I have a secret to share with you. Managed IT Service Providers (MSPs) do not want to publish their pricing. Most MSPs will not even give out a price over the phone. They fear divulging information to their competitors (secret shoppers) or losing a lead before they have a chance to explain their value proposition. I am going to lead you behind the curtain of our industry and show you how to make a more informed decision about your service provider. Let’s look at the core questions that will help you invest in the right technology partner:
- Why do MSPs guard their pricing?
- What is the going rate for IT services?
- How do you compare apples to apples?
Let’s take a look:
Why do MSPs guard their pricing?
The dirty secret is that most Mature MSPs charge about the same amount of money per month to their clients when you add everything up. So why keep pricing under wraps? Let us explore the industry a little to get to the answer. The industry has four distinct types of MSPs:
- Trunk Slammers : 2 – 4 people, no processes, handful of clients and using the same tools as mature organizations. They look like a mature MSP because of cloud based tools and marketing, but fall short on experience, follow through and ability to grow over time. Usually technical, but lack business direction.
- Value MSPs : Usually 8-15 people. They provide a very inexpensive service which includes “break-fix” and hourly options. Usually they have a limited tool set and lack business technology consulting experience. They often do not have extensive internal processes and can lack checks and balances on personnel or security.
- Bolt-on MSPs : Usually very large organizations. Companies that have a core business competency that is NOT IT Services. These organizations core competency is providing phone systems, printer rental and service, insurance sales, accounting services or audio/video solutions to name a few. These companies are looking to build a new recurring revenue stream by providing Managed IT. Most are not equipped to manage technology for other organizations the way a Mature MSP does. They are typically built as sales organizations.
- Mature MSPs : Usually over 25 employees. Have been in business as an MSP for over 10 years. They have documented processes which include onboarding, consulting, service, security and project management. They have distinct departments for the fulfillment of support, projects, purchasing, sales and account management. Their core competency is the service and consulting of business technology for their clients using a monthly billable subscription or service model.
Mature MSPs all know one another. At conferences, we are often very friendly with one another. We all know that we charge about the same amount per person/computer per month for services. We like to compete with one another on new opportunities because most of the time, it is a matter of fit and scope, not price.
The real reason that most Mature MSPs do not like to share their pricing is because of the other three types of MSPs. Without the overhead of accounting, training, security and business processes Trunk Slammers and Value MSPs will often provide lower pricing during the sales process. Uneducated buyers may not understand to ask about the maturity of an organization or their ability to deliver service and how it would impact pricing.
Bolt-on MSPs will often lead with a very inexpensive offering and a professional sales team. They will drive for a commitment from the client and then drive up the contract pricing over time with add-ons and items not included in the initial proposal. Bolt-on’s are often unable to fulfill consultative technology service delivery due to their lack of operational focus on being an MSP. They often have other, more pressing business lines.
Mature MSPs will often ask to review a client’s technology environment prior to pricing. They take the time to understand what the business need is. They typically have solutions that include a variety of service and software as a bundle. When it is broken down, they usually charge about the same as one another, although some may cost more due to vertical experience, customer experience or specific client needs.
What is the going rate for IT services?
As of March, 2020, the going rate for managed IT services in the United States is between $100 -$150 per person per month. If you include advanced security solutions and consulting it may get as high as $200 – $250 per month per person.
As an example, if you are a company with 35 people and have 1-2 servers and do not require advanced security due to PCI, HIPAA or other such requirement, you should expect to pay between $3,500 and $5,500 per month for managed IT services. This is pricing from Mature MSPs and does not include licensing such as Office 365 or VoIP.
MSPs provide different billing options. Some will bill per person. Others will bill per computer/server. Still others will bill a flat fee for everything. Regardless, Mature MSPs should all be priced around the same total figure per month. If a deal looks too good to be true, it is. If a proposal looks way too high, you need to ask how the proposal breaks down and what do you get for the money.
How do you compare apples to apples?
Ask each MSP what is included in their package:
- Do all of our employees get to call the helpdesk directly?
- Is the helpdesk “all you can eat”?
- Which security applications are we getting for each computer?
- Do we get user security training?
- Can we get a breakdown of all the applications and services we get with this package?
Then ask questions about their business maturity:
- Do you use Multi-Factor Authentication (MFA) on ALL of your tools that support our business?
- Do you have a change management process for all clients and your systems?
- How often do your technicians have to get certifications in the technology that I use in my business?
- What technology experience do your account managers have?
- How long have you been in business?
- Tell me about the history of your firm. Were you always a technology services provider?
- How many people work for your firm as W2 employees? Are they background checked?
- Do you outsource any of your core services that support my business?
Then ask for referrals:
- Do you have two longtime client referrals?
- Can I get a referral of a client my size or in my vertical?
- will you provide a referral from a client where things were rocky and got better?
Looking for a new technology provider is not easy, but with some education, business executives can take a lot of the guess work out of it and make a decision not based solely on price. We have developed a resource for what to look for in a managed services provider. Download it here or contact IronEdge for further questions.
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