Short answer: For most UK SMBs under 80 staff, outsourced IT is cheaper, broader in coverage, and lower risk than hiring in-house. The break-even point is roughly 80 to 100 staff. Above that, a co-managed model usually beats either pure option. Numbers and decision tree below.
The real numbers, side by side
Let us put fully-loaded annual costs on a typical 25-person UK business in 2026. Same team, same tools, two different operating models.
| Cost line | In-house IT (1 mid-level engineer) | Outsourced (Essentials tier MSP) |
|---|---|---|
| Salary (mid-level UK IT engineer) | £40,000 | N/A |
| Employer NI + pension (~13.8%) | £5,520 | N/A |
| Tools, training, software licences for the engineer | £4,000 | Included |
| Recruitment fee (amortised over 3 years) | £1,800 | N/A |
| 25 users at £35/user/month managed support | N/A | £10,500 |
| Holiday/sickness cover (consultancy when off) | £3,000 | Included |
| Out-of-hours / emergency cover | £2,500 | Included on Standard+ |
| Annual total | £56,820 | £10,500 |
That is roughly a 5x cost difference at 25 staff. The savings shrink as you grow because outsourced cost scales linearly with headcount while in-house cost stays roughly fixed (one engineer handles 25 users about as easily as 60).
The break-even maths
Outsourced support at £35 per user per month equals one engineer’s fully-loaded cost (around £55,000 to £60,000 per year) at roughly 130 to 145 users. So purely on cost, the cross-over is somewhere in that range.
But pure cost is not the whole picture. The reasons most businesses switch from outsourced to in-house earlier than that are:
- Speed and presence. Walking up to someone’s desk beats a ticket every time. At 60 to 80 staff, the daily volume of small “can you have a look at this” requests becomes annoying through a help desk.
- Bespoke applications. If your business runs a specific line-of-business app that needs deep expertise, an in-house person who lives in it daily is hard to beat.
- Office and infrastructure work. Patch panel changes, meeting room AV, new starter desks, all benefit from a body in the building.
- Strategic alignment. An internal IT lead who sits in your leadership meetings will think about IT differently from an MSP account manager.
So in practice, businesses tend to bring IT in-house in the 60 to 80 staff range, well before the cost cross-over. That is fine if you understand what you are buying with the extra spend.
When each model wins
When outsourced IT clearly wins
- You are under 50 staff. Period. The cost case is overwhelming.
- You need broad expertise (security, networking, M365, cloud, end-user) and you can’t justify hiring one of each.
- You want 24/7 cover and a real SLA without paying for it three times over (one engineer cannot cover 24/7).
- You operate from multiple sites and need consistent service across all of them.
- Compliance pressure (Cyber Essentials, ISO 27001, sector-specific) is driving your need, and you want the certification work bundled.
- You are scaling fast. Outsourced flexes monthly with headcount; hiring lags reality by 6 months.
When in-house clearly wins
- You have 200+ staff and growing.
- You operate a complex bespoke application stack that needs an engineer who lives in it daily.
- You are in a regulated industry where strict data residency or staff vetting rules out a third party for some IT functions.
- You have very high IT change velocity (multiple deployments per week) and you need on-the-spot decisions.
When co-managed wins (and this is most growing businesses)
Between roughly 50 and 250 staff, the right answer is usually a hybrid: one or two internal IT staff handling the on-site, the politics, the line-of-business apps, the bespoke work; an MSP handling the platforms, security tooling, out-of-hours, certification, and escalation.
Why this works:
- Your internal person is not on call at 2am because the MSP is.
- You get specialist depth on day one (security ops, M365, networking) without hiring three people.
- Your internal person can focus on the 30 percent of work that needs business context, not the 70 percent that does not.
- Holiday cover, sickness cover, training cover, all handled.
- You scale up the MSP side faster than you can scale headcount.
Co-managed pricing is typically £25 to £40 per user per month for the MSP side, on top of your internal salary. So at 100 staff with one internal IT lead and a co-managed MSP, you would spend roughly £55,000 (internal) + £42,000 (MSP at £35/user) = £97,000 per year. Versus £110,000+ for two internal engineers without external coverage.
Signs it is time to switch from one to the other
Time to bring some IT in-house if:
- Your team complains weekly about response times for small things.
- You are over 70 staff and your MSP feels like a different team rather than an extension of yours.
- You have a bespoke application your MSP keeps pushing back on.
- Office moves and infrastructure changes are running long because the MSP needs to schedule visits.
- Your CEO wants someone in leadership meetings who owns IT.
Time to outsource (or co-manage) if:
- Your one IT person is constantly firefighting and never gets to projects.
- You have had a security incident that exposed gaps in their training or tooling.
