Managed I.T. Services Pricing

When it comes to I.T. Services and Managed I.T. Services pricing, the reality is that pricing can be all over the board depending on who you talk to.  More and more companies are starting to offer some sort of “managed technical services” or “managed I.T.”.  Some of these organizations are those that have grown up in the I.T. industry doing project based work, engineering, and integrations.  Others are branching out into I.T. from their main line of business.  We have seen copier companies, accounting firms, cable contractors, PC manufacturers, and even big box stores now offering managed services. Unfortunately trying to make sense of all the differences can be overwhelming and oftentimes leads decisions being made only to find out after the fact that it doesn’t include everything that was intended or has unexpected costs after the contracts are signed.  So how do you know and how do you evaluate the plethora of companies crowding into the marketplace today?

How Much Should Managed I.T. Services Cost?

We have seen managed I.T. services start as little as $20 per user and go all the way up to $300 per user so that’s not an easy question to answer at face-value.  The real question should be – how much should MY managed I.T. services cost, because only you know your unique needs and how your company depends on technology to operate.  While most MSPs offer a standardized solution to most of their clients, that doesn’t necessarily mean you are a fit for their offering and you really must dive deeper into the details of their offer, why they offer it, and why it might make sense(or not) to your organization.  In reality, we at DaZZee meet with a lot of different businesses on a weekly basis and really only a small percentage of those businesses are a fit for our approach to managed I.T. services. Thats OK… we want to make sure the clients we serve, LOVE our way of delivering services and we are a perfect fit for their organization.  We don’t want to try to be all things to all people, but rather the right thing for the right people.

Pricing Methods

Time and Materials – This is the original approach to I.T. services that most MSPs that have been around for 10 years or longer started with.  With this approach, you pay by the hour and only when you request or authorize the provider to do something.  This is typically a better fit for small organizations with less than 10 employees.  There is no long term commitment, and you only pay for what time is used.  The challenge with this approach is that it is entirely based upon a reactive methodology – meaning that the provider only works on items after you request it.  That may leave some major and increasingly important maintenance items unaddressed simply because as a non-I.T. person you don’t know they need to be completed.  The other disadvantage to this model is that it is in the I.T. providers best interest for you to have problems.  More problems = more billable hours and the longer it takes to fix the items, the more $ they bill.  Now that is not to say all providers in this model take advantage of that, it just simply means that the model is stacked against you in terms of mitigating risks and issues.

Block Hours – This is an extension of the Time and Materials model in that it just allows you to still operate on an as requested basis, but you pre-pay for a block of I.T. support hours in advance to get a discount off of the normal hourly rate.  The same risks are there that are in the Time and Materials approach, you just save more over the long term since you are paying upfront.  This again typically makes sense for smaller organizations with 10 or fewer employees or in the case where you need highly specialized services.  An example that comes to mind for the highly specialized services would be a bank that needs someone to work on their AS400 environment…. not all MSPs have the expertise to do this so the specialized techs will typically have a smaller market to go after and thus offer this primarily on a Time and Materials or Block Hour basis.

Monthly Contract – This has become one of the more common approaches for I.T. support and management in the last 7-8 years.  In this model, you pay a set monthly price every month for a set of services or hours that reoccurs each month.  This is where things can get a little murky in terms of seeing exactly what all is included or not included.  Some providers will only give you a set amount of hours and others will include unlimited hours.  Defining this is critical to making sure you understand what you are signing up for.  Some MSPs only support certainly devices or locations.  Some providers may only provide unlimited remote support and charge extra for any onsite work.  Regardless of how they designate their contract coverage, moving to a monthly contract approach provides some significant benefits;

  • Continuous monitoring – most providers will install some sort of monitoring software to monitor what goes on with the network as well as individual systems(PCs and servers).
  • Remote access – this software allows the provider to remotely gain access to your systems to troubleshoot, correct, or maintain the computers and servers without sending a truck to your location.
  • Patching and updating – the remote access software also allows the support provider to patch and update most computers and servers remotely.  This may be something that is scheduled and automatic or it may be a manual task that has to be initiated, but most of the time it is all completed without a technician coming onsite.
  • Maintenance –  ongoing maintenance can be done remotely to ensure critical items are addressed before they become larger problems.
  • Support – having a contract in place allows you to request support without the nagging thought in the back of your mind of, “how much is this support call costing me?”

Typically a Monthly Contract model makes sense for organizations with 15 or more technology users or for those organizations with multiple sites.  Some of the advantages of this model are;

  • Full support team instead of an individual person taking care of your support needs
  • Normally a full fledged support ticketing process in place to document and track all items and requests to ensure nothing gets dropped
  • More proactive in nature.  Since most providers are giving you either a set number or hours included or unlimited hours, it makes more sense for the provider to take care of critical items and maintenance items before they become a problem.
  • Typically you can expect better response times in this model since it focuses on more of a structured approach to handling your I.T. environment.
  • You can budget and forecast what your expense will be.  This allows you a predictable cycle instead of peaks and valleys in expenses that vary based upon what goes wrong on a typical month.

