Managed IT Services Pricing
As you may have already learned, it’s not easy to determine and compare MSP 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. Most MSPs will tell you that the pricing is too complex for them to put the costs on their websites. Our feeling is that, with a little knowledge and guidance, most people are capable of figuring out the pricing on their own.
Regardless, we will explain that 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:
MSP Pricing Models
Per-User MSP Pricing Model
As the name suggests, this MSP 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. This makes it 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.
Per-Device MSP Pricing Model
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.
That said, 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
Tiered MSP Pricing Model
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.
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.
Meeting 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.
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, web hosting, 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
There are a number of factors that go into the cost that MSPs charge on a monthly basis. In addition to the cost of employees, software tools and systems. Some of the most important factors include:
- Service Level Agreement (SLA)
An SLA is a contract between the MSP and the client that outlines the level of service the MSP will provide. SLAs typically include guarantees for uptime, response time, and resolution time. The more stringent the SLA, the higher the MSP’s monthly charges are likely to be.
- Services Provided
The services MSPs offer vary widely, and the more services an organization requires, the higher the monthly charges are likely to be. For example, an organization that requires 24/7 support, monitoring, data backup, and disaster recovery services is likely to pay more than an organization that only requires basic network management.
- Size of the Organization
The size of the organization also plays a role in determining MSPs’ monthly charges. Larger organizations typically require more services, and the MSP’s fees will reflect that.
- Complexity of the Infrastructure
The more complex an organization’s IT infrastructure is, the more time and effort the MSP will need to spend managing it. This, in turn, will drive up the monthly charges.
- Geographic Location
The geographic location of the organization can also affect MSPs’ monthly charges. MSPs in areas with a higher cost of living may charge more than those in areas with a lower cost of living.
Additional Factors to Consider
In addition to the factors listed above, there are several other factors that organizations should consider when evaluating MSPs’ monthly charges. These include:
1. Contract Length
MSPs typically offer discounts for longer-term contracts. Organizations should weigh the benefits of a longer contract against the potential risks of being locked into a contract with an MSP that doesn’t meet their needs.
2. Additional Fees
Some MSPs may charge additional fees for services that are not included in the standard package. Organizations should make sure they understand what is included in the standard package and what additional fees they may be responsible for.
3. Customer Support
Customer support is an important factor to consider when evaluating MSPs. Organizations should look for MSPs that offer 24/7 support and have a reputation for excellent customer service.
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.
Cost of Meeting 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.
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.
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.
Can MSPs customize their services based on the client’s needs?
Yes, MSPs can customize their services based on the client’s needs. They may charge extra fees for customized services.
How can organizations ensure they are getting a fair price from their MSP?
Organizations can get quotes from multiple MSPs and compare the services offered and their pricing. They can also ask for references and reviews from other clients to gauge the MSP’s reputation and customer service.
Can organizations negotiate with MSPs on their monthly charges?
Yes, organizations can negotiate with MSPs on their monthly charges. However, it’s important to keep in mind that MSPs have minimum fees they need to charge to cover their costs.
TechNoir Solutions is a full-service, nationwide, MSP based out of Chicago. Our goal is to provide the highest level of service and support to our clients.