Dylan Hayes That initial quote from the outsourced IT service provider looked so reasonable. Lower than you expected, actually. You signed the contract feeling pretty good about the decision, maybe even a little smug that you’d negotiated such a solid deal.
Fast forward to year three, and you’re paying almost twice what you started with—not because the provider pulled a bait-and-switch, but because the pricing model was designed to work exactly this way from the beginning. You just didn’t see it coming.
The Per-User Model That Creeps Up on You
The most common pricing structure for outsourced IT service is per-user, per-month. Sounds straightforward enough. You’ve got 30 employees, the provider charges $100 per user, you’re paying $3,000 monthly. Simple math.
What they don’t emphasize during the sales process is how that user count gets defined—and how it inevitably grows over time.
Who Actually Counts as a User?
In year one, you’re probably counting actual employees. But as your relationship with the outsourced IT service provider evolves, that definition expands. Contractors who need email access? Users. Part-time employees who work two days a week? Users. That consultant who needs to VPN in occasionally? Yep, another user.
Some providers even count devices instead of people. Got an employee with a laptop, a phone, and a tablet? That could be three users in their billing system, depending on how the contract’s written.
The Growth You Didn’t Plan For
Even if your headcount stays flat, your “user” count climbs. You hire one person to replace someone who left, but for a month you’ve got overlap during the transition—boom, extra user charges. You bring on seasonal workers. You expand with remote contractors. You set up service accounts for automated systems.
None of these feel like you’re adding IT complexity, but they all add to your monthly bill.
The Tiered Service Trap
Some outsourced IT service providers structure pricing in tiers: Basic, Standard, and Premium. The sales pitch focuses on the Basic tier because it’s affordable and gets them in the door.
Six months later, you’re being upsold to Standard because “your needs have evolved.” By year two, you’re on Premium because that’s the only tier that includes what you actually need to operate.
How the Migration Happens
It’s rarely a single big jump. Instead, it’s incremental. You need better security monitoring—that’s a Standard feature. You want someone available after 6 PM—Premium only. You’re opening a second location and need multi-site support—oh, that requires Premium plus an additional fee.
The provider isn’t lying about these requirements. Your needs probably do require those features. But the Basic tier was never viable long-term, and somewhere in the back of their minds, they knew that when they quoted it.
The “Included” Services That Aren’t
Read your outsourced IT service contract carefully, and you’ll find language about what’s included in your monthly fee versus what counts as “project work” or “out of scope” services.
In year one, you probably don’t hit these boundaries much. You’re still in the honeymoon phase, and the provider’s being generous about what counts as standard support.
When the Boundaries Get Rigid
By year three, those boundaries have become very clearly defined. Need help migrating to a new server? That’s project work—$5,000, please. Want to implement new software across the company? Out of scope—here’s a separate quote. Need someone onsite for more than two hours? Onsite visits are billable.
The actual work you need done hasn’t changed. What’s changed is how strictly the provider enforces what’s covered under your monthly fee versus what requires additional payment.
The Security Compliance Escalation
Here’s a particularly expensive pattern: your outsourced IT service contract probably includes “basic” security services—antivirus, firewall management, maybe some patch management.
Then you land a client who requires you to be SOC 2 compliant. Or your cyber insurance company audits your systems and demands improvements. Or new regulations hit your industry.
The Compliance Upsell
Suddenly, “basic” security isn’t cutting it. You need advanced threat detection. You need security awareness training. You need regular vulnerability assessments. You need detailed compliance reporting.
Every single one of these is an add-on to your outsourced IT service agreement. The provider isn’t doing anything underhanded—these really are additional services that require more resources. But the cumulative effect can easily add $2,000 to $5,000 monthly to your costs.
And here’s the thing: you can’t really say no. Once you’re aware of these security gaps, you’re liable if something goes wrong. The provider knows this, which is why these conversations always end with you approving the additional spending.
The Infrastructure Refresh Cycle
Most outsourced IT service agreements include management of your existing infrastructure. They’ll monitor your servers, maintain your network, keep your current systems running.
What they won’t do is replace aging equipment as part of your monthly fee. That’s on you.
The Sticker Shock in Year Three
Your servers are getting old. Your networking equipment is starting to show its age. Your backup systems need upgrading to handle your growing data volume.
The outsourced IT service provider is happy to help—for separate project fees that can easily run $20,000 to $50,000 or more. And because they’ve been managing your infrastructure, they know exactly what needs replacing and when.
You can’t really go to another vendor for these upgrades because your current provider knows your environment and has everything documented (in theory). Getting someone else up to speed would cost almost as much as just paying for the upgrade.
The Software Licensing Shell Game
This one’s subtle but expensive. Many outsourced IT service providers will “include” certain software licenses as part of your agreement—monitoring tools, security software, backup solutions, remote access platforms.
What you might not realize is that these licenses are often purchased by the provider at volume discount rates, then billed to you at or near retail price. The difference is profit margin for them.
When Licensing Costs Multiply
As your business grows, you need more of these licenses. But the provider has locked you into their ecosystem. You can’t just go buy your own licenses for these tools because they’re integrated into the provider’s management platform.
So you’re paying whatever they charge, and those costs scale directly with your growth. By year three, you might be paying $500 or more monthly just for various software licenses that the provider manages—licenses that might cost you $200 if you were buying them directly.
The Real Cost Model You Should Understand
Here’s how the economics actually work from the provider’s perspective: they price year one to win your business, knowing they’ll lose money or barely break even during onboarding and the initial learning curve.
Year two is where they start making their target margins. They’ve learned your environment, the support load has normalized, and they’re operating efficiently.
Year three is when they really profit, because you’re now paying for all those add-ons, upgrades, and expanded services while their costs to serve you have actually gone down due to familiarity with your systems.
What You Can Do About It
The answer isn’t necessarily to avoid outsourced IT service providers. For many businesses, they’re still the right choice. But you need to go into the relationship with your eyes open about how costs will evolve.
Ask for a three-year cost projection during the sales process. Push them to be realistic about what’s likely to change. Get clarity on exactly what triggers additional fees. Build in contract terms that limit how much costs can increase year-over-year without renegotiation.
And maybe most importantly, recognize that the cheapest initial quote often ends up being the most expensive option in the long run. Sometimes you’re better off paying more upfront with a provider who’s transparent about the full cost picture than getting lured in by artificially low introductory pricing that’s designed to hook you before the real costs start piling up.
