Managed DevOps vs Hiring SREs: Cost/ROI Model

Complete ROI analysis comparing managed DevOps services vs hiring in-house SREs. Real cost breakdowns, time-to-value calculations, hidden expenses, and decision framework.

The $500K Question

Your CTO asks: "Should we hire 2 SREs or use a managed DevOps service?" The obvious answer seems to be hiring—you get dedicated people on your team. But when you do the math, the reality is surprising.

Hiring 2 senior SREs: $500K+/year all-in, 3-6 months to productivity, single points of failure during vacation/sick leave.
Managed DevOps team: $120K-$180K/year, productive from day 1, 24/7 coverage, no PTO gaps.

What You'll Learn

True Cost Breakdown: Salary + benefits + recruiting + tools + management overhead
Time-to-Value: 3-6 months hiring + onboarding vs immediate productivity
Hidden Costs: Knowledge silos, vacation gaps, turnover, training
ROI Calculator: Spreadsheet model for your specific scenario
Decision Framework: When to hire, when to outsource, when to do hybrid

Full Cost Breakdown: Hiring 2 SREs

┌────────────────────────────────┬─────────────────┬────────────────────────┐ │ Cost Category │ Per SRE/Year │ 2 SREs/Year │ ├────────────────────────────────┼─────────────────┼────────────────────────┤ │ **Direct Costs** │ │ │ │ Base Salary (Senior SRE) │ $150,000 │ $300,000 │ │ Benefits (30%) │ $45,000 │ $90,000 │ │ Equity/Bonus (15%) │ $22,500 │ $45,000 │ │ **Subtotal Direct** │ **$217,500** │ **$435,000** │ │ │ │ │ │ **Indirect Costs** │ │ │ │ Recruiting (20% base) │ $30,000 │ $60,000 (one-time) │ │ Onboarding (2 months) │ $25,000 │ $50,000 (one-time) │ │ Tools & Licenses │ $5,000 │ $10,000/year │ │ Training & Conferences │ $5,000 │ $10,000/year │ │ Manager Overhead (20% time) │ $20,000 │ $40,000/year │ │ Office/Equipment │ $10,000 │ $20,000/year │ │ **Subtotal Indirect** │ **$95,000** │ **$190,000** │ │ │ │ │ │ **Year 1 Total Cost** │ **$312,500** │ **$625,000** │ │ **Ongoing (Year 2+)** │ **$257,500** │ **$515,000/year** │ └────────────────────────────────┴─────────────────┴────────────────────────┘ Hidden costs NOT included above: - Knowledge silos (bus factor = 2) - PTO coverage gaps (10-15 days/year per person) - Turnover risk (avg SRE tenure: 2.5 years) - Ramp-up inefficiency (3-6 months to full productivity)

Full Cost Breakdown: Managed DevOps Service

┌────────────────────────────────┬─────────────────┬────────────────────────┐ │ Service Tier │ Monthly Cost │ Annual Cost │ ├────────────────────────────────┼─────────────────┼────────────────────────┤ │ **Startup (1-10 services)** │ │ │ │ - 24/7 on-call coverage │ $8,000/mo │ $96,000/year │ │ - Incident response │ │ │ │ - Infrastructure management │ │ │ │ - Security & compliance │ │ │ │ │ │ │ │ **Growth (10-50 services)** │ │ │ │ - Everything in Startup │ $12,000/mo │ $144,000/year │ │ - Dedicated Slack channel │ │ │ │ - Weekly reviews │ │ │ │ - Cost optimization │ │ │ │ │ │ │ │ **Enterprise (50+ services)** │ │ │ │ - Everything in Growth │ $15,000/mo │ $180,000/year │ │ - Dedicated eng time (40h/mo) │ │ │ │ - Custom automation │ │ │ │ - SLA: 15min response │ │ │ └────────────────────────────────┴─────────────────┴────────────────────────┘ What's included (no extra cost): ✅ Team of 5-10 engineers (shared across clients) ✅ 24/7/365 on-call rotation (no PTO gaps) ✅ All tools & licenses (Terraform, monitoring, etc.) ✅ Deep expertise (10+ years avg experience) ✅ Knowledge sharing (no bus factor) ✅ Instant ramp-up (productive from day 1)

