Microsoft 365 & Cloud

Managed cloud services vs in-house IT: which model suits a business of up to 250 people?

In-house, fully managed or co-managed: how the three ways of running cloud systems compare on cost, cover and expertise, and when in-house is the right call.

By Dig IT SolutionsUpdated 8 September 20266 min read

Short answer

Managed cloud services suit most businesses of up to 250 people because the work of running Microsoft 365, cloud servers, security and backup needs several skills but rarely fills a full-time role. In-house IT makes sense when you have complex line-of-business systems or enough scale to justify a team. Co-managed support sits between the two.

Moving to the cloud changes what IT work looks like, but it does not make the work disappear. Someone still has to manage identities and licences, watch for suspicious sign-ins, apply updates, check backups, tidy SharePoint and answer the phone when a laptop will not connect. The question for a growing business is who that someone should be: an employee, an external provider, or a mix of both.

What cloud management actually involves

The phrase "managed cloud services" covers a specific list of recurring tasks. For a UK SME running Microsoft 365, a few cloud-hosted applications and perhaps a hosted server, the list looks like this:

Identity and access: creating and removing accounts, enforcing multi-factor authentication, reviewing who holds admin rights, setting Conditional Access rules.
Licensing: assigning the right plan to each user, freeing licences from leavers, reviewing tiers so nobody pays for Premium features they never use.
Security monitoring: reading the alerts Microsoft generates, investigating unusual logins, keeping Defender and endpoint protection configured.
Updates and patching: Windows and application updates on every device, firmware on firewalls and access points, changes Microsoft rolls out to the tenant.
Backup: running and testing a third-party backup of Microsoft 365, because Microsoft's native protection is limited to retention and recycle-bin windows. See Microsoft 365 backup and our explainer on whether Microsoft 365 includes backup.
Structure: keeping SharePoint, Teams and OneDrive organised so files stay findable as the business grows.
Support: helping staff day to day, onboarding new starters and offboarding leavers correctly.
Cost review: checking cloud bills for unused resources and duplicate subscriptions.

None of these tasks is hard in isolation. The problem is that together they need skills across identity, security, networking and support, and in a 30-person business they add up to a day or two a week of work rather than a full-time job. That is an awkward shape for a hire and a natural shape for a service.

The three models compared

	In-house IT	Fully managed service	Co-managed IT
Who does the work	Employee or small team on payroll	External provider's engineers	Internal lead plus provider
Best fit	80+ users, complex line-of-business systems, or a regulated environment needing an internal owner	up to 250 users with standard Microsoft 365 and cloud applications	Businesses with one IT person who needs cover, depth and escalation
Breadth of skills	Limited to what your hire knows	Whole team across security, cloud, networks, backup	Internal business knowledge plus external specialists
Cover for holidays and sickness	Single point of failure unless you hire two	Built in	Provider covers absence
Cost pattern	Salary, training, tools, recruitment	Predictable monthly fee per user or device	Lower monthly fee, internal salary retained
Response to incidents	Depends on one person being available	Helpdesk with several engineers	Internal first line, provider escalation
Strategic input	Depends on the individual	Usually included as periodic reviews	Shared
Main risk	Knowledge leaves when they do	Provider dependency, so contract terms matter	Overlap must be clearly defined

A managed service typically prices per user or per device each month. An in-house hire costs salary plus employer contributions, training, tooling and the cost of recruiting a replacement when they move on. For most businesses in the middle of that range, the monthly fee is lower than the loaded cost of one employee, and it buys a team rather than an individual.

Where in-house IT genuinely makes sense

It would be easy for a managed service provider to say outsourcing always wins. It does not.

In-house IT is the right answer when:

You run complex line-of-business systems that need daily hands-on attention: manufacturing control, laboratory systems, bespoke databases, or a large on-premise estate that is staying put.
You are large enough that the work fills full-time roles. Above roughly 80 to 100 users, the sums start to favour at least one internal IT person.
Regulation or client contracts require a named internal owner for information security who answers to the board.
The business changes constantly and needs someone in the building who understands operations as well as technology.

Even then, most internal IT leads benefit from an external partner for the things one person cannot cover: holiday cover, a second opinion on security, project capacity and specialist skills such as firewall configuration or a tenant migration.

Where a managed service usually wins

For the typical business of up to 250 people running Microsoft 365, a fully managed IT support arrangement tends to win on four counts.

Breadth. The same provider handles the tenant, the network, the backup and the phones, so there is one accountable team rather than a set of vendors pointing at each other.

