Is MDR expensive? Let’s look into the costs and returns.

Mar 25

Comprehensive Analysis of the Financial Implications of Managed Detection and Response (MDR) Deployment vs. Hiring Internal IT Staff for 24/7 Security

In the age of increasing cyber threats, organizations of all sizes must prioritize robust cybersecurity measures. Many businesses face a difficult decision: should they invest in Managed Detection and Response (MDR) services, or should they allocate resources toward building and maintaining an in-house IT security team? Both options come with their own set of costs and benefits, and understanding the financial implications of each choice is crucial for making the most informed decision.

This article provides an in-depth analysis of the financial considerations associated with the deployment of MDR versus hiring internal IT staff to handle an organization’s cybersecurity needs 24/7. We'll explore direct and indirect costs, scalability, risk mitigation, and overall efficiency to determine which option offers the best value for money.

Understanding the Two Approaches

Before diving into the financial implications, it's important to clearly understand what each of these two cybersecurity strategies entails:

Managed Detection and Response (MDR): MDR is a third-party service that offers continuous monitoring, detection, analysis, and response to cybersecurity threats. The provider typically uses advanced security tools (like EDR, SIEM, and threat intelligence platforms) and a team of security experts to handle all aspects of the organization’s security operations, including threat hunting, incident response, and breach containment. MDR services are generally subscription-based, providing ongoing 24/7 protection.
Internal IT Staff for 24/7 Security: Alternatively, organizations can build an internal IT security team responsible for monitoring and securing the company’s network and IT infrastructure around the clock. This includes hiring cybersecurity professionals, investing in security tools, and maintaining infrastructure for continuous threat monitoring and response. The internal team is responsible for detecting and responding to cyber threats, ensuring compliance, and conducting vulnerability assessments.

1. Upfront and Operational Costs

MDR Deployment Costs:

MDR services typically operate under a subscription-based pricing model, with fees based on factors like the size of the organization, the number of endpoints or devices that need protection, and the level of service required. Common MDR pricing structures include:

Per Endpoint/Device: Fees based on the number of endpoints, such as workstations, servers, and mobile devices that need monitoring and protection.
Per User: A pricing model based on the number of employees or users that require coverage.
Service Tiers: Many MDR providers offer different service levels that can be scaled up or down depending on the organization's specific needs, such as adding more advanced threat-hunting capabilities or incident response services.

For example, a typical MDR service may cost anywhere from $30 to $100 per endpoint per month (depending on the provider and level of service), and this price can vary based on the size and complexity of the organization.

Internal IT Staff Costs:

Building and maintaining an internal IT security team incurs a variety of costs. The initial hiring and recruitment process can be expensive, and the ongoing expenses include salaries, benefits, training, and security tool subscriptions.

Salaries and Benefits: According to the 2023 Global Knowledge IT Skills and Salary Report, the average salary for a cybersecurity professional in North America is between $70,000 and $150,000 per year, depending on their level of experience. For larger organizations or those with high-security needs, the team may need to include several roles, including security analysts, network security engineers, threat hunters, and incident responders. On average, an organization might need 4–10 staff members dedicated to IT security (especially for 24/7 operations).
Training and Certifications: Cybersecurity professionals need to stay current with the latest threats, tools, and compliance requirements. Certifications such as Certified Information Systems Security Professional (CISSP) or Certified Ethical Hacker (CEH) cost anywhere from $1,000 to $5,000 per employee. These costs are typically paid by the employer to ensure that staff stay competitive in the field.
Security Tools and Infrastructure: An internal IT team will need to invest in security tools, such as firewalls, endpoint protection software, SIEM systems, and network monitoring tools. These tools can cost tens of thousands of dollars annually. For example, a SIEM solution can range from $10,000 to $50,000 per year, depending on the organization’s size and complexity.

In total, hiring and maintaining an internal IT security team can cost between $500,000 to $1.5 million annually, depending on the size of the team and the infrastructure requirements.

2. Ongoing Operational Efficiency

MDR Operational Efficiency:

MDR services are designed to maximize operational efficiency by providing a team of cybersecurity experts who monitor threats around the clock. Since MDR providers specialize in security, they often have access to advanced detection technologies and threat intelligence networks that would be expensive or difficult for individual organizations to replicate.

By outsourcing to an MDR service, organizations can avoid the need to hire, train, and retain a full internal team, reducing both time and effort spent managing cybersecurity operations. Additionally, the third-party provider takes on the responsibility of continuously maintaining and upgrading the security infrastructure, ensuring that the organization benefits from the latest protection without having to manage updates internally.

