Pricing Managed Services

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Category : The Overworked Geek

One of the questions that has been asked to me the most is how much to charge for managed services.
I feel this is a greatest hurdle IT providers face while making the transition to managed services.  What it really comes down to is that there is no easy answer or formula to pricing managed services or product or service for that matter.

The end result for your MSP in most cases is make the most money possible for the least “risk”.  By “risk”, I refer to the accountability to fix problems if they do occur.  Some clients may pay you $2000.00 / month to manage their network when another client with the exact same network may only pay you $1000.00 / month.
What you need to figure out is if it is worth $1000.00 / month for you to accept that responsibility to manage their network.

I think we would all like an extra $1000.00 / month of recurring revenue as long as it does not cost us our precious time and sanity, both of which are finite resources.Obviously we would all like all of our clients to pay us $2000.00 / month, but if some clients are only willing to pay half that, it may still be worth it.

If it is an existing client, you should have a good idea how much support they require.  Take a look at the number of tickets they open in a month, or a year.  I have some clients on managed services contracts that we hear from less than once a month.  We could charge a very low monthly price and still come out ahead.

It is hard to tell if a new client is going to be a strain on your resources, but you can usually tell from the first meeting.  Trust your instincts.  You can also setup your contracts to have a trial or probationary period where you can sit down and renegotiate your contract after a month or two or three.

In addition to this, investments in automation, proper SLAs and procedures will help mitigate the “risk” to your firm and hopefully make the contract profitable for your business.

Here is how I price my managed service contracts

 

I like to charge $350 / month for servers, $80 / month for workstations and about $15 / month for printers.

I use these prices as a guideline and under no circumstance do I let a client know this.  I prefer to give a client one price for the entire contract.  The reason I do this is so that I do not become a commodity for to my client.  If I give them a price of $80.00 / month / workstation, then that is how I value myself to them.  This kind of pricing allows a competitor comes in with a price of $70.00 / month / workstation.  As a managed services provider, you do not want to compete on price!

When I said those prices are guidelines, I mean it!  I then usually add or subtract the cost from depending how high or low maintenance a client is.I like to include unlimited onsite, remote, phone and email support as well as any anti-virus, spam and backup services I need to make my job easier.  Obviously, if their backup or anti-virus needs are more costly, the price of the contract goes up.

The unlimited onsite, remote, phone and email support apply on Monday – Friday from 9:00 AM to 5:00 PM.  After that, I charge half our hourly rate from Monday to Friday 5:00 PM – 9:00 PMand our full hourly rate from 9:00 PM to 9:00 AM.  I also charge thefull rate on weekends.

So to sum everything up, charge what you can.  A client who will only be willing to pay you $500.00 / month may still be a good fit for your managed services practice. Some clients may be willing to pay three or four times that price, so let them.

 

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Comments (12)

Good rule of thumb here. In our experience working with MSP Partners literally across the globe – the actual numbers fluctuate from market to market based on competition.

These numbers cannot be defined without considering what others are charging and providing for their rates.

With that relativity in mind – breaking prices out internally by a per workstation, server and network device is a great way to anticipate workload. This how we work things out for our Outsourced Help Desk and NOC as well.

Lastly, I couldn’t agree more about the importance of keeping these baseline prices private (Brad – I hope your competitors aren’t reading!)

Thanks Dan, another great comment!

Do you offer a tiered pricing plan, or just one rate? How many hours per month (onsite and remote) do you find the average workstation and server require to support?

I like to offer one rate to my clients. It makes everything a whole lot simpler for everybody. A properly managed network should be under an hour / month for a workstation and under 3 hours / month for a server. We hardly ever go onsite.

Thanks Brad. Great information here. I appreciate you taking the time to share your knowledge and experience with the rest of us.

No problem, I love sharing! Thanks for reading.

Really nice blog! Thanks for sharing the info… it is definitely helpful.

In regards to pricing for servers is it $350 per physical server per month or per service ie email, domain controller etc? I’ve seen different pricing structures so far during my research on managed services. I am considering the move into self-employment.

Thanks Again!

Thanks for the compliments Roger.

To repeat what I was trying to get across in the post, you want to make the most money possible for the least “risk”. So, if a service you agree to manage is going to require 4 – 6 hours of maintenance a month then $350.00 / month is not going to be enough to manage that risk. If it will only cost you an hour or less then the cost should be more than enough to account for the risk.

Let me know if I explained this clearly.

[...] This is a tricky question to answer, but I covered it here. [...]

After researching many different IT companies pricing models I have found it quite frustrating to find the right price to charge for our service. As you can see below I have just an example to two different companies same area of service in Southern California and the price difference is huge?

Hourly our company is way lower than many in our area, but pricing all inclusive managed services seems to be harder to price that I thought. Based on Brad’s example of his guideline, Brad would be charging in the higher end of the range.

One company we have been after for a while has over 350 desktops and 5 servers, the company that manages them now is charging in Brad’s range we have quoted them significantly lower than that range, but now after reading this I’m struggling a bit with the correct pricing model in order to save the client money, but not to burden ourselves with meager profitability.

Unless we have a client that has a very restrictive budget we like to have a flat rate all inclusive plan, and we also figure our plans based on the number of machines we service.

What is your suggestion on companies with this amount of machines, would you give them a volume or a lower rate due to the number of machines services / monitored?

Based on the above scenario what would be your range in pricing.. this is an automotive dealership that is obviously very large.

Example Company 1: (300 pc’s and 5 servers)

PC / LAPTOP ……………… $10 / mo
SERVERS………………..… $199 / mo
(so from a monthly standpoint this would be $3900 ~ $4000 per month).

Unlimited on-site visits
Limited 24/7 remote support (I thought this was weird should be other way around no?)

Example Company 2: (300 pc’s and 5 servers)

$80 ~ $110/ seat/month
(so from a monthly standpoint this would be $24,000 ~ $33,000 per month).

Unlimited support phone, remote, onsite

This seems like there’s something missing?

Jeremy,

Unless I’m reading your post incorrectly, you would be sorely under-pricing based on the risk you would be taking on. For a site that has 300 PCs and 5 servers – you still haven’t listed what it is that you are and more importantly – are NOT covering. Are you just patching and monitoring? Are you providing help desk?

To give you a rough estimate – we have a law firm with two servers and about 30 seats. We bill them $4,000/month. There’s no way I would accept a site with ten times that number of workstations for the same price. Again, depending on what all you are going to be doing, for 300 seats I would be pricing somewhere in the $20,000/month range *easy*, especially if I were providing unlimited on site, 24×7 support.

You need to determine the potential risk before tossing out numbers.

Can you please explain what is the charge when you mentioned ” I charge half our hourly rate from Monday to Friday 5:00 PM – 9:00 PM and our full hourly rate from 9:00 PM to 9:00 AM. I also charge thefull rate on weekends” does that mean you charge half of your normal rate between 5pm to 9pm.

Thank you.
By the way long time no see your Great articles for a while.

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