Key Takeaway: Co-managed IT works when the scope is defined clearly and the relationship with the internal IT person is managed as a partnership. The most common failure is ambiguity about who is responsible for what. Define it in writing before the engagement starts.
Co-managed IT is the fastest-growing segment of the managed services market, and most MSPs either ignore it or do it badly. The model exists because the world is not neatly divided into businesses that have no IT staff and businesses that have a full IT department. A large and growing portion of the market sits in between: companies with one or two internal IT people who need more depth, more coverage, or more specialized expertise than their internal team can provide.
According to MSP industry data for 2026, 40% of mid-market companies now use co-managed IT, up from 25% in 2022. That growth reflects a structural reality: the complexity of modern IT environments has outpaced what most internal IT teams can handle alone, and the talent shortage has made hiring additional internal staff increasingly difficult.
What Co-Managed IT Actually Is
Co-managed IT is a model in which an MSP works alongside an internal IT person or team rather than replacing them. The MSP and the internal team share responsibility for the technology environment under a defined scope of work. The internal team handles what they handle well. The MSP provides what the internal team cannot: after-hours coverage, specialized security expertise, tooling infrastructure, and the strategic advisory layer that most internal IT people do not have time to deliver.
The model is not a compromise between full managed services and break-fix. It is a distinct service offering that requires its own pricing structure, its own scope definition, and its own relationship management approach. MSPs that treat co-managed IT as a reduced version of their standard agreement typically deliver a reduced version of their standard service.
Why Co-Managed IT Is Growing
Three forces are driving the growth of co-managed IT in 2026.
The talent shortage. The share of MSPs reporting difficulty hiring skilled technicians nearly doubled year-over-year in 2026, according to Kaseya’s 2026 State of the MSP Report. The same shortage affects internal IT departments. Companies that cannot hire a second IT person are turning to MSPs to fill the gap without the overhead of a full-time hire.
Cybersecurity complexity. The security requirements for SMB and mid-market businesses have grown significantly. Cyber insurance carriers now require documented security controls, 24/7 monitoring, and incident response capabilities that most internal IT teams cannot deliver alone. An MSP that provides the security layer while the internal team handles day-to-day operations is a natural fit.
After-hours coverage. An internal IT person works business hours. Technology does not. The co-managed model allows companies to maintain an internal IT presence during business hours while relying on the MSP for after-hours monitoring, incident response, and on-call coverage.
How to Structure a Co-Managed IT Agreement
The most important element of a co-managed IT agreement is a clear definition of who is responsible for what. Ambiguity about ownership is how gaps appear, and gaps in IT responsibility show up at the worst possible time.
The scope definition should address every major IT function and assign it clearly to either the internal team or the MSP. Common divisions:
MSP responsibilities: 24/7 monitoring and alerting, after-hours incident response, security tooling and management (EDR, DNS filtering, backup), patch management, security awareness training, vCIO advisory, and compliance support.
Internal team responsibilities: Day-to-day helpdesk support, user onboarding and offboarding, hardware procurement and deployment, vendor relationship management, and first-line incident response during business hours.
Shared responsibilities: Documentation (both parties contribute), escalation handling (internal team escalates to MSP for complex issues), and quarterly business reviews (both parties participate).
The agreement should also address the relationship between the MSP and the internal IT person. This is the most sensitive element of co-managed IT. The internal IT person may feel threatened by the MSP’s involvement, or may resist the MSP’s processes and standards. The MSP that approaches this relationship as a partnership rather than a takeover will have a fundamentally different experience than the one that does not.
Pricing Co-Managed IT
Co-managed IT is typically priced lower than full managed services because the MSP is delivering a subset of the full service. The internal team handles a portion of the work, which reduces the MSP’s labor cost per client.
A reasonable starting point for co-managed IT pricing is 50% to 70% of the full managed services rate, depending on the scope of what the MSP is delivering. If the MSP is providing primarily the security layer and after-hours coverage, the lower end of that range is appropriate. If the MSP is providing most of the managed services functions with the internal team handling only day-to-day helpdesk, the higher end is more appropriate.
The pricing should reflect the actual cost of delivering the service, not a discount from the full managed services rate. Calculate what the MSP’s labor and tooling costs are for the specific scope, add the target margin, and price accordingly.
The Internal IT Person Relationship
The internal IT person is the most important relationship in a co-managed IT engagement. Get it right and you have a partner who makes the engagement more effective. Get it wrong and you have a source of friction that undermines everything else.
The internal IT person’s concerns are legitimate. They may worry that the MSP is there to replace them, that the MSP will make them look bad, or that the MSP’s processes will add work rather than reduce it. Address those concerns directly and early.
The framing that works: the MSP is there to make the internal IT person more effective, not to replace them. The MSP handles the things that are hard to do alone: 24/7 monitoring, specialized security expertise, after-hours coverage. The internal IT person handles the things that require local knowledge and relationships. Both are necessary. Neither is sufficient without the other.
When to Recommend Co-Managed IT vs. Full Managed Services
Co-managed IT is the right recommendation when a client has an internal IT person who is genuinely capable and who the business values, but who needs support in specific areas. It is not the right recommendation when the internal IT person is the problem, when the internal team’s processes are incompatible with the MSP’s standards, or when the client is using co-managed IT as a way to avoid paying for full managed services.
The honest conversation with a prospect who has internal IT: what does your internal person do well, and where are the gaps? If the gaps are in security, after-hours coverage, and strategic advisory, co-managed IT is a natural fit. If the gaps are in basic operational competence, the solution is not co-managed IT. It is a different internal IT person, or a transition to full managed services.
Frequently Asked Questions
What is the difference between co-managed IT and full managed services?
Full managed services means the MSP takes complete responsibility for the client’s IT environment. Co-managed IT means the MSP shares responsibility with an internal IT person or team. The scope of what the MSP delivers is smaller in co-managed IT, and the pricing reflects that. The relationship management is more complex because it involves coordinating with an internal team rather than being the sole IT provider.
How do I handle it when the internal IT person resists my processes?
Address it directly and early. The internal IT person’s resistance usually comes from one of three places: fear of being replaced, disagreement with the MSP’s approach, or a genuine belief that their current processes are better. The first requires reassurance. The second requires a conversation about why the MSP’s standards exist. The third requires listening, because sometimes the internal person is right. The MSP that approaches this as a partnership rather than a takeover will resolve most resistance within the first 90 days.
Should I offer co-managed IT to all clients?
Only to clients who have internal IT staff. Co-managed IT is not a discount tier for clients who want managed services at a lower price. It is a distinct service model for clients who have internal IT capacity that the MSP is supplementing. Offering it to clients without internal IT creates scope confusion and typically results in the MSP delivering full managed services at co-managed IT pricing.
About Brent Lacy: Brent Lacy is a technology advisor and the voice behind Rewired MSP. He helps MSPs operate with greater maturity and helps business owners make IT choices that make them more secure and more efficient. He is the author of Rewired MSP: Mastery, Scalability & Performance, vCIO Rewired: Virtually Conquering IT Obstacles, and Near Miss: Preventable IT Failures Threatening Your Business Security.
Related Reading
- MSP vs. In-House IT: An Honest Comparison for Business Owners
- What Is an MSP? The Definition, the Model, and What Good Looks Like
- Crafting Honest SLAs: Why Most MSP Service Agreements Are Fiction
- MSP Growth and Sales Hub
