Every growing organization faces the same question: should we outsource IT to a managed service provider, hire in-house IT staff, or find a different approach entirely? The answer isn't just about cost — it's about control, compliance, and responsiveness. But cost is where the conversation starts.
This guide breaks down the real costs of each approach using 2025 market data. We'll look at what organizations with 50, 100, 200, and 500 employees actually pay — not just the sticker price, but the hidden costs that inflate your real IT spend by 30-60%.
Option 1: Managed Service Provider (MSP)
MSPs provide outsourced IT management for a monthly per-user or per-device fee. They handle help desk support, network monitoring, patch management, and often security. The appeal is obvious: predictable monthly costs, no hiring headaches, and 24/7 coverage.
Typical MSP Pricing (2025)
MSP pricing varies significantly by region, service level, and industry. Here are current market ranges:
- Basic (monitoring + help desk): $100-150 per user/month
- Standard (+ security + backup): $150-250 per user/month
- Premium (+ compliance + vCIO): $250-400 per user/month
- Healthcare/regulated premium: $300-500 per user/month
MSP Cost Breakdown by Org Size
| Employees | Monthly Cost | Annual Cost | Per-Employee |
|---|---|---|---|
| 50 | $10,000-12,500 | $120,000-150,000 | $2,400-3,000 |
| 100 | $20,000-25,000 | $240,000-300,000 | $2,400-3,000 |
| 200 | $36,000-46,000 | $432,000-552,000 | $2,160-2,760 |
| 500 | $75,000-100,000 | $900,000-1,200,000 | $1,800-2,400 |
Hidden MSP Costs
The per-user fee is rarely the full picture. Watch for these:
- Project work: MSPs charge separately for projects (migrations, deployments, new office setup). Expect $150-250/hour.
- After-hours surcharges: Many MSPs charge premium rates for nights and weekends, or exclude after-hours from the base contract.
- Vendor management: Coordinating with your ISP, phone provider, or application vendor may incur additional charges.
- Compliance add-ons: HIPAA, SOX, and PCI compliance packages are typically extra — $50-100 per user/month.
- Minimum commitment: Most MSPs require 1-3 year contracts with early termination fees of 50-100% of remaining contract value.
- Response time tiers: Want guaranteed 15-minute response? That's a premium tier. Standard response might be 1-4 hours.
Realistic annual cost with hidden fees for a 100-person org: $300,000-$420,000
Option 2: In-House IT Staff
Hiring your own IT team gives you direct control, institutional knowledge, and immediate responsiveness. The downside is the full cost of employment, limited coverage, and the challenge of attracting talent in a competitive market.
IT Salary Data (2025)
- Help Desk Technician: $45,000-60,000 base salary
- Systems Administrator: $70,000-95,000
- Network Administrator: $75,000-100,000
- IT Manager: $95,000-130,000
- IT Director: $130,000-175,000
But salary is only 60-70% of the total cost of employment. You also pay:
- Benefits: Health insurance, 401(k), PTO — typically 25-35% of salary
- Payroll taxes: 7.65% (FICA) plus state unemployment
- Training and certifications: $3,000-8,000 per person per year
- Recruiting: $5,000-15,000 per hire (job boards, agency fees, interview time)
- Tools and licenses: RMM, PSA, security tools — $5,000-15,000 per technician per year
In-House Staffing by Org Size
| Employees | IT Staff Needed | Annual Cost | Per-Employee |
|---|---|---|---|
| 50 | 1 IT generalist | $95,000-130,000 | $1,900-2,600 |
| 100 | 1 IT manager + 1 tech | $195,000-265,000 | $1,950-2,650 |
| 200 | 1 manager + 2-3 techs | $330,000-470,000 | $1,650-2,350 |
| 500 | 1 director + 1 manager + 4-6 techs | $680,000-1,050,000 | $1,360-2,100 |
Hidden In-House Costs
- Coverage gaps: One IT person can't provide 24/7 support. Vacations, sick days, and turnover create gaps that are hard to fill.
