Go look up Microsoft 365 Business Basic on Microsoft’s website right now. It is $6 per user per month. Some IT companies charge $60 for it. They do not tell you that.
I have had clients come to me after years with another provider, and when I pull up what they were paying for Microsoft licensing versus what Microsoft charges, the reaction is always the same. A long pause, and then some version of “I had no idea.” That gap, between what software costs and what a managed IT provider charges for it, is one of the dirtiest open secrets in this industry. I am tired of pretending it is not there.
What the Industry Does
Managed IT providers have a few ways to make money. They charge for labor, which is straightforward. They charge monthly fees for monitoring and support, which is also reasonable. Then there is a third category: software and hardware resale, where the markup practices range from modest to, in my opinion, genuinely indefensible.
Microsoft 365 licensing is the most common example. Microsoft publishes its prices publicly. Any business can see exactly what each tier costs. Despite that, markups of 200 to 1,000 percent on Microsoft licenses are evident across the industry. The justification is usually something about bundled expertise or account management. Sometimes there is no justification at all because the client never asked and the provider never volunteered the information.
Hardware is similar. A laptop that costs $1,200 on the manufacturer’s website might appear on a client invoice at $1,800 with no explanation of where that difference went.
I am not saying every firm doing this is acting in bad faith. In most cases, markup is warranted. But the client cannot evaluate that tradeoff if they do not know the spread exists.
What We Do Instead
When a client buys hardware through us, we mark it up about 20 percent over our cost. We tell them that upfront. The 20 percent covers the time and internal costs of procuring, vetting, configuring, and delivering the equipment. It is not a secret profit center. It is a disclosed service fee.
For software licensing, we pass through at or near cost and charge separately for the actual work: setup, administration, account management, and ongoing support. Those are real services worth paying for. They should just show up as line items, not hidden inside an inflated license fee.
The reason I run it this way is not because I am allergic to profit. It is because the math eventually catches up with you. Clients who feel taken advantage of leave. In professional services communities, where accounting firms, law offices, and property management companies all know each other and talk, that reputation travels. I have been doing this for over 35 years. The relationships are the business. You do not protect relationships by hiding what you charge.
What Fair Pricing for Managed IT Support Services Looks Like
Fair-priced managed IT services are not necessarily the cheapest. Good IT support costs real money, and firms that chase the lowest per-user rate almost always pay for it in downtime, slow response times, and technicians who do not know their environment.
What fair pricing looks like is this: you can see what you are paying, understand what each line item is for, and ask questions about any of it without getting a runaround.
You should be able to get a straight answer to the question, “How much of my Microsoft 365 fee goes to Microsoft?” If your current provider cannot or will not answer that question, you have your answer.
Hardware purchases should come with a disclosed margin or, at minimum, a clear explanation of what the markup covers. Software renewals should not quietly increase year over year without anyone telling you why.
Monthly service fees will have complexity baked into them, and that is legitimate. A flat per-user number oversimplifies what it takes to run an IT environment for a 75-person firm. There are infrastructure costs, tool costs, after-hours coverage, and vendor relationships that do not map neatly onto a per-seat calculation. However, your provider should be able to walk you through the general structure of what drives that number, even if the full breakdown is complicated.
The Question Worth Asking Your Current Provider
If you are not sure where you stand, the simplest test is to ask your provider what they pay Microsoft for your licensing tier and what they charge you. You do not need to be aggressive about it. It is a reasonable question that any transparent provider should be able to answer in about 30 seconds.
If the answer is evasive, or if you are told that the pricing is “bundled” in a way that cannot be broken out, that tells you something. Not necessarily that you are being gouged, but that the relationship is not being run on the terms of transparency that you deserve.
Clients who have been with us for a decade know what they pay and why it changes. That is the standard. If yours is not meeting it, it may be time for a second opinion.