Monthly Contract With Projects – Most managed services providers will exclude project work from their monthly service contract since there is no way to control the requirements for this.  So they typically will provide your monthly maintenance and service as part of the contract but anything that is a new addition or project will be billed in addition.  With the Monthly Contract with Projects approach it expands upon the original concept of the monthly contract to also include either a set number of project hours each month or in some cases unlimited projects and hours.  There are some considerations organizations should be aware of in this model as well, such as if it only includes a set number of hours, what is that and how can they be utilized.  If the contract includes unlimited projects and hours, how are those projects scheduled, what is the minimum notice required, and is there a guarantee of performance on those projects?  Finally you also want to nail down if there are any exclusions to the projects that can be completed under this agreement.  In this model you get many of the same benefits of the normal Monthly Contract approach and you can also get a predictable expense associated with projects rolled in.  The things to be cautious of with this is in some instances projects can require a long lead time and notification and may drag out longer than if they are billed as a separate project that has strict timelines associated.  The Monthly Contract With Projects included typically is a good fit for larger organizations, rapidly growing organizations, or organizations with advanced technology requirements(hospitals, banks, etc.)

Managed Security Services Provider(MSSP) – The final model(as it stands today) is one that encompasses the monthly contract models above but goes beyond that and provides a much more advanced focus on security.  While most of the models above have some degree of security services associated with them, there are items that cannot be addressed without some advanced focus on security.  This is where the MSSP approach shines.  With Managed Security Services, the technology services provider not only provides maintenance, support, and services for end-users, network and server services, but extends the focus to include tools, resources, and processes to provide much more extensive security coverages.  These may include;

  • Advanced security monitoring
  • Advanced security tools and software
  • Identity management
  • Advanced backup and business continuity services
  • Advanced Remote Access Technologies
  • 24/7 Security Operations Centers to analyze security logs as events happen
  • Intrusion Detection and Prevention

While a large number of companies are providing the basic managed I.T. services, the number of qualified Managed Security Services Providers(MSSP) is significantly smaller.  This is a much more specialized provider that typically has considerably more experience in terms of years supporting high security environments such as banks and hospitals and has technical staff onboard that carry more advanced security certifications and specializations.  While most typical Managed Services Providers(MSPs) will also say they provide managed security – it is very important to understand the differences between the two offerings and the related pricing that goes along with it.  Unlike the other models, Managed Security Services cannot be lumped into broad categories in terms of who is a fit versus how isn’t.  With the exponentially changing security threat landscape, most if not all organizations could benefit from some sort of managed security services.  The key challenge with these services is that most organizations do not realize they need help until it is too late and in those circumstances the costs to for corrective work can be more than the annualized costs for a monthly Managed Security Services contract.

Other Items To Consider

Pricing methodology – This is another grey area that can vary wildly between providers.  When it comes to the monthly contract approach(regardless of which variation you look at), most providers will base their pricing on one of two different approaches;

  • Per Device – This is an older pricing model in which you pay based upon the number of devices being supported.  In some cases, this is just the number of computers and servers.  In other cases the pricing will be based on that plus the number of network devices and/or printers and copiers.  But in all the cases the constraint with this is that with more and  more users using multiple devices, the device counts can add up quickly.  The pitfall that normally goes hand in hand with this is that organizations may be tempted to exclude some devices such as a laptop or tablet since it is not a primary device.  This can be very problematic especially when it comes to security since an uncovered device really makes no difference when it comes to network access and therefore introduces more risk to the organization
  • Per User – Most providers are moving to a per-user approach to pricing.  With this approach you pay based upon the number of users within the environment instead of number of devices.  The advantage to this approach is that all devices get covered and thus reduces the security risks and allows support for all devices.   Things to clarify when looking at this model are – what defines a user… is that a full time employee?  How does a part-time employee count?  Is it based upon total employee count or just technical users?(This can make a huge difference in markets like manufacturing).

What else is included – This is where things can get really murky in terms of comparing different pricing proposals for managed I.T. services.  In addition to outlining how the support agreement works and what is and is not included, you also need to make sure to identify what if any of the following products may be included.

  • Anti-virus software – While quite a few providers will also include anti-virus software since it helps reduce their risks, it is key to identify what type of coverage is included.  Many Managed Services Providers will include the software but it may be free or limited versions of the software.
  • Hardware – depending on the agreement and the provider, there may also be hardware included in the services.  Some agreements will include a managed firewall as part of the services while others may include all the network and server infrastructure and even desktops as well.
  • Backup – Again this can be a key differentiator.  Some providers may include backup as part of their service agreement and if so,  you also need to clarify how it is backed up.  Is it just a locally stored backup, it is a Cloud backup, is it file level backup or image level.
  • Remote Access – How do you get access to your files and information remotely?  Does the provider also include a secure way for you to get remote access and is it and extra charge.

Final Thoughts

While managed I.T. services and managed technology providers are almost becoming a commodity in today’s market, this makes it increasingly important to clarify and understand the details of the solution being presented.  The topics covered here are a good starting point.  In addition, you want to make sure you take a look at the provider as a whole and ask questions like;

  • How long have you been in this industry?
  • What sets you apart from everyone else doing this?
  • Do you specialize in certain industries?
  • What does your engagement look like in all phases of the relationship?
  • Does your technical staff maintain industry level certifications to stay up with the latest technologies?

By asking these types of questions you can start to see where differences will come into play as it relates to different companies and pricing strategies you may receive.

Ultimately – you simply can’t go by price alone at this point(and probably no point in the future).  There are too many variables to simply go by the lowest or cheapest option.  When it comes to I.T. services and particularly security services, the old adage that you get what you pay for rings very true!

We have prepared a checklist of items to make sure you make a good choice when it comes to a managed services provider.

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