MSP vs in-house IT: the comparison, without the sales pitch
Published
Nearly every MSP-versus-in-house comparison online is published by an MSP, and reaches the same conclusion. We are an MSP too, so treat this accordingly — but the arithmetic below is the arithmetic, and it does not favour us at every size.
The real cost of an internal hire
Salary is roughly two thirds of the true figure. For a US systems administrator:
| Component | Annual |
|---|---|
| Median salary | $96,800 |
| Employer tax and benefits (~25%) | $24,200 |
| Tooling, licences, training | $6,000–$12,000 |
| Recruitment (amortised) | $5,000–$10,000 |
| Fully loaded | $132,000–$143,000 |
Two things this table does not capture. One person cannot cover 24/7, and cannot take leave without leaving you uncovered. And one person's skill set is one person's skill set — the same salary buys either a strong network engineer or a strong Microsoft 365 administrator, rarely both.
The real cost of an MSP
At $100–$400 per user per month (see what managed IT actually costs):
| Users | At $140/user/mo | Versus one internal admin |
|---|---|---|
| 10 | $16,800/yr | MSP wins decisively |
| 25 | $42,000/yr | MSP wins clearly |
| 50 | $84,000/yr | MSP still ahead, gap narrowing |
| 75 | $126,000/yr | Roughly line-ball |
| 150 | $252,000/yr | Two internal engineers cost less |
The crossover sits somewhere around 75 users for most organisations. Below it, an MSP buys more capability than the same money buys internally. Above it, you are paying a per-user rate for coverage you could increasingly staff yourself.
Note what the crossover does not account for: at 150 users those two internal engineers still cannot cover nights and weekends, still take leave, and still have two people's worth of specialisms. Which is why the answer above the crossover is rarely "fire the MSP".
Where each genuinely wins
An MSP is the better answer when
- You are under about 50 users and cannot justify a full-time hire.
- You need breadth — network, cloud, security, compliance — more than depth in one area.
- Out-of-hours coverage matters and you cannot staff a rota.
- You are growing fast and do not want to re-hire every eighteen months.
- You need a named provider for compliance, insurance or client due diligence.
Internal staff are the better answer when
- Your systems are unusual enough that generic expertise does not transfer — bespoke line-of-business software, industrial control systems, research computing.
- Response time is business-critical in minutes, not hours.
- You are above roughly 100 users with predictable, stable needs.
- Institutional knowledge is the bottleneck — someone needs to know why a decision was made in 2019.
- Data sensitivity makes third-party administrative access genuinely difficult.
The answer most organisations land on
Framing this as a binary is mostly a sales device. Above about 75 users, the common arrangement is co-managed: internal staff own day-to-day support, user relationships and institutional knowledge; the MSP provides depth, out-of-hours cover and specialisms you cannot justify hiring.
This is usually what people actually want when they say they are evaluating MSPs. It also tends to be the honest recommendation at that size, and it is worth noticing which providers offer it unprompted — a provider that only sells full outsourcing at 200 users is optimising for their revenue rather than your outcome.
Two costs neither side advertises
The transition. Moving either direction costs three to six months of reduced effectiveness. Documentation is incomplete, context is lost, and things that "everyone knew" stop being known. Budget for it honestly in both directions.
Lock-in. With an MSP, the risk is that documentation and credentials live with them, so leaving is expensive. Ask who owns the documentation before you sign. With internal staff, the risk is that everything lives in one person's head, so their resignation is an outage. Both are real; neither appears in the comparison table.
How to actually decide
- Count your users honestly, including contractors and shared accounts. This one number drives most of the answer.
- Write down what genuinely cannot go down, and for how long. This tells you whether you need out-of-hours cover or merely want it.
- List the specialisms you actually need. If it is more than two, one hire will not cover them.
- Calculate both over three years, including transition costs on both sides.
- Ask about co-managed even if you think you want one or the other.
If you want a second opinion on the arithmetic for your specific numbers, send us the shape of your organisation. If internal is the right answer at your size we will say so — it is a better outcome than a contract you leave in eight months.
Frequently asked
At what size does an MSP stop being cheaper than internal IT?
The crossover is usually around 75 users. Below that, an MSP typically costs less than one fully loaded internal administrator at $132,000 to $143,000 a year while providing broader coverage. Above roughly 100 users, per-user pricing can exceed the cost of two internal engineers, though internal staff still cannot cover nights, weekends and leave without additional hires.
What does an internal IT hire really cost?
A US systems administrator has a median salary near $96,800, which becomes $132,000 to $143,000 fully loaded once employer tax, benefits, tooling, licences, training and amortised recruitment costs are included. Salary alone understates the true figure by roughly a third.
What is co-managed IT?
An arrangement where internal staff handle day-to-day support, user relationships and institutional knowledge, while an MSP provides specialist depth, out-of-hours coverage and skills you cannot justify hiring full time. It is the most common outcome for organisations above about 75 users.
What is the biggest hidden cost of switching to an MSP?
The transition period. Moving in either direction costs three to six months of reduced effectiveness while documentation is rebuilt and context is transferred. The second is lock-in: if the provider owns your documentation and administrative credentials, leaving later becomes expensive. Confirm you own both before signing.