6 Different Managed Services Pricing Models

There are numerous ways to price Managed Services Offerings, and it’s ultimately up to you to choose the pricing model that makes the most sense for you. Here are 6 different pricing models for Managed Services Providers we've seen implemented with varying levels of success:

1. The "Value-Pricing" Model

This is our personal favorite, and the model that we promote and train our MSP University Partners in. This model tremendously benefits the MSP as well as the client. For the provider, it allows the freedom to customize the monthly fee in each and every Service Agreement for maximum profitability. With this methodology, during one of the 7 steps in the sales process, you illustrate how much money the client loses each and every month that they do not enlist your services.

Because a component of your sales presentation is based upon how much you can potentially save the client when they enlist your services, when the sales process is executed properly, you should be able to sign clients to Agreements worth much more than other pricing models might allow. There are several variations to this model, but the general concept is to provide a flat fee for all support rendered to the client each month, which can include Remote Support, Onsite Support, Lab/Bench time, or all three.

2. The “Per Device” Pricing Model

This pricing model is fairly simple, and many MSPs utilize it primarily for its simplicity. The premise is to develop a flat fee for each type of device that is supported in a client’s environment. For instance, a basic Per Device pricing model might designate a flat fee of $49 per Desktop, $199 per Server, $29 per Network Printer and $99 per Network managed.

The benefits of this pricing model include that it is very easy to quote and illustrate costs for prospective clients, as well as the facility it affords the MSP to modify the monthly service fee as the client adds additional devices in the future. Something to think about when evaluating this model is that it can lend itself to selling Managed Services based more upon price, rather than value. The experienced MSP will realize this, and modify their sales presentation accordingly.

3. The "Tiered" or “Gold/Silver/Bronze” Pricing Model

This model may be the most popular among MSPs. The premise is to build several bundled packages of services, with each increasingly more expensive package providing more services to the potential client.

For instance, a “Bronze” Managed Services package may include basic phone and remote support, Patch Management and Virus and AdWare Removal for an entry level price. Bumping up to the higher-priced “Silver” Managed Services package may include onsite visits, and the
“Gold” package may include Emergency After-Hours Support, being the highest-priced package. This pricing model lends itself well to all devices in the client’s environment. Additional Services to round out a full offering with the “Tiered” Pricing Model are usually made available á la carte.

4. The “Pick 5” Pricing Model

This Managed Services Pricing Model is an interesting combination of the “Tiered” Pricing Model with an “á la carte” twist. The basic premise here is to identify three or more successively higher-priced categories with a specific list of services available in each. The client gets their choice of picking a set number of services from the one category they wish their Managed Services Agreement to cover. For instance, let’s say you have categories named Basic, Advanced and Premium. In the Basic category you have 8 services available to choose from, including Phone Support, Remote Support, Patch Management, AdWare Management, License Management, Case Management, Backup Management and Monitoring. The client would choose 5 of these, and a Service Agreement would be created to support them.

For the Advanced Category, you might add limited After-Hours and Onsite Support for a higher flat fee than the Basic category, allowing the client to choose from these additional Services.

The Premium Category may include Emergency 24 Hour Support, 1 Hour Response Time and Disaster Recovery of the Server(s) as additional options for a higher flat fee than the Basic and Advanced Categories, and the client would now be able to choose from these additional services to create their Managed Services support plan.

MSPs contemplating the implementation of this pricing model should carefully choose the minimum required services available in each category to insure that they are selected, in order to provide the best possible support for the client.

5. The “Á La Carte” Pricing Model

Possibly the most difficult pricing model to sell and maintain profitably, the “Á La Carte” model may be the least popular discussed here. The basic premise of this pricing model is to allow the client to pick and choose the Managed Services they would like from a large menu of individually priced services.The dangers inherent with a pricing model of this type include giving the cllient too many decisions to make, thereby slowing the sale. The more choices the client needs to make, the more confused they might get, leading them to skip selecting services that they really need, and/or choosing services that might not be so critical to their particular environment. In addition, this pricing model may again skew the client’s perception of these services to a cost, rather than a value perspective. To top it all off, putting together the Managed Services Agreement for the “Á La Carte” Pricing Model is the most time-consuming of all models in this discussion.

6. The “Monitoring Only” Pricing Model

Often seen in Medium to Enterprise engagements, and usually where the client has in-House IT staff, the “Monitoring Only” Pricing Model provides Network Monitoring Services and Alerting to the MSP, the Client’s in-house IT staff, or both.

In this scenario, several different service levels can be employed, from a very basic requirement to forward all alerts to the client’s in-house IT staff only, allowing them to address and perform all incident management, to a scenario where the MSP participates in basic incident resolution or even more advanced support.

MSP may also simply resell their chosen Vendor’s Network Monitoring Service to the client in a larger environment, and have no direct or indirect responsibility after the sale.

Whichever Managed Services Pricing Model you choose, you should always have a “Monitoring Only” service available to market to those clients who may not immediately opt for a more robust Managed Services deliverable, but would say yes to a lower-cost alternative. The MSP will then have their foot in the door, and can work over time to prove the value of additional services.

Learn more about Managed Services Pricing Models in "The Guide to a Successful Managed Services Practice".

Erick Simpson
MSP University
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Posted in: Secrets to improving an I.T. Services Practice, Service Delivery

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