Are you buying IT support services and solutions for your business?
Are you struggling to understand the range of pricing you are receiving?
Don’t know who to trust?
Concerned if you make the wrong choice your business will be at risk?
This blog post has been written just for you, well, you and the Managed Service Providers (MSP’s).
You may refer to them as your IT Support Business (ITSB). We typically help to manage and grow their business, however today we are approaching the topic of pricing from your perspective, our customers’ customer!
Firstly, who are ‘we’ and what qualifies us to write about this topic?
We are Adam and Daniel, former MSP business owners, who have been active in the IT channel since the mid-90s. Having sold our respective businesses in trade sales, freeing us to consult and support our peers in recent years. We have direct experience and a wide insight from our customers, totalling thousands of end-user and IT services businesses spanning the past four decades with our current MSP customers generating more than £50m in annual revenue.
What’s in this for us though?
Well, our fates are directly entwined, as are our customers. If you pay ‘the right price’ and optimise the balance between risk and price (for you), you will be a happy long-term customer of our customer, who will in turn have a sustainable and profitable business, that continues to be a sustainable and profitable customer for us!
Let’s get down to “IT” then, starting with the price range. We would expect you to see (having gone out to the marketplace) prices broadly between £25.00 and £250.00 per user, device, endpoint or all three units combined. You could well see pricing above and below this range, and there will always be exceptions. Why such as wide range? We explore the rationale below;
Maturity of the MSP
Their commercial and operational maturity, not their age, although the quantity of experience will be a key factor in their development.
A couple of examples, and therefore questions to ask of your prospective IT partner to assess their financial maturity could include; do they produce monthly management accounts, do they have a budget, do they collect payment via direct debit? They should be answering yes to all three.
Regarding their operational maturity, questions you should ask include how they ensure consistent service delivery and resilience?
A mature IT partner would talk about their SOPs, dedicated technical and commercial contacts and most likely a well-chosen yet limited technical stack (the products, services, and solutions that all mature MSPs need to standardise on to be viable).
The ‘jack of all trades’ IT partner is a thing of the past or a sign of an immature MSP. A mature MSP will describe how they partner with other specialists and are active in the MSP community, networking and attending peer groups for learning. The most mature will typically have an advisor such as MSP Finance Team!
Location of MSP or MSP Team/s
We do see price differences geographically, although this is not universal.
After all, a mature MSP will be protecting their margin, so just because the office or staff costs are lower in a particular area their pricing should not automatically be lower.
Take London for example, lots of competition, hundreds of MSPs operate here, yet office and staff costs can be higher so you will see a range of pricing. Also remember there are a range of customers here too.
Accelerated by the pandemic (customers and MSPs embracing remote working) offshoring has been increasing in recent years, which can reduce an MSPs staff cost, however, is likely offsetting the lack of availability of local staff or the increase salary demands of local staff due to inflation and the skills shortage. Therefore, London based with offshore teams does not mean lower pricing by default.
Customer Niche or Specialisation
This can affect pricing at the high and lower end, for example focusing on a niche that has a simple deployment of technology, narrow usage range and normal hours only could result in a lower price point, whereas a high demand customer with a specialist technology or service could mean a much higher (value-based) price.
Unit pricing
There is no perfect universal measure here. Some customers will have more devices than users and vice versa, so if an MSP has a simple unit for pricing they could appear more or less expensive, with the outlier examples being a high margin or loss for the MSP.
What is included
As the MSP market and its technology have matured, the range of products and services have increased.
Driven by security, for which the combinations of defensive layers are seemingly infinite and confused by an equally wide-ranging education on the security topic for both MSP and customers.
A decade ago the bundled items were normally a remote monitoring and management (RMM), an agent and maybe an anti-virus licence. Today an MSP with a medium security posture could be insistent on a minimum-security bundle, consisting of multiple products, costing the MSP itself easily £20 per user, per month for the protection of their customer and their own business.
All that technology needs management time too. Some will make these products optional, and some will do a good job of supporting the customer to make an appropriate decision on spend, and some wont. The traditional inclusions will still apply also, such as coverage hours, remote and on-site allowances, account management and strategic proactive guidance.
What are the pros and cons of the outlying pricing points
Low end pricing unsurprisingly is likely to result in a low-end inconsistent service, higher risk, and ultimately higher cost in event of unplanned IT event.
High end pricing should reduce risk and improve consistency of delivery to a reasonable standard.
What is the right price then?
It depends on all the above elements!
For a typical UK SME business, a price point between £50.00 and £150.00 per user (based on total monthly recurring cost), device, endpoint or all three units combined is a narrower range to focus on.
Want to know more?
Adam and Daniel are available to help you, under our “Ally” service with an “End-Customer Governance” Track, which includes;
Discovery of business, IT service history and incumbent MSP/internal team
Regular review, recommendation and mediation assistance of performance and strategic guidance
Scheduled and reactive interactions
Learn more at https://mspfinanceteam.com/ally/ or to discuss further schedule a call at https://calendly.com/danielmspft