- You cannot run Cyber Essentials, ISO 27001, or compliance work alongside daily ops.
- Your IT person is leaving and you are dreading the recruitment.
- You need 24/7 cover and you cannot afford to staff it.
- Your sites have grown beyond what one or two people can cover.
Hidden costs of going in-house
The salary number alone is misleading. Real costs people forget:
- Single point of failure. One engineer means when they are off or leave, you are exposed. Recovery cost (consultancy, recruitment, lost productivity) is usually £15,000 to £30,000 per incident.
- Tool sprawl. They will want their own RMM, their own ticketing system, their own scanning tool. Each is £1,000 to £5,000 per year.
- Skill gaps. One person cannot be expert in security, networking, identity, cloud, and end-user support. You will end up paying consultants for the gaps anyway.
- Recruitment churn. UK IT roles in 2026 have ~18 month median tenure for SMB internal roles. Plan for 1.5 hires per role per 2 years.
- Training and certification. Microsoft, security vendor, networking certs are £2,000 to £5,000 per cert.
Hidden costs of going outsourced
And on the other side, things that catch people out:
- Project work outside scope. Most managed contracts cover BAU. Migrations, new offices, complex rollouts are quoted on top.
- Licence margins. If your provider resells M365 with a 15 percent margin, that adds up at scale.
- Cultural fit. A poor MSP fit is exhausting. Vet hard, talk to references, ask “have you lost a client and why”.
- Tool lock-in. If you ever switch providers, expect 4 to 8 weeks of overlap and some tooling reconfiguration.
See the IT support cost guide for the 11 questions to ask before you sign with any UK MSP.
Our view
We are biased; we are an MSP. But here is what we tell prospects honestly:
If you are under 50 staff, outsource. The cost case is overwhelming, and the breadth of expertise you get is impossible to hire one-for-one. We would tell you the same thing if you went to a competitor.
If you are 50 to 100 staff, run co-managed. One internal IT lead for the political and bespoke work, an MSP for everything else. Cheapest combined model and lowest risk.
If you are 100+ and growing fast, you are probably going to build a small internal team (2 to 4 people) and keep an MSP for security operations, out-of-hours, and specialist projects. Pure in-house at this size only works if your business is genuinely IT-heavy.
If you are 250+, you are buying enterprise-grade managed services, not SMB IT support. Different conversation.
Not sure which model fits your business?
A free 30-minute IT health check looks at your current setup and tells you where outsourced, in-house, or co-managed makes sense for your team size and growth plan.
Book your free IT health checkRead more about our managed IT services (full outsource), day-to-day IT support, or browse all our services.
Frequently asked questions
At what staff size does outsourced IT stop being cheaper?
Pure cost cross-over is around 130 to 145 users for an Essentials tier MSP at £35 per user. In practice, most businesses bring some IT in-house earlier (60 to 80 staff) for speed-of-response reasons, but co-manage rather than fully insource until well beyond 200 staff.
Is co-managed IT the same as outsourced?
No. Outsourced means the MSP runs everything; you have no internal IT staff. Co-managed means you keep one or more internal IT people and the MSP supplies tools, escalation, security operations, and out-of-hours cover. Co-managed is usually the right model between 50 and 250 staff.
Can we keep our internal IT person and add an MSP?
Yes, that is exactly what co-managed is. The split usually works as: internal handles end-user support, office infrastructure, line-of-business apps, and project delivery; MSP handles security operations, monitoring, M365, certification, out-of-hours, and tooling.
How long does it take to switch from in-house to outsourced (or vice versa)?
Switching to outsourced takes 4 to 8 weeks for a clean transition, including documentation handover, tool migration, and a parallel period. Going from outsourced to in-house takes 8 to 16 weeks because you have to recruit first, then transfer knowledge over a 30 to 60 day overlap.
What if my MSP is not delivering?
Have a direct conversation with the account manager first; most issues are fixable with the right SLA review. If the relationship is broken, plan a 60 to 90 day exit with the new provider running in parallel. Avoid hiring an in-house person purely as a reaction to a bad MSP, you will end up with both problems instead of one.
Does outsourced IT include strategy or just support?
At Essentials tier, mostly support. At Standard and Premium tiers, you should expect a virtual CIO (vCIO) who runs quarterly business reviews, builds a 12 to 18 month roadmap, and joins your leadership conversations on IT-related topics. Ask for sample reports during the sales process.
Is in-house IT more secure than outsourced?
Not inherently. Security depends on tooling, processes, and discipline, not on which org chart the IT person sits on. A specialist MSP usually has better security tooling and incident response capability than a single in-house engineer can maintain. The risk with outsourced is concentration: if your MSP has a breach, all their clients are exposed. Pick a provider with their own Cyber Essentials and visible security posture.