Demystifying Managed IT Services Pricing

As you may have already learned, MSPs don’t like to disclose pricing.  For whatever reason, MSPs are reluctant to provide transparency on pricing.  There is some consensus within the MSP community that the pricing, due to many variables, is too complex.  The thought is the pricing can only be determined in the backrooms of IT companies.  
We feel it’s time to lift the veil.
There are a multitude of ways MSPs can charge for services and nine times out of ten these MSPs will charge you slightly differently. 
The different models have various pros and cons, described below. Determine what would work best for your business, and talk to a potential MSPs to see if they follow a pricing model that aligns with your objectives. 
There are three (and a half) common pricing models you’ll come across in the MSP world.

Pricing Models

Model 1: Per-User Pricing

As the name suggests, this pricing model is based on how many users are within your business. 

This is the pricing model TechNoir Solutions uses, (more and more MSPs are using this model too) because the costing is easy to track for both parties. 

Every employee has to go through an onboarding process when they’re brought into a company or an offboarding process when they leave, so it’s easy to track when users are added or lost. We refer to this as the Mountain/Valley principle. Services increase as employees increase and services decrease when employees decrease. 

Changes to the services based on employees will be reflected in your monthly rate as your per-user count increases or decreases

Model 2: Per-Device Pricing

As you likely guessed, this pricing model is based on the number of “managed” devices within your IT environment. 

Traditionally, this is how most MSPs charge.. However, as reliance on IT increased and the number of devices grew, it became difficult for MSPs to keep track of every device coming in and out of service. 

However, this model is not obsolete. Many businesses find the model makes more sense for them if they have a high turnover of employees but rely on the same set of devices. 

Different devices are assigned different recurring rates based on their complexity. For example, a server, which requires more knowledge to troubleshoot and solve issues, will cost more per month than a desktop, which even entry-level IT engineers can typically troubleshoot

Model 3: Tiered Pricing

Regardless of whether your MSP uses the per-user or per-device model, they may further break down their rates into tiers. 

These tiers generally include varying degrees of availability, company size, and term length. These variables have to be considered to ensure our clients get the coverage they need to meet business outcomes.

TechNoir uses a calculation that accounts for the number of users, availability needed, complexity of environment, and term length.

For example, a business of 50 users with a straightforward IT environment and a 5-year contract for remote-only managed IT services will pay less than a business of the same size with a complex environment in a 1-year contract with regular visits to the office.

Model 3.5: Ala-Carte Pricing

Ala-Carte services are not typically offered independently from the standard managed services, however certain may require special accommodations.

Remote-Only IT services, can work well in the right situation. The MSP will solve problems remotely, change passwords, maintain the email servers, add or remove accounts, etc. Remote-Only services can also provide provisioning and on/offboarding too.  

This means unless you have a hardware failure, you won’t see your MSP, it will be 100% outsourced.

After Hours and Weekend support is generally an Ala-Carte add on to a service agreement.  If guaranteed off-hours support is required, MSPs can provide off-hour resources, however, be warned, it is very costly.. 

What Determines The Cost?

The models define the way an MSP charges.This section describes what components go into the cost of Managed IT Services. 

There are three components you need to keep in mind when pricing out your MSP contrat.

Cost # 1: You may need to meet minimum standards

Before an MSP starts supporting your business, it will want to audit your environment in order to know what technology your business is using and how it’s being used.

They’ll review your company’s IT environment to develop a general overview, see what solutions you’re using, and evaluate its size and complexity. 

Most MSPs charge for an audit, this typically costs $500 per site. 

TechNoir Solutions does not charge for an audit, because we believe audits are a necessary part of the estimation process and should not be a burden on the client.

Cost #2: Onboarding Cost

There are many variables when it comes to onboarding a client to our services. Is there another MSP that we need to interface with? Are all the admin passwords accurate, will there be migration of services (email, webhosting, data backup etc) and how many users need to be onboarded.

Onboarding can be very time consuming, because the MSP has to “touch” each network device and each user’s computer to install the security bundle and monitoring software.

The cost to onboard a client with a simple environment is typically the cost of one month of services, plus 40%, however this can vary based on the term length.  

For example, if you monthly service is $2500, the onboarding fee would be as follows:

$2500 (one month) + $1000 (40% of one month) = $3500

Cost #3: Recurring Charges

While the onboarding is a one-time fee, the support portion of a managed IT services contract is a recurring cost. 

Along with remote support always being available, the subscription also covers a five-layer security bundle, that includes:

  • Managed Detection and Response Monitoring: actively hunts, and responds to real-time threats

  • Dark Web Monitoring: Proactively monitors compromised or stolen employee and customer data

  • User Awareness Training: Help employees recognize potential threats

  • Secure Identity & Access Management: Password management and Multi Factor Authentication

  • DNS-layer Security Protection: for work-from-home employees as well as those in the office

The total cost for each user, per month, ranges between $145 and $175.  Considerations in pricing include the size of the environment, type of support needed, backup needs, etc.

Additional / Hidden Fees

The situations listed above, cover most  managed services agreements. However, in the interest of transparency, there are a few additional and “hidden” fees you should consider.

“Hidden” fee 1: You may need to meet minimum standards.

You’ll need to be compliant with the MSP’s software and hardware requirements, so your network will be evaluated to determine whether all Managed Services Requirements are in place.   

Depending on how the environment has been maintained, you may need to update software licenses and replace equipment if it isn’t enterprise grade or is end of life. Having capable, current equipment helps your IT run more efficiently, so you’ll experience fewer issues.  The idea is to be proactive, not reactive.

Additionally, the techs and engineers can provide quicker resolution for problems that do occur if the hardware is current and capable of handling the workloads.

"Hidden" fee 2: User changes aren’t immediately reflected in your contract.

One of the benefits of per-user pricing is the ability to adjust your contract when you add or subtract employees. 

However, the process of onboarding new users and their devices falls outside of a standard agreement. Support for the new users, that are on boarded mid-month, also falls outside of the agreement until the next billing cycle, likely the next month. 

In most cases, an MSP will have a standard cost for onboarding and will support a user on a pro-rata basis, if necessary. 

Additionally, if an employee leaves mid-month, the change is incorporated in the next billing cycle.

"Additional" fee 3: Not all contracts include after-hours or holiday support.

MSPs can generally provide an option for support of your business’s IT needs, 24 hours a day, seven days a week, 365 days a year. 

However, this support is typically very costly and it generally isn’t included in a standard agreement. Tiered pricing or ala-carte addons often make after-hours and holiday support available at an additional monthly cost. 

This doesn’t mean you can’t make a support request after-hours  if it’s not included in your contract. However, you should anticipate your MSP giving you a reminder. They will let you know that they can help you, however there will be an additional charge for off hours support.

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