How to Understand Managed IT Service Pricing

How to Understand Managed IT Service Pricing

By on Mar 15, 2022 in Commercial Construction, Healthcare, Professional Services, Technical

The managed IT services model offers a long list of benefits. In addition to greater network stability, 24/7 technology support, and strategic IT planning, one of the great advantages of working with an MSP is that it eliminates the budgeting uncertainty and unexpected costs that sometimes come with IT management.

By replacing expensive hourly consultant, who come onsite only after your network has already stopped working properly, the MSP support model provides all the proactive onsite and remote IT support that your business needs, for a single monthly fee.

But there are many MSPs out there, each with slightly different pricing models and offerings. We thought it’d be useful to outline each of those pricing strategies and explore why and how MSPs vary in their pricing, so that business owners in Ohio can navigate the process of hiring their first MSP with more confidence.

An Overview of the Three Dominant MSP Pricing Models

There are a two major categories for how MSP are pricing their services, and one new model that’s started to gain currency in recent years, as cybersecurity and regulatory compliance have become a topics of central concern. Let’s look at them one by one:

  • Per-user Pricing
    This straightforward model provides users with full support no matter how many devices they’re accessing, including workstations, laptops, and mobile phones. Per user pricing can fluctuates significantly (from $100 per user to over $250 per user) between MSPs, based on the level of support they provide, how they plan on defending your network from cyberattacks, your regulatory compliance needs, and other factors.
  • Per-device Pricing
    Device-based pricing is more flexible than user-based pricing. Because it allows the MSP to tailor their pricing specifically to the needs of a client, it may seem at first glance to be the better choice, but it’s not that simple. Device-based pricing can inflate the IT support bill of midsized organizations and can lead to unnecessary cost complexity for smaller firms, as new devices are added or removed.
  • Risk-based pricing
    While user- and device-based pricing are the most popular models, risk-based pricing has increased in popularity in recent years as cybersecurity and regulatory compliance concerns have come to dominate so many conversations around technology. By estimating the amount of cyber risk associated with the client, this model helps both the MSP and client achieve greater clarity around the costs associated with securing their devices and data.

It’s worth noting that while some MSPs will use one pricing model consistently, others will flexibly combine them to arrive at the most efficient pricing strategy for each client.

According to research from Kaspersky, 70% of businesses plan to outsource or continue outsourcing cybersecurity to an MSSP or MSP in the next twelve months.

What Level of Service Quality Are You Getting for that Price?

One of the major challenges businesses have with MSP pricing is understand what exactly they’re getting for that price.

While most MSPs are making similar claims in their sales or marketing literature, businesses that are vetting a new MSP must perform due diligence to determine the real value of what they’re purchasing, and if the MSP can deliver on their promises.

Start with the Service Level Agreements
The service level agreement (SLA) is a contract that outlines — in precise metrics and key performance indicators — what the client can expect from the MSP. By examining the SLA closely, you should be able to answer the following questions:

  • How quickly the MSP will respond to various service requests
  • What determines the critically of a service request
  • How complicated support issues will be escalated through the MSP

>> Here’s a great source for learning more about service level agreements.

Are Their Customers Satisfied?
While the SLA is useful tool, it’s just a way to know if an MSP is going to meet their commitments. Once you’ve had a preliminary talk with a new MSP, you should also check in with your local business community to validate their claims and gauge some of the intangibles in the MSP relationship, like how friendly and supportive their MSP client-facing team is. You may also want to discuss their customer satisfaction score (CSAT) to validate online reviews.

According to a study of 950 managed IT service providers, only 38% track metrics to assess service quality and customer retention.

The Red Flags of Managed IT Service Pricing

There is no centralized authority dictating who can call themselves an MSP, which means the industry attracts disreputable, budget providers who close new clients with as few questions asked as possible, then provide unresponsive, lackluster service.

These budget MSPs invariably leave business in a terrible position when technology problems do strike.

Examining the pricing strategies of a prospective MSP is a good way to weed out those cut-rate providers and ensure that you partner with a qualified, long-term partner. Here are some red flags of an IT services bottom feeder.

  • Cut-rate pricing
    The number one cost involved in providing managed IT services is staffing. If an MSP is undercutting the competition by a significant margin, then typically they’re either significantly understaffed or they’re outsourcing core areas of their business overseas. During the vendor selection process, you should address both concerns directly by inquiring about which functions they manage in-house and how many full-time technicians they have in relation to their clients.
  • Hidden fees and surcharges
    Reputable MSPs should be providing unlimited onsite and remote support, during business hours, in their monthly packages. They should also be very clear about defining what project work will fall outside those boundaries. So-called “gotcha fees” or surprises on your monthly bill are a huge red flag that your MSP isn’t being honest about pricing; these firms are likely to be dishonest about other matters in the future.
  • Cookie-cutter pricing
    Putting your technology into a spreadsheet and coming up with an invoice is not an effective way to arrive at a good IT support price for your business. You want a partner who understands your current needs but can also look forward with you and see how your needs are going to change as your business evolves. An MSP should dig deep into your business during preliminary meetings and provide a custom quote that reflects your security, compliance, and IT support needs.

Other, non-pricing related red flags to watch for include high employee turnover or understaffing, which indicates that there are problems with the MSPs culture, or a lack of regular communication. Clear communication both ways between you and your MSP is critical to long-term, equitable partnership. A lack of transparency is a major MSP red flag.

20 Year of Trust Managed IT Services to Ohio Businesses

For over 20 years, the Astute Technology Management team has been helping businesses in Columbus, Cincinnati, and Cleveland find lasting IT and cybersecurity confidence. Looking to upgrade to a veteran managed IT services partner? Contact our friendly team any time to find out how we can help.