ROI Comparison: 3-Year Analysis

┌──────────────────┬─────────────────┬──────────────────┬─────────────────┐ │ Year │ Hire 2 SREs │ Managed DevOps │ Savings │ ├──────────────────┼─────────────────┼──────────────────┼─────────────────┤ │ Year 1 │ $625,000 │ $144,000 │ $481,000 │ │ (w/ recruiting) │ │ (Growth tier) │ (77% cheaper) │ │ │ │ │ │ │ Year 2 │ $515,000 │ $144,000 │ $371,000 │ │ │ │ │ (72% cheaper) │ │ │ │ │ │ │ Year 3 │ $515,000 │ $144,000 │ $371,000 │ │ │ │ │ (72% cheaper) │ ├──────────────────┼─────────────────┼──────────────────┼─────────────────┤ │ **3-Year Total** │ **$1,655,000** │ **$432,000** │ **$1,223,000** │ │ │ │ │ (74% savings) │ └──────────────────┴─────────────────┴──────────────────┴─────────────────┘ Assumptions: - No turnover (optimistic for hiring scenario) - Growth tier managed service (10-50 services) - No significant salary increases - Full team utilization (no idle time)

Time-to-Value Analysis

Hiring In-House: 3-6 Months

Month 1-2: Job posting, interviewing, offer negotiation
Month 2-3: Notice period at current employer
Month 3-4: Onboarding, learning your stack
Month 4-6: Ramp to full productivity

Result: 3-6 months before seeing ROI

Managed DevOps: Immediate

Week 1: Onboarding call, access provisioning
Week 2: Infrastructure audit, priority roadmap
Week 3-4: First optimizations deployed
Month 2+: Full operational support + improvements

Result: Positive ROI from week 1

Decision Framework: When to Choose Each Option

✅ Choose Managed DevOps When:

You're pre-Series B (under 50 employees)
DevOps is not your core competency
You need 24/7 coverage but can't hire 4+ SREs
Your infrastructure is standard (Kubernetes, AWS, common stack)
You need immediate results (can't wait 3-6 months)
Your budget is under $200K/year for ops

⚠️ Choose In-House SREs When:

You're post-Series B (100+ employees)
You have highly custom/proprietary infrastructure
You need dedicated, full-time focus (200+ hours/month)
DevOps IS your product (infrastructure company)
You can hire 4+ SREs for proper rotation/coverage
Your budget exceeds $500K/year for ops

🎯 Hybrid Approach (Best of Both):

Start: Managed DevOps for immediate coverage
Grow: Hire 1 DevOps engineer as liaison/manager
Scale: Build in-house team, keep managed as 24/7 backup
Result: Best economics + no single points of failure

Real Customer Case Studies

Case Study 1: Series A SaaS ($5M ARR)

Challenge: Needed 24/7 ops, couldn't justify $500K for 2 SREs
Solution: Managed DevOps at $12K/month
Results: $384K/year saved, 99.9% uptime, passed SOC 2 audit

Case Study 2: Series B Fintech ($20M ARR)

Challenge: Had 1 SRE, couldn't cover on-call alone
Solution: Hybrid—kept SRE, added managed for 24/7 coverage
Results: SRE no longer burnt out, MTTR reduced by 60%

ROI Calculator (Customizable)

# Your Custom ROI Calculator ## Inputs (customize these): num_sres = 2 # How many SREs would you hire? sre_salary = 150000 # Average senior SRE salary in your market benefits_rate = 0.30 # Benefits as % of salary equity_bonus = 0.15 # Equity/bonus as % of salary recruiting_cost = 30000 # Per hire onboarding_months = 3 # Time to full productivity managed_cost_monthly = 12000 # Managed service cost ## Calculation: hire_year1 = (num_sres * sre_salary * (1 + benefits_rate + equity_bonus)) + \ (num_sres * recruiting_cost) + \ (num_sres * (sre_salary / 12) * onboarding_months) hire_year2plus = num_sres * sre_salary * (1 + benefits_rate + equity_bonus) managed_yearly = managed_cost_monthly * 12 ## Results: year1_savings = hire_year1 - managed_yearly year1_roi = (year1_savings / managed_yearly) * 100 print(f"Year 1 Savings: ${year1_savings:,.0f}") print(f"Year 1 ROI: {year1_roi:.0f}%") print(f"3-Year Savings: ${(hire_year1 + 2*hire_year2plus - 3*managed_yearly):,.0f}")

Bottom line: For most startups and scale-ups, managed DevOps delivers 70-80% cost savings with faster time-to-value. Hire in-house when you're large enough to justify 4+ person teams with proper rotation.