The two most common ways that IT services can be contracted for a business are managed service plans and time billing plans. Choosing the right one can save considerable costs for any business, but to do that it is important to understand how each functions and in what situations they are most cost effective, and just as importantly, when they are not.

Time Billing Plans

Time billing plans, or hourly rate service plans as they are often referred to, operate on the premise that you simply pay an agreed rate for use of the service, with no ongoing costs other than that. This is often viewed as a cost efficient model, however an in depth look at the services provided compared to a managed system reveals that this analysis is a little too simplified.

These kinds of service plans are break fix focused, in that the service tends to only be used when something has gone wrong, and the focus is on the business itself to manage the IT on a day to day basis. Because it is always an additional cost, often problems that begin to manifest are ignored or self-repair is attempted, and only when actual failure occurs does the manager contact the service company.

This kind of problem solving means that there is a higher likelihood of downtime using this system, and internal manpower is required to monitor and attempt to remedy manifesting issues with the IT during day to day operations. This is of course an extra cost that should be taken into account when ascertaining value for money.

The key here is that the IT ownership is entirely with the business, and the uncertainty both of reliability and in the case of failure service cost, must be taken under consideration with this kind of plan. It does however remove the need for ongoing or setup requirements which can be useful for startups, and can be ideal for business that have a broad range of IT knowledge within the business already.

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Managed Service Plans

Managed service plans take a different approach, utilizing an ongoing payment schedule, usually every month. There are generally no charges per use however, and as such this service tend to be operationally focused, used to keep the system going and react to developing problems rather than waiting for failure.

The managed service plan itself features an agreed scope of work with an associated level of performance for the systems, and this is the key difference. The support provider has a stake in the IT system itself, and as it is more cost efficient for the provider to fix developing issues than it is to fix outages, this changes the focus of the entire service to one of preemptive action. The provider uses tools to monitor and address situations and ensure high levels of service continuity and minimal downtime.

What this focus and the basic premise of the plan creates is predictability. The cost is by definition predictable, and as it is drawn up in the service agreement, the level of performance of IT systems under the agreement are also predictable. This removes much of the need for internal manpower to address IT continuity, and is much easier to manage. Even startups may find the predictable costings more manageable than unknown costs should failure occur.

Cost is of course important, but it is perhaps the focus on service continuity that is the most beneficial aspect of managed service plans, few businesses today can function adequately without their IT infrastructure and downtime can be both destructive and expensive to deal with.

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The Choice

Managed plans bring a lot of benefits to business that an hourly plan simply does not, in particular the shift in focus to keeping things operational rather than fixing things when they fail. However, while there are clear advantages to managed plans, neither approach is infallible, and IT downtime is possible with either type of service plan. An IT service plan is though, a risk mitigation approach above all, and in this aspect the managed plan, with its approach that looks to address problems before they affect service continuity, offer less risk of failure than hourly plans do today.

While hourly rate IT service plans seem to offer a cost effective solution, once the cost of internal administration and possible failure downtime is taken into consideration, this is not necessarily the case. Each individual business has different needs, and importantly, a different skillset amongst staff, and there are conditions where an hourly rate may be appropriate. However, for many businesses, the predictability, both of service and cost, along with the lower requirement for in-house expertise, makes a managed service plan a more attractive option to take.

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