Consistency. Patching, backup checks and licence reviews happen on a schedule because the provider is contracted to do them, not when someone finds a spare afternoon.

Cover. Staff sickness and holidays do not leave the business without IT, and knowledge of how the environment is built sits with a team and its documentation rather than in one head.

Cost. A monthly per-user fee is easier to forecast than salary plus tools plus the emergency consultant bill when something goes wrong. Cloud bills themselves are also easier to control when someone reviews them monthly, because unused licences and forgotten virtual machines are the most common source of waste.

The trade-off is dependency on the provider, which is why contract terms, documentation and exit arrangements matter. A good provider documents your environment and keeps subscriptions in your name so that nothing is held hostage.

The co-managed middle ground

Many businesses between 40 and 100 people already have one IT person, often someone who grew into the role from operations or finance. They know the business well but cannot be an expert in everything and cannot be available every day of the year.

Co-managed IT support keeps that person in place and adds a provider behind them for escalation, projects, monitoring tools and cover. The internal lead handles day-to-day requests and owns the relationship with the business. The provider handles security tooling, backup, patching and the jobs that need a specialist. The key is writing down who does what so that nothing falls between the two.

A hybrid example

The choice of model is not the same as the choice between cloud and on-premise. Mr Plant Hire, a plant and tool hire business established in 1981 with multiple depots, runs Microsoft 365 and SharePoint for inter-company document sharing alongside Windows servers that still earn their place, with local and cloud backup. Dig IT has supported that environment for over 15 years, and the Mr Plant Hire case study shows how cloud services and on-premise systems can be managed as one estate rather than two.

Questions to ask before choosing

How many hours a week does IT work actually take today, and who is doing it unofficially?
What happens when that person is on holiday or leaves?
Which systems are standard (Microsoft 365, accounts, CRM) and which are specialist?
Is the current setup documented well enough for someone else to pick it up?
Are backups tested, and does anyone review licences and cloud spend monthly?
What would a security incident cost in lost working days?

If the honest answers show IT depending on one person, unwritten knowledge and untested backups, the model needs to change whichever option you pick.

What to do next

Compare what you spend now on internal time, ad-hoc consultants and tools against a predictable monthly figure. The IT support cost calculator gives an indicative monthly cost for your number of users and devices and shows what a managed or co-managed arrangement would include.

Frequently asked questions

What do managed cloud services include?

For a typical UK SME, managed cloud services cover the recurring work of running Microsoft 365 and any hosted servers or applications: user and licence administration, multi-factor authentication and access control, security monitoring and alert handling, updates and patching, third-party backup and restore testing, SharePoint and Teams structure, day-to-day helpdesk support and a regular review of cloud spend. Some agreements add strategy reviews and project work.

Is managing cloud systems in house cheaper?

Sometimes on paper, rarely in practice for businesses under 80 users. An in-house hire costs salary, employer contributions, training and tools, and covers only the skills that one person has. A managed service charges a predictable monthly fee per user or device and brings a team. The hidden costs of in-house management are holiday cover, untested backups, unread security alerts and the emergency consultant bill when something the person has not seen before goes wrong.

Do we lose control of our data with a managed provider?

No. Your business remains the owner of the Microsoft 365 tenant, the data in it and any cloud subscriptions, which should be registered in your name. The provider administers the environment on your behalf under an agreement that should state what they can change, how changes are recorded and what happens at the end of the contract, including handing over documentation and admin credentials.

Can we keep our IT person and still use a managed service?

Yes. That arrangement is called co-managed IT. Your internal lead keeps day-to-day contact with staff and ownership of the relationship with the business, while the provider supplies monitoring tools, security management, backup, patching, project capacity and cover for holidays and sickness. The important part is a written split of responsibilities so that nothing is assumed to be someone else's job.

At what size does a business need in-house IT?

There is no fixed number, but above roughly 80 to 100 users, or earlier where there are complex line-of-business systems, an on-premise estate that is staying, or contractual requirements for a named internal security owner, the workload starts to justify at least one internal role. Even then most internal IT leads work alongside an external partner for specialist skills, projects and cover.

Does Microsoft 365 still need managing once it is set up?

Yes. Staff join and leave, licences drift, sharing settings change, Microsoft adds and retires features, and security alerts arrive that someone has to read. Microsoft also does not include backup beyond retention and recycle-bin windows, so a third-party backup has to be run and tested. A tenant that nobody manages becomes untidy, leaky and more expensive within a year or two.