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Monday, October 27, 2014

Per Device, Per Month or Per User? Tips for Pricing Managed Services

Which managed services pricing model works best -– per device, per month or per user? Mike Byrne, AVG Technologies' (AVG's) director of partner enablement, shared his thoughts on how managed service providers (MSPs) can price their offerings during a breakout session at this week's AVG Cloud Partner Summit in Phoenix.

Byrne noted standardization is key when it comes to pricing managed services. "Pricing is not an easy process, but it's an easy process if you just apply the same methodology to it," he told summit attendees.

Byrne also pointed out there are several factors that impact managed services pricing, including the competitive landscape, hardware costs, software costs, and technical and account management

So how should an MSP price its services? Byrne provided the following tips:

  1. Know your labor costs -- "Labor is key," Byrne said. "You really have to focus on all of the interactions between your team and the software you've deployed."
  2. Know the competition -- An MSP needs to review the competitive landscape to ensure it is offering managed services that meet its customers' needs and are competitively priced.
  3. Know your personnel and internal costs -- "When you're building a managed services offering, the only figure you need to determine is what you're paying your staff," Byrne said. "From an internal cost perspective, it's all about understanding your labor and understanding how long it takes for you to provide all of your deliverables."
  4. Know your service delivery costs -- It is important for an MSP to determine alert and notification, patch management and other service delivery costs before pricing its managed services.
  5. Know your devices -- Checklists are vital for MSPs because they allow service providers to monitor and evaluate all of the devices that they support.

Byrne ultimately recommended per month or contract-based pricing for MSPs because it can help them better manage their costs.

"Per device pricing, to me, is the single biggest roadblock for MSPs, and the problem with per user is you run into scenarios where you have office staff versus non-office staff users," Byrne added. "But MSPs can put every cost into all of their contracts."

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