They say that money makes the world go round, and that saying couldn’t be more accurate in the modern age. Whenever we meet with a potential client, many questions are often directed toward that exact subject. To be more specific, they ask: how much do managed IT services cost?
In truth, it all comes down to what you, the consumer, desire. It can vary depending on your environment, the size of your team, and just how extensive your service is - or how big you plan for it to be. That may sound overwhelming at first, but it's all about taking things step by step.
Managed IT services: Pricing structures
Think of managed IT services like pasta; there’s more than one way to do it — lasagna, bolognese, carbonara, Alfredo, you name it. As opposed to having one set business plan, there are several pricing structures from which you can choose.
Obviously, there are different factors to take into consideration. As tends to be the case, there are a lot of pros and cons to work your way through from start to finish. At Velo, we’ve offered programs that utilize every single one of these ideologies across almost two decades. So, you could say we have some experience in the field.
In this piece, we plan on setting out the perfect picture of what exactly is on offer and what we’d recommend. Different companies may have different philosophies, but in our view, it should all come back to a correlation between the client’s success and the managed IT service provider’s success.
All-inclusive fixed fees
An all-inclusive fixed fee model does exactly what it says on the tin. Any given company will be charged a fixed rate every single month, with this number often being decided based on the volume of people using tech within the team. As is the case when you buy a great chocolate cake, all of the ingredients are included. There are no unexpected charges or fees waiting around the corner, which is the first stage of reassurance.
The majority of managed service providers will charge between $175 and $250 per user every month for a setup of this description. That figure could drop, but based on our research, the quality levels also fall substantially, with the only benefit being paying slightly less in exchange for a short-staffed team who provide only minimal proactive effort.
The one thing that can be guaranteed here, especially with Velo, is predictability in billing. This allows any business to properly budget for what they spend on an MSP and covers all requirements. Cloud management, technical fixes, updates, backups, 24/7 assistance, and more. It’s all included in the fixed monthly fee.
However, there are some variations on this pricing structure that exist in the market where you’ll end up having to pay a fixed monthly rate plus, plus, plus. Backups might cost extra, cybersecurity monitoring and alerting might cost extra, and so on. While it may be tempting to just hunt for the lowest bid, you will probably thank yourself later on if you’re able to secure a deal with an MSP who may charge a higher rate, but is truly all-inclusive (and stacked with a deep bench of talent!)
Sometimes, you may need to call the vet on short notice to help assist with a pet emergency. Or, perhaps, something breaks around the house and needs fixing ASAP. More often than not, the person that comes out to help will work on an hourly rate - which is the focus of our latest entry.
In an instance such as this one, you’re only really paying for help when you absolutely need it. The amount comes down to the time it takes to fix the issue, meaning you’ll be left waiting to see what kind of service you’ll get.
IT providers will tend to charge between $100 and $200 per hour, and probably more if it’s urgent. However, it’s worth remembering that the team you’re calling may not give you a permanent solution. After all, a repeat issue leads to greater income, meaning they may not always have your best interests at heart.
This is the kind of idea that may seem flexible at first glance but could be deceptive. Retainers, also known as ‘Block Time,’ allow businesses to buy a certain number of hours’ worth of work at a lower rate. When outsourcing to a managed IT service provider, knowing exactly how much you need doing is beneficial.
For example, a retainer plan could be worth $2,000 per month for around 15 hours of work - and then, if you stretch beyond that, every extra hour will be billed at $200. That may sound reasonable, but as we’ve all experienced with direct debits, it’s one more thing to audit regularly, and it can be easy to lose sight of just how much you’re spending.
In reality, it’s all about reading the fine print to really discover what the managed service provider cost is. Take a closer look at what is involved in the contract and what can count as ‘out of hours,’ whether it be travel-related or other expenses. Plus, and this is crucial in our own business plan, it feels much more reactive instead of proactive.
Depending on the price per user, some providers may keep certain luxuries out of the scope. They may be doing so to keep things economical, but it can feel like a slight of sorts for paying customers. Either way, though, this is why it’s so important to take a long, hard look at each company in solitude, examining precisely what it is they are offering.
With regards to what will be considered ‘additional,’ separate projects would almost always fall under that category. They are often defined as an extensive migration due to a new location being introduced or a server upgrade, and they regularly feature their own quote and scope that may impact your existing agreement.
There is also the process of onboarding. The MSP tends to require upfront payment before beginning their work, often put forward as a one-time fee. The amount can vary from provider to provider but should still be positioned as a fixed rate regardless of how big your business may be.
What’s the best pricing structure?
The bottom line is this - it’s scary to pay more for IT. We all know how unpredictable it can be and how quickly the landscape of the industry can change. So, while all of this talk about managed service provider costs may scare you, we here at Velo feel like we’ve found the answer.
In our opinion, there’s a real return on investment that comes from working with an all-inclusive MSP. The fixed fee offer is the only program that makes sense to us, and even though we did dip our toe into the water with the alternatives, we’ve been on this path for many years now with great success.
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