Internal IT Staff Operational Efficiency:

Managing IT security internally requires a considerable ongoing effort. Organizations must invest time in recruitment, training, and upskilling their IT staff, and in many cases, the team must constantly adapt to new and emerging threats. The need for 24/7 vigilance can lead to burnout and turnover, requiring businesses to hire new staff and incur additional costs to onboard and train them.

Furthermore, internal teams may struggle to keep up with the ever-changing threat landscape, often relying on traditional antivirus software and basic threat detection tools. This inefficiency increases the likelihood of attacks going undetected, and in turn, the organization may face longer recovery times and higher remediation costs.

3. Scalability and Flexibility

MDR Scalability:

One of the most significant financial advantages of MDR is its scalability. As organizations grow or their needs evolve, MDR services can easily scale to match new requirements. Whether expanding to new offices, adding more users, or integrating new devices into the network, an MDR provider can adjust the level of coverage and the number of endpoints being protected without requiring a major restructuring of the organization’s internal IT staff or infrastructure.

Additionally, many MDR services offer flexible contracts and tiered pricing, allowing businesses to pay only for the services they need at any given time. As a result, companies can better align security costs with their budget and security requirements.

Internal IT Staff Scalability:

Scaling an internal IT security team requires additional hiring, training, and sometimes the acquisition of new security tools. This can be particularly costly as the organization grows and requires more specialized expertise. For example, adding new cybersecurity roles or expanding the team's hours of operation to maintain 24/7 vigilance could quickly add significant operational costs.

Moreover, maintaining scalability while avoiding gaps in coverage can strain HR resources. If an organization has to hire and onboard several new cybersecurity professionals quickly, it may not always find the talent necessary to fill those roles, leading to delays or gaps in protection.

4. Risk Mitigation and Long-Term Value

MDR Risk Mitigation:

MDR services are particularly valuable in terms of risk mitigation. Cyberattacks are becoming more sophisticated, and the financial consequences of a breach (data loss, regulatory fines, reputational damage, etc.) can be devastating for an organization. MDR services often provide cyber insurance discounts due to their proactive nature, and organizations benefit from a faster response time, reducing the impact of an attack.

Furthermore, MDR providers invest heavily in threat intelligence and advanced detection methods, significantly increasing the likelihood of identifying an attack early. By detecting and mitigating threats before they escalate into full-scale breaches, MDR services can prevent costly incidents, minimizing downtime and data loss.

Internal IT Staff Risk Mitigation:

An internal IT security team is tasked with managing all risks associated with the organization’s IT infrastructure. However, this often means that internal teams may miss emerging threats due to resource limitations or a lack of specialized expertise. While internal teams can be effective at preventing known attacks, they may struggle to identify novel attack vectors or address vulnerabilities that require immediate attention.

In addition, the potential cost of a breach, especially in cases involving sensitive data or regulated industries, can outweigh the investment in an internal IT team. The long-term value of an MDR service lies in its proactive detection and response, which lowers the risk of a costly data breach or security incident.

5. The Total Cost of Ownership (TCO)

When comparing the financial implications of MDR versus in-house IT security staff, it’s important to evaluate the Total Cost of Ownership (TCO), which includes all costs associated with deploying and maintaining a security strategy.

MDR TCO:

Initial Setup Costs: Low to moderate depending on the provider and scope of services.
Ongoing Costs: Subscription fees that scale based on the number of endpoints and service tiers.
Hidden Costs: Lower operational burden, reduced HR expenses, and reduced cost of breach remediation.

Internal IT Staff TCO:

Initial Setup Costs: High, including salaries, recruitment, training, and tool procurement.
Ongoing Costs: Continuous staffing, tool maintenance, training, and infrastructure management.
Hidden Costs: Potential inefficiencies, employee turnover, burnout, and gaps in coverage.

In conclusion, while hiring internal IT staff for 24/7 security might appear cost-effective in the short term, it is often more expensive in the long run due to hiring, training, infrastructure, and overhead costs. MDR, on the other hand, offers a predictable, scalable, and cost-efficient solution, providing a better return on investment for organizations aiming to ensure robust cybersecurity.

Sources for Further Reading:

Cybersecurity Ventures – Cybersecurity Market Report, detailing the growing costs of cyberattacks and the increasing demand for MDR solutions.
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Global Knowledge – Annual IT Skills and Salary Report, which provides detailed salary data and insights into the cost of cybersecurity professionals.
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Gartner – "Market Guide for Managed Detection and Response Services," which provides a detailed analysis of the MDR market and its growing role in cybersecurity.
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Neville Driver