How much does it cost MSPs to partner for NOC?
Almost certainly less than the cost of building and managing a NOC in-house!
And I say this with confidence as we have been providing NOC services to MSPs for quite some years and have worked through the cost comparisons many times.
In almost all cases, partnering for NOC offers a much more cost-effective option – as well as bringing additional benefits over and above ‘dollars and cents’ savings.
There are three main reasons for this.
You avoid the significant up-front capital investment required for in-house NOC
An effective NOC, supported by state-of-the-art RMM tools, is essential for MSPs looking to scale. But setting up, staffing and running a NOC in-house – particularly if you are committed to offering 24/7/365 NOC, with ‘always on’ monitoring, remediation, maintenance and support, requires a major up-front capital investment.
If you use a partner to deliver NOC services, your capital cost is largely replaced by a predictable operational expense that can be managed flexibly as your business grows.
You only pay for the resources you need, when you need them
While you can probably ‘just about manage’ with your existing team when you are only taking on a couple of new clients every few months, if you are really serious about growth, you need to be sure you have the right level of resource in place to support both existing and ‘pipeline’ customers effectively – all of the time, and covering peaks and troughs of activity. But it’s not easy to decide when to bring in additional resources to support a customer upswing: leave it too late and customer service levels can suffer; bring in extra people too soon and the business model becomes uneconomic.
If you partner for NOC you lose the cost/risk of hiring in anticipation of growth that doesn’t happen to the timescales you anticipated.
You benefit from competitive rates
While your NOC partner will have had to make a significant up-front investment in facilities, people and systems, these costs can be amortised over a large MSP customer base, so the rates offered to you reflect your partner’s economies of scale.
But don’t just take my word for it.
Use our new NOC calculator to work out your own in-house NOC staffing costs – and see how they compare with Inbay’s NOC charges.
Remember, though, for a true comparison, you need to include all the costs related to running your NOC in-house. That means burden costs and ‘hidden’ costs like utilisation rates and recruitment costs, as outlined below.
Full labour burden costs
Staff costs are probably the biggest expense for MSPs. But it’s not enough to just think about the salaries you pay your engineers. To get a true picture, you need to calculate the full labour burden, that is, the total of all billable staff labour costs above and beyond gross compensation, including taxes, insurance, benefits, vacations and sick leave plus a share of the overhead burden (such as non-billable staff, rent, rates, training, fuel, utilities, and so on).
This is the real employee cost to your company.
The NOC calculator requests your burden rate expressed as a percentage. Most MSPs will know this figure – you need it to price accurately. If you don’t have all the figures to hand, however, a typical rate would be 40%.
Don’t forget the ‘hidden’ costs
These may not be visible, but they should still be taken into account when you calculate the true cost of in-house NOC delivery.
For example, the calculator prompts for an engineer utilisation rate. In other words, the proportion of time spent on billable work. A 100% utilisation rate would be a wonderful thing – but it would mean no holidays, sick days, or training time for your staff. There is no hard and fast rule for ideal utilisation rates, but many MSPs aim for around 75% utilisation; some lower, some higher.
Other ‘hidden’ costs are not specifically requested as inputs to the NOC calculator – but they are nevertheless worth considering. For example:
- Recruitment costs
The cost (and your time/effort) of repeatedly having to advertise, interview, recruit and train up new engineers can be heavy – particularly if you have high staff-churn. Much of this cost would disappear if you partner for NOC.
- Misuse of engineers’ time on routine tasks
Using skilled engineers to carry out routine maintenance tasks and low-level reactive support tasks may be the quickest way to get an issue sorted but it can be costly, diverting them from billable hours (your utilisation rate takes a hit) and the delivery of higher value services. Partnering for NOC means that your engineers can remain focussed on revenue-generating work, while the partner is responsible for the day-to-day essential tasks.
Highlighting the importance of working out the true cost of resourcing NOC in-house is not just me trying to ensure a favourable cost-justification for Inbay’s NOC services. It is generally agreed that partnering for NOC makes sound financial sense, as voiced by Richard Tubb, former MSP, consultant and industry commentator:
“Once you’ve found an NOC partner you believe is a good fit for your company, it’s time to do the figures and work out whether working with that NOC partner is a financially sound move for you. For most MSPs, it will be. When I was first growing my MSP business, the cost of outsourcing the low-value but high importance tasks like monitoring and maintenance paled in comparison to hiring employees to do the same work.”
Be aware that the figures produced are based on our list prices. You may benefit further if volume discounts apply. Plus, we offer different levels of support to match your specific requirements.
And while the figures produced by the NOC calculator are helpful in illustrating typical cost comparisons, we are always happy to provide a detailed quotation tailored to your needs.
For further information, get in touch or chat now