Managed Services Pricing Models

IStock_000005759523SmallThere are many ways to price Managed Services offerings, but there doesn't seem to be any particular pricing model that will work for all Managed Services Providers.  It's up to you to find and implement the model that matches your needs best, but at MSP University; we promote and train our Managed Services Partners with the “All-You-Can Eat”, Flat-Fee model.

All-You-Can Eat, Flat-Fee Pricing Model

This pricing model is beneficial for both the Managed Services Provider and the client.  As the provider, you can customize the monthly fee and included services for each service agreement you write for your clients, to allow for maximum profitability.  With service agreements in hand, you can easily predict your ongoing revenues. 

For the clients on a flat-fee pricing model, they know exactly how much their IT support is costing them, and can see at a glance how much they lose per month if they don't use a Managed Services model. We illustrate exactly how we execute this successful Managed Services Sales Technique in our best-selling “The Guide to a Successful Managed Services Practice”, and exactly how we use the Existing Client Cost Analysis  for existing Clients and the New Client Cost-Savings Analysis for New Clients to accomplish it, all available for download from www.mspu.us.

The “Per Device” Pricing Model

In this pricing model, you assign a flat rate for each type of device that is supported in the client's environment.  You might charge $49 per desktop computer, $199 per server, $29 per network printer and so on.  In the provider's point of view, this is an easy pricing model to quote and illustrate costs for clients, and easy enough to modify the monthly service fees as clients add additional devices.  A potential drawback of this pricing model is that it may lead to selling Managed Services based more on the price more than benefit – speeding pricing commoditization, so you'll need to be aware of this and adjust your sales presentation accordingly.

The “Tiered”, or “Gold/Silver/Bronze” Pricing Model

This pricing model is very popular, and is based on bundled packages.  Each package gets more expensive and offers more benefits than the one before it. The Bronze Managed Services package might include basic support services for phone or remote support, patch management and Virus and Spyware removal at an entry level price.  The Silver Managed Services package would include all of Bronze options, plus additional features like Onsite visits, while Gold might include after hours emergency support.

For services not included in the packages, you would then provide them á la carte.

The “Pick 5” Pricing Model

This pricing model is a mash-up of the Tiered and la carte pricing models. The basic premise here is to identify three or more successively higher-priced categories with a 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 we have categories named Basic, Advanced and Premium. In the Basic category we have 8 Services available to choose from, including Phone Support, Remote Support, Patch Management, Spyware 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. 

From the client's perspective, this pricing model allows them to choose the services they think they need most, rather than paying for a “package deal” that might include services they don't think they would utilize.

SMB IT Service Providers 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 Proactive Support for the Client.

For more information Managed Servicess Pricing Models, start reading on page 95 of The Guide to a Successful Managed Services Practice! 

Erick Simpson
MSP University
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2 Comments

  1. software developer December 15, 2009

    Humm… interesting,
    Thanks for sharing,
    Keep up the good work

  2. Managed Services February 5, 2010

    Although I agree with the Erick’s comment “There are many ways to price Managed Services offerings, but there doesn’t seem to be any particular pricing model that will work for all Managed Services Providers.”, I would still strong advocate the “All-You-Can Eat, Flat-Fee Pricing Model” for the vast majority of businesses. This model is adopted from many other industries and is called a variety of names, such as “annuity model”, “retainer model”, etc. As stated by the author, this model has been proven over time to be a win for client and provider. For my businesses, I usually couple a version of All-You-Can Eat, Flat-Fee Pricing Model and tiered pricing. The tiered piece adds a bit more structure and flexibility that my clients appreciate. It also helps me to quickly use a standard quote for two levels and custom the third.
    I would appreciate Erick writing more on the subject.