When business leaders evaluate their IT spend, they often look only at line items like hardware, software licenses, or a few salaries. But the real cost of running an internal IT department is far more complex—and in many cases, far higher than expected.
From staffing and training to turnover, tools, and compliance, internal IT costs quietly pile up. If you're a COO, CFO, or business owner making decisions about IT investment, understanding the full picture is essential.
Here’s a detailed breakdown of what your internal IT department is really costing you—and what alternatives might make more financial (and operational) sense.
An average IT department requires multiple roles to be effective:
Total annual salary burden: $340,000+ (not including benefits and overhead)
Add 20–30% for benefits, taxes, and insurance, and you're looking at well over $400,000/year for a modest IT team.
In-house teams need a full stack of enterprise tools to operate effectively:
Estimated monthly software/tooling cost: $2,500–$5,000
Annual cost: $30,000–$60,000
Technology evolves quickly—and your internal team needs to keep up:
Estimated annual training budget per employee: $3,000–$7,000
For a team of four: $12,000–$28,000/year
IT has one of the highest turnover rates in business functions. Replacing a skilled IT staff member can cost 50–200% of their annual salary.
Plus, every time a role is vacated, you risk:
One unexpected resignation can set a small business back by 3–6 months of IT performance.
Are you covered for HIPAA, SOC 2, PCI, or SEC tech regulations? If not, you're gambling with potential fines, reputational damage, or lost business.
In-house compliance efforts often fall short due to:
Cost of non-compliance or breach fines: $10,000 to $1M+ depending on industry
|
Category |
Estimated Annual Cost |
|
Salaries & Benefits |
$400,000+ |
|
Tools & Software |
$30,000–$60,000 |
|
Training & Certifications |
$12,000–$28,000 |
|
Turnover Impact |
Variable ($50K+) |
|
Compliance & Risk |
High potential cost |
|
Total |
$500,000+ annually |
Many mid-sized firms turn to Managed IT Service Providers (MSPs) for a better balance of cost and capability. A reliable MSP can deliver:
Typical annual cost for outsourced IT services:
$75,000–$150,000 depending on company size and scope
That’s 60–80% less than internal IT, with more specialized tools and support.
Your internal IT team may be doing their best—but the financial and operational burden of maintaining an in-house department is more than most businesses realize. Between overhead, burnout, tool gaps, and missed compliance, the costs go far beyond just payroll.
Consider this your call to audit your IT spend. What’s truly serving your business—and what’s just draining your budget?