromising service quality. However, to ensure a smooth transition and maximize the benefits of partnering with an MSP, effective budgeting is crucial.

Building a solid budget for this partnership ensures that companies can meet IT goals while maintaining financial health. Here’s a guide on creating a budget with considerations for a new MSP partnership and how to forecast IT spending effectively.

Read: 9 Tips on Choosing the Right Managed Service Provider (MSP)

1. Understand Your Budget Needs

Before engaging with an MSP, it’s essential to have a clear understanding of your organization’s IT budget needs. This involves:

• Identifying core IT services: Determine the essential IT services required from the MSP to support your business operations, such as network infrastructure, cloud services, data backup or advanced advisory from a fractional chief information officer (CIO).
• Assessing current IT costs: Analyze your existing IT expenses, including hardware, software, licensing fees and labor costs. This will provide a baseline for comparison and help identify potential cost-saving opportunities.
• Defining long-term IT goals: Establish clear IT goals aligned with your overall business objectives. This will help you prioritize IT investments and allocate your budget accordingly so you can choose a provider whose services align with your goals.

Many MSPs offer customizable service packages, allowing you to scale services up or down. This flexibility is helpful for budget management, as you only pay for what you need at any given time.

2. Establish a Budget Forecasting Model

Budget forecasting is vital for ensuring that your MSP partnership aligns with your financial plans and IT roadmap. Forecasting gives you a clearer view of the year’s anticipated expenses, allowing for smoother financial planning and avoiding surprises. To improve your forecasting accuracy:

• Analyze historical data: Review past IT expenses and spending trends to identify patterns and establish a baseline.
• Plan for recurring and unexpected costs: Account for fixed monthly MSP costs, such as monitoring and support fees, while setting aside a buffer for unexpected issues.
• Stay aware: Stay informed about emerging technological advancements and their potential impact on your IT budget.
• Review and adjust: Keep your forecast agile. Regularly review your IT budget forecasts and make necessary adjustments to account for changing business needs, new projects, upgrades, market conditions and evolving compliance regulations.

3. Align IT Planning with Business Objectives

Budgeting for an MSP goes beyond the dollars and cents – it’s about ensuring your IT infrastructure supports your overall business goals. Set specific, measurable objectives that the MSP can help you achieve, such as reducing downtime, enhancing data security or scaling your cloud environment.

• Prioritize initiatives: Work with your MSP to prioritize projects based on your company’s growth and operational needs. This helps allocate resources where they’re needed most.
• Think long-term: Plan for both immediate IT needs and future upgrades or scaling requirements. This foresight prevents costly overhauls later on and helps maintain a sustainable budget.
• Utilize fractional CIO guidance: Many MSPs offer access to fractional CIOs who can guide IT planning, helping to balance your current technology landscape with your budget while keeping future growth in mind.

4. Measure ROI from Your MSP Investment

Like any other business expense, MSP spending should yield measurable results. Track and analyze the ROI from your MSP investment by assessing benefits like reduced downtime, improved productivity and faster support resolution. By tracking these metrics, you can make informed decisions about budget allocations and ensure you’re getting the maximum value from your partnership. Key metrics to track include:

• Cost savings from preventative maintenance: MSPs reduce risk by proactively managing and maintaining your IT systems. Compare the costs saved from prevented issues to your MSP fees.
• Time saved on IT issues: Reduced downtime leads to increased productivity. Quantify these gains by estimating the value of time saved for each department.
• Enhanced security and compliance: With the rise in cyber threats, an MSP’s cybersecurity services reduce the risk of breaches. Calculate the potential cost of breaches avoided to measure value.

5. Work with Your MSP on Transparent Reporting

Ask your MSP for regular reports that break down costs, services used and outcomes achieved, often through key performance indicators (KPIs). Transparency will give you a clear view of where your budget is going and help you plan for future expenditures, as well as identify potential cost-saving opportunities. A reliable MSP will work with you on transparent reporting, helping you understand the complete picture of your IT investment and its impact on your business.

Before Choosing an MSP…

After budgeting for an MSP, it’s time to choose who your next IT partner will be. However, before you sign that service level agreement (SLA), consider these factors:

• The SLA: Ensure that the MSP’s SLAs align with your business needs and are reflected in the pricing structure.
• Contract terms: Understand the contract terms, including any recurring fees, one-time charges and potential additional costs.
• The MSP’s expertise: Utilize the MSP’s expertise to optimize your IT infrastructure and reduce costs.
• Scalability: Factor in the potential need for scaling up or down services as your business grows or changes.
• Hidden costs: Be aware of any hidden costs, such as additional fees for specific services, hardware or software.

Partner with Thriveon

Budgeting for a new MSP requires careful planning and proactive management. By carefully implementing effective budgeting strategies, you can maximize the benefits of your MSP partnership while minimizing costs.

Consider partnering with Thriveon, an award-winning MSP with over 20 years of experience. We offer a range of services, including cybersecurity, managed IT, IT project and modern office. Our skilled experts can handle any issues that occur, and our proactive mindset aligns you with over 500 industry best practices.

Schedule a meeting now for more information.