Freemiums: Should MSPs Give Some Services Away for Free?

Though cloud-based media companies have pioneered the freemium model, <a href="" target="_

August 16, 2010

3 Min Read
Freemiums: Should MSPs Give Some Services Away for Free?

By Sam Gutmann 2

freemium managed services

Though cloud-based media companies have pioneered the freemium model, there’s been some chatter lately about the use of freemiums in the managed services space. The reasoning behind the model is that there’s value in giving something away for free in hopes of snagging a fatter cow — i.e., super users — who are willing to pay for extra features (Skype), advertising-free content (Pandora), or unlimited use (Flickr). But can the freemium model work with MSPs? I’m skeptical. Here’s why.

For those companies — Skype, Pandora and Flickr — the cost of offering a free application is insignificant. They consider it part of their marketing strategy. Though a relatively small percentage of freemium users convert into paying customers, the massive net these companies cast ensures that they catch enough fish to pay the bills.

Generating Revenue

With proper access controls and a compelling full version product, those companies can make money. Though it’s tough to find the right balance and many struggle turn a profit, offering a free version of their product may prevent people from signing up with competitor, buying them time to figure out how to generate revenue.

That being said, I don’t think the freemium model would generate positive ROI for most MSPs. Simply put, MSPs don’t have a lot of tools that they can give away inexpensively because of the service-based nature of the business. Unlike offering a limited application that leaves the user wanting more, a watered-down service won’t entice many potential customers to convert.

Long Feedback Loop

Another problem is that the feedback loop can be really long in the freemium model. Most MSPs need the recurring revenue and can’t wait six months to a year or more to see the ROI on their marketing efforts.

However, MSPs can still offer something that’s valuable in addition to their service. An incentive based model is cost effective because you’re not wasting resources, you’re creating a stronger bond with your customer, and you’re differentiating yourself from your competition.  It also shows that you are attuned to your customers’ needs.

An Incentive Our Partners Can Use

For example, Intronis is developing a customizable disaster recovery plan that our partners can use to help drum up more business and retain existing customers. This business tool will allow our partners to input client-specific data via a web-based interface on our partner portal. The tool will generate a PDF disaster recovery plan that they can customize for each client.

Everyone wins—our partners get a value-added incentive for their clients; our partners’ clients get a critical piece of the business continuity puzzle, and we get a lot of happy partners.

Intronis is offering this tool to our partners at no extra cost because we know this will help our partners sell a lot more business—an incentive they can use with their own customers. As a channel-only company, our success is dependent on the ability of our partners to grow their businesses. So we’re doing everything we can to help our partners do just that.

We developed our disaster recovery plan generator because we feel that it’s a critical business tool for our partners.  We hope our partners will recognize that it’s a competitive advantage for them as well.

Sam Gutmann is president and CEO of Intronis. Find Intronis partner program information here. Guest blog entries such as this one are contributed on a monthly basis as part of MSPmentor’s 2010 Platinum sponsorship. Find all of Sam’s guest blogs here.

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