Is It More Profitable to Offer Managed Services a la Carte or Bundled?
How should a managed service provider (MSP) price its services? It might all depend on how a service provider chooses to package them.
For example, a new survey of 150 IT providers conducted by remote monitoring and management (RMM) software provider Continuum revealed many MSPs leverage a “hybrid approach” to package and price services to support a variety of customers.
Among the survey’s findings:
- 75 percent of MSPs said they bundled their services; 59 percent noted they offered their services a la carte.
- The three most common factors that affected the price of an MSP’s services were cost of technology or tools to support services (41 percent), cost of staff to support services (39 percent) and cost of selling services (37 percent).
- Flat-fee pricing (61 percent) was most common among MSPs, followed by tiered (51 percent), per-device (49 percent) and per user (43 percent) pricing strategies.
“MSPs today leverage a number of pricing and packaging strategies in order to maximize their margins, and there’s no one-size-fits-all formula to guarantee success,” Continuum wrote in its report. “Rather than putting all their eggs into one basket, many MSPs leverage a hybrid approach.”
When it comes to packaging and pricing managed services, however, perhaps a simple approach may prove to be most profitable for MSPs.
Professional services automation (PSA) software company ConnectWise recently shared the following tips from Gary Pica, CEO of MSP training and solutions provider TruMethods, to help MSPs package and price their services effectively:
“When pricing, don’t overcomplicate things. Use your average all-in seat price (AISP) as a guide. Take all your recurring revenue and divide it by the total number of seats you support to get the average. If you had 25-100 customers at this rate, would your profit margin be where you want it to be? Or, should your per seat rate be higher? Don’t over explain. Your clients probably aren’t interested in your pricing calculator details. They simply want to know how you’re going to impact their business and what it will cost them every month.
ConnectWise also pointed out that an MSP may be able to determine how to package and price its services properly in 5 minutes or less.
“In less than 5 minutes, can you tell me how you’re going to impact my business and what my investment will be without having to reach into your bag for a brochure or spreadsheet?” ConnectWise asked.
An MSP’s offerings ultimately should benefit its bottom line while improving customers’ productivity and functionality, lowering their costs and giving them peace of mind, ConnectWise said.
As such, these services should be packaged and priced accordingly, ConnectWise pointed out, to help an MSP and its customers achieve these goals.
How do you package and price your managed services? Share your thoughts about this story in the Comments section below, via Twitter @dkobialka or email me at dan.kobialka@penton.com.
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