MSP or Internal IT? How Businesses End Up on the Wrong Path and When to Switch

As companies grow, technology quietly becomes one of their most critical operational dependencies. Systems that once felt simple suddenly support revenue, security, compliance, and customer trust. At that point, a question surfaces that many leaders did not expect to face so early.

Should IT be handled internally, outsourced to a managed service provider, or shared between the two?

There is no shortage of advice on this topic, yet many organizations still end up choosing the wrong model for their size, industry, or risk profile. Even more common is choosing the right model initially, then holding onto it long after it stops fitting the business.

This guide breaks down why companies choose the wrong IT path, how to recognize the signals, and when switching models becomes not just helpful, but necessary.

Understanding the two IT models

Before digging into mistakes, it helps to clarify what each model is actually designed to do.

Internal IT teams

Internal IT refers to in-house staff employed directly by the organization. These teams typically manage endpoints, networks, identity, security policies, vendors, and long-term technology planning.

Internal IT works best when technology is deeply tied to daily operations, revenue, or regulatory obligations.

Managed service providers

An MSP delivers IT services under a contract, often on a per-user or per-device basis. MSPs typically provide helpdesk support, monitoring, patching, backups, and security tooling across many clients.

MSPs excel at standardization, scale, and predictable service delivery.

The problem arises when companies expect one model to behave like the other.

Why companies choose the wrong IT model

Choosing the wrong path rarely comes from negligence. It usually comes from reasonable decisions made with incomplete information.

Optimizing for short-term cost

One of the most common reasons businesses choose the wrong model is cost bias.

Early on, an MSP often appears cheaper than hiring staff. Later, internal IT can look cheaper than recurring service contracts. In both cases, the calculation often ignores downtime, security risk, and productivity loss.

When cost is the only variable considered, the model almost always breaks later.

Making the decision too early

Many organizations lock into an IT model before they understand their growth curve.

A small company may hire internal IT at twenty employees, only to realize six months later that coverage and expertise gaps are unsustainable. Another may sign a long MSP contract, then grow past one hundred employees and find ticket queues slowing the business.

The mistake is not the initial choice, but assuming it will scale indefinitely.

Treating IT as support only

Another common failure is misunderstanding what IT actually does.

Internal IT teams are often expected to function as helpdesk staff, even when the business needs strategic planning, security ownership, and lifecycle management. At the same time, MSPs are sometimes expected to behave like embedded partners who understand business context and long-term goals.

When expectations do not match the model, frustration builds quickly.

Following peer or board pressure

IT decisions are sometimes driven by imitation rather than analysis.

Leaders hear that peers use MSPs, or that a board member prefers internal teams, and assume the same model will work for them. This ignores differences in industry regulation, risk tolerance, and operational complexity.

What works for one organization may be a liability for another.

Avoiding difficult conversations

Fear also plays a role.

Hiring internal IT feels permanent. Ending an MSP relationship feels risky. Loyalty to long-time staff or vendors can delay necessary changes even when the model is clearly strained.

In these cases, the business keeps the wrong structure simply because changing it feels uncomfortable.

Signals that the current model is no longer working

IT models rarely fail overnight. They show stress signals long before things break.

Operational signals

Common operational warning signs include slower response times, growing ticket backlogs, repeated escalations, and increasing workarounds by business teams.

If users are bypassing IT to get work done, the model is no longer serving the organization.

Financial signals

Rising IT costs without measurable improvements are another red flag.

This might look like MSP spend approaching the cost of full-time hires, or internal IT overtime quietly inflating budgets. Tool sprawl and duplicate licenses often appear when ownership is unclear.

Security and risk signals

Security gaps are often the most dangerous signal.

Missed patches, inconsistent access reviews, undocumented backups, and audit findings all indicate that responsibility is not clearly owned. Whether IT is internal or outsourced, accountability must be explicit.

Cultural signals

Burnout is a signal, not a staffing issue.

If internal IT staff are constantly firefighting or if MSP relationships feel adversarial rather than collaborative, the structure itself is likely wrong.

When switching IT models makes sense

Switching IT models is not a failure. It is a sign of organizational maturity.

Switching from MSP to internal IT

This transition often happens as companies cross fifty to one hundred employees, especially in regulated or revenue-critical environments.

The business starts to need faster decisions, deeper system knowledge, and IT involvement in planning. MSP ticket queues and standard workflows begin to feel restrictive.

In these cases, internal IT provides ownership and immediacy that outsourcing cannot.

Switching from internal IT to an MSP

This shift usually occurs when internal teams are stretched too thin.

One or two people cannot realistically provide twenty-four hour coverage, deep security expertise, and consistent documentation. When vacations cause outages or critical tasks are delayed due to workload, outsourcing becomes more cost effective.

Moving to a hybrid model

For many organizations, the most cost-effective answer is neither extreme.

A hybrid or co-managed model combines internal ownership with external scale. Internal IT handles strategy, security decisions, and business alignment. An MSP provides helpdesk, monitoring, and redundancy.

This model reduces single points of failure while controlling costs.

Why switching feels harder than it is

Most leaders overestimate the technical difficulty of switching IT models.

The real challenges are organizational.

Knowledge transfer, tool ownership, access control, and communication create friction, not technology itself. When documentation is weak or responsibilities are unclear, switching feels chaotic.

When planned deliberately, transitions are predictable and low risk.

The role of tooling during transitions

One overlooked factor during IT transitions is tooling consistency.

When tools are tied to a specific MSP or poorly documented internal workflows, switching becomes harder than it needs to be. Organizations benefit from platforms that support both internal teams and service providers without forcing lock-in.

This is where tools like Level fit naturally into modern IT strategies.

Level is designed to work equally well for internal IT teams, MSPs, and co-managed environments. Because it emphasizes clarity, automation, and shared visibility, it reduces friction when responsibilities shift.

Instead of rebuilding processes from scratch during a transition, teams can maintain continuity while changing who operates the system.

How to avoid choosing the wrong path again

The most effective organizations treat IT models as flexible, not permanent.

They revisit the decision when headcount changes, when risk increases, or when the business becomes more technology dependent. They measure success by outcomes, not by whether IT is internal or outsourced.

Most importantly, they choose tools and processes that support evolution rather than locking them into a single operating model.

Final thoughts

There is no universally correct IT model.

The wrong choice is not using an MSP or building internal IT. The wrong choice is failing to reassess as the business evolves.

Companies that succeed long term are not those that get it right once. They are the ones that recognize when the model no longer fits and have the discipline to change it before it becomes a liability.

If your organization is growing, facing new risks, or feeling friction in IT delivery, the question is not whether your current model is wrong.

The real question is whether it still fits where the business is going.