- Turnover cost: Average IT turnover is 13-20%. Each departure costs 50-200% of the role's annual salary to replace.
- Knowledge silos: When your one sysadmin leaves, they take all institutional knowledge with them.
- Scaling challenges: You can't hire half a person. Growth often means being understaffed until you hit the next staffing threshold.
- Tool stack: In-house teams still need help desk software, monitoring tools, and security platforms — the same tools MSPs use.
Realistic annual cost with hidden fees for a 100-person org: $240,000-$350,000
Option 3: AI-Powered IT Management
A newer approach combines AI automation with lean in-house oversight. Platforms like TechManager AI handle ticket resolution, monitoring, compliance logging, and routine operations autonomously, while a small internal team handles strategy, vendor relationships, and escalations.
AI Platform + Lean Staff Pricing
| Employees | Platform + Staff | Annual Cost | Per-Employee |
|---|---|---|---|
| 50 | Platform only | $30,000-42,000 | $600-840 |
| 100 | Platform + 1 IT coordinator | $100,000-145,000 | $1,000-1,450 |
| 200 | Platform + 1 IT manager | $175,000-245,000 | $875-1,225 |
| 500 | Platform + 1 manager + 1-2 techs | $340,000-480,000 | $680-960 |
What AI Automation Replaces
The cost savings come from automating the work that consumes most IT hours:
- Tier 1 help desk (60-70% of tickets): Password resets, access requests, printer issues, VPN problems, software installation — all handled by AI ticket resolution with governed execution.
- Compliance documentation (15-20 hrs/week): Audit logging, access reviews, policy documentation — handled automatically by the compliance dashboard.
- Knowledge management: Troubleshooting guides, procedures, vendor documentation — searchable and maintained by the AI knowledge base.
- Device and software tracking: Inventory, patch status, warranty tracking — managed by device and software management.
Side-by-Side Comparison: 100-Employee Organization
| Factor | MSP | In-House | AI + Lean Staff |
|---|---|---|---|
| Annual cost | $300K-420K | $240K-350K | $100K-145K |
| Response time | 1-4 hours | Minutes (business hrs) | < 3 minutes |
| 24/7 coverage | Yes (premium tier) | No | Yes (included) |
| Compliance built-in | Add-on ($$$) | Manual effort | Included |
| Audit trail | Varies | If documented | Automatic |
| Contract lock-in | 1-3 years | None | Month-to-month |
| Scaling cost | Linear (per user) | Stepped (new hires) | Flat per tier |
Which Approach Fits Your Organization?
MSP Makes Sense When:
- You need broad expertise across many technologies
- You don't want any IT management responsibility
- Budget is flexible and you value simplicity over savings
- You're in a non-regulated industry with simple IT needs
In-House IT Makes Sense When:
- You have complex, custom internal systems that need deep knowledge
- Immediate physical presence is required (manufacturing, labs)
- You can afford 2+ FTEs to avoid single-point-of-failure
- Your IT strategy is a competitive differentiator
AI + Lean Staff Makes Sense When:
- You're in a regulated industry (healthcare, legal, finance) and need built-in compliance
- You want fast resolution without MSP response time delays
- Budget efficiency matters — 50-70% savings vs MSP
- You value audit trails and governance but don't want to build it manually
- You're growing and need IT that scales without proportional cost increases
For regulated industries specifically, see our detailed guides for healthcare, legal, and financial services. Or read about managing IT without an MSP for a deeper dive into the transition.
The Bottom Line
For a 100-employee organization, the annual cost difference between an MSP and an AI-powered approach is $155,000-$275,000. Over three years (a typical MSP contract term), that's $465,000-$825,000 in savings — enough to fund significant technology investments elsewhere.
The right choice depends on your specific situation, but the economics of AI-powered IT management are making the traditional MSP model increasingly difficult to justify for organizations that need compliance, speed, and cost efficiency.