Depending on the service level and business philosophy, managed services have different pricing models. In addition to sales and service delivery, pricing ranks among the top considerations when starting a managed service provider (MSP) or transitioning from another channel business model to managed services. Choosing the right pricing strategy is crucial. Managing MSP pricing is challenging because of its opaque nature, and most providers don’t want to disclose their pricing plan to their competitors.
The guide illuminates standard Managed Service Pricing Models and practices that can help you make better decisions in selecting the best managed IT service provider.
Managed IT Services: What are they?
Before we discuss managed service pricing models, let’s examine what managed IT services are. This will allow us to understand better the pricing structures that they employ.
In essence, managed IT services cover a wide range of IT-related services provided by third parties rather than the internal IT staff of the company. Some of these services include on-site assistance, system diagnoses, remote management, and data recovery.
In most cases, the services to be rendered are defined in a contract between the client and the MSPs and the required expectations.
Pricing Models For Managed IT Services
Many factors affect managed IT services pricing, so it isn’t easy to pin down exact figures. Businesses use various specific technologies every day that are significantly different from one another in terms of complexity. Generally, the more complicated the technology, the more cost it requires to maintain.
Rather than trying to find specific numbers that cover every possible IT scenario, let’s look at a few of the most popular managed service pricing models. Managing IT services under these models allows for more accurate pricing while covering a wide range of services.
Small and midsize businesses (SMBs) and enterprise customers use the monitoring-only pricing model to provide network monitoring and alerting. These services can be provided by the MSP or the enterprise customer’s in-house IT staff, or both.
This pricing model allows MSPs to keep their clients informed about issues, which are then handled by the client’s internal IT team. If necessary, the MSP can assist on a fee basis.
For example, an MSP provides updating (antivirus), patch management, and network/server monitoring services for a monthly fee. This also provides an opportunity for the MSP to charge for remediation activities identified via remote monitoring.
Service levels for monitoring can be as little as essential monitoring and alerts provided by the in-house IT department, or an MSP can offer much more in-depth services, such as complex support. From SMBs and midsize businesses to large enterprises, this model is sold to all sizes of companies.
It’s no wonder managed IT service providers continue to use the per-device model. In this pricing model, providers calculate their charges based on the number of devices their clients own, including personal computers and workstations. The number of devices is more critical to MSPs than the total number of users.
However, as more devices are supported, things become more complicated. Recent trends of working from home and bringing your device (BYOD) can complicate billing due to the proliferation of smartphones and tablets. If there are many devices, the per-user pricing model could be the most appropriate choice.
This pricing model is similar to the per-device model, with the difference being that a flat fee is billed per user per month and includes support for all devices owned by the user.
MSPs supporting clients with multiple devices typically use this model to cover all devices used by each end-user, thereby simplifying billing for their clients.
A managed service provider counts users during sign-up, and most conduct annual and semi-annual audits to ensure a competitive price and verify user counts.
The model offers MSPs the freedom to design service packages whose prices increase from tier to tier as more comprehensive services are provided.
There are four main categories of service packages: Bronze, Silver, Gold, and Platinum, where Bronze indicates the least expensive package with essential services, whereas Silver and Gold will cost more.
The flat-fee monthly model offers the most flexibility and complete package, including remote support, on-site support, lab time, and bench time. As part of this model, MSPs may offer services for a limited time per day and charge clients for services that extend beyond that period.
Also, some MSPs provide 24-hour support, seven days a week, 365 days a year. Customers prefer this model because they can predict their costs over time and avoid any billing fluctuations.
A La Carte
In this pricing model, organisations are only charged for the IT services they use instead of other managed IT all-inclusive services. A considerable advantage of this approach is that you can customise precisely the services you require, thereby saving a lot of money over other packages. As such, the A la carte model is a more cost-effective solution for most businesses.
According to this pricing model, a flat fee is charged to the client monthly for all services rendered. Among these services are monitoring, hardware and software support, and on-site technical assistance.
This is considered the best model for the client, as it guarantees a full range of services without any financial surprises. Managed services providers can hire qualified personnel, upgrade critical equipment, and offer the best cybersecurity support with a guaranteed monthly income.
Choosing A Pricing Model
MSPs and pricing models come in various forms. Each service provider should have a clear understanding of what they are offering, identify their customer prospects, and should be able to price their service accordingly.
A monitoring-only pricing model may prove the best option for a company just starting in managed services since a limited monitoring offering would be the ideal way to start. A company that provisions multiple devices for its employees might consider a per-user pricing model.
As far as pricing managed IT services go, there is no one-size-fits-all solution. What is most effective for Jane may not be the best option for Doe, so after careful consideration, you might find that a blend of these pricing models is most effective, or you might want to test another way of pricing.
Even so, it’s necessary to always keep an eye on costs since if your vendors’ or customers’ needs change, you probably might need to shift along with them to stay competitive and profitable.