Pricing Your Managed Services Offering: Why the Per User Model Makes Sense!

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Vince Tinnirello is the founder and CEO of Anchor Network Solutions.

Many managed service providers (MSPs) struggle when determining how to price their offering. Should they do it per-device or per-user?  In the past, it seems that per-device was the model of choice. You would simply take the number of PCs and servers and multiply them by your per-unit price and there was your monthly fee.

 

One of the disadvantages of this model is that it forced you to commoditize your offering.

If a client knows the per-unit pricing and decides to remove a device, they expect a cost reduction based on what they understand the per-unit price to be. Example: suppose you charge per device and you’re supporting two servers at $500 each for a total of $1000. If the client knows you charge per device and removes one sever, they expect to save $500, but this may or may not be a realistic price for you to support a single server depending on your backend costs.

The other issue is the proliferation of devices. As we’ve moved forward into the era of smartphones and tablets, we’re forced to wonder: how do we bill for the support of these devices?  Are they just an additional per-unit cost? How do we bill for supporting a client who may be using a laptop to remotely access an office machine? As an MSP you must ask yourself, “Do we support computers or users?”

I believe we support both, but what happens if a client has 100 users split into four shifts that share twenty-five computers? It starts to get hairy.

Another important question, and one that really drove us toward the per-user model is, “What happens when we move on-premise servers to the cloud?” When we first moved a client to a cloud server, they immediately asked, “Does our bill go down now that we don’t have a server on premise for you to manage?” The answer was no, of course, because whether or not a client’s technology is onsite or in the cloud is irrelevant. They still need someone to support it. This can sometimes be difficult to articulate to clients who don’t understand the concept.

Luckily, our problems were solved when we decided to move to a per-user model. Important to note is the fact that we calculate our cost per user on the backend, but we only quote clients a flat fee. This way we have the ability to set our per-user backend pricing higher or lower depending on each individual client’s needs. We keep our pricing flexible so that if a client happens to have five servers and twenty-five users, we don’t suffer from their unique situation. We can make sure the per-user price is higher in cases where equipment is older or if they have more servers or computers than users, and so forth.

When presenting value to the client, we can now tell them we don’t care how many devices they have, it’s just one fixed fee. Do you have a desktop, laptop, smartphone, and tablet you want us to support? No problem, and we won’t nickel and dime you on a per-device basis. When we present it this way to prospects, the light bulb turns on and they see the value. It’s a win-win proposition and one that you can apply to your MSP practice and take into the future without fear of losing revenue due to disappearing on-premise hardware.

Photo Credit: 401(K) 2013 via Compfight cc

Vince Tinnirello

Vince Tinnirello

Vince Tinnirello is the founder and CEO of Anchor Network Solutions and regular contributor to The Recovery Zone. Vince has over 15 years of experience in the IT industry and is passionate about helping small businesses focus on running their businesses rather than worrying about IT solutions.

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