4 common pricing models MSPs use
When you’re considering managed IT services, pricing will be a large factor in deciding to move forward with a managed services provider (MSP).
For most MSPs, calculating the price of their services comes down to an algorithm that takes into account your usage, size, and needs.
Here at The KR Group, we find charging per user to be an effective way to bill our customers. However, other MSPs bill differently.
Four common pricing models you may come across when contracting with an MSP are:
- Per-user pricing
- Per-device pricing
- Tiered pricing
- Remote only pricing
These models use different equations to calculate a similar cost of managed IT services.
However, you may find one model makes the most sense for your business.
Traditionally, MSPs charged per-device, but it is complicated to keep track of all of a company’s devices. As users started using even more devices on the job (tablets, smartphones, laptops, etc.), it only added to the difficulty.
Introducing per-user pricing was a way to cover all of these devices by charging for the person who uses them and divide the cost of shared devices among the users.
That doesn’t mean per-device pricing is outdated, though. Some MSPs still find it easy to quote and charge customers per device. At this point, it’s simply their preference.
Tiered and remote-only pricing offer variations of these two pricing models to further customize contracts to meet the unique needs of different businesses.
With this overview of why there are different options, we’re going to break down each pricing model even further.
As the name implies, the per-user pricing model depends on the number of users at your company.
A benefit of pricing this way is it’s easy to track how many users you have since they’ll need to go through the onboarding or offboarding process with your human resources department.
Keep in mind, adding and removing users will affect your monthly rate, but how soon these changes are reflected on your bill depends on your MSP’s policies.
Adding a user
If you’re adding a user, ideally, you’ll inform your MSP a few weeks in advance, and it’ll prepare any devices the new user will require.
Your MSP will meet with someone from your company – typically in human resources – and fill out an onboarding form to figure out what devices and software your new user will require.
From there, your MSP will prepare the devices for your new user. On the employee’s first day, he or she will be able to hit the ground running with all their tech devices already configured.
You’ll be billed for time and resources to add the new user, but eventually, he or she will be covered under your recurring fees.
Removing a user
From a security standpoint, removing a user from your network is more important than adding a user.
If you can provide your MSP with the time and day your user is leaving your organization, it can remove their access to email and your network.
Whether an employee left on good or bad terms, you have little to no control over their future actions, so ensuring they’re locked out of your network is paramount to keeping your data security.
Per-device pricing is billed similarly to per-user, except instead of counting people this model counts the number of devices.
This billing method can be more difficult to track since devices come in and out of companies’ networks more frequently and with less ceremony than users.
Another problem is instead of tracking a single point you’ll be tracking the multiple points of technology.
Different devices are assigned different recurring rates. 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 service.
However, some company’s may find per device pricing makes more sense for them if they have a high turnover of employees but rely on the same set of devices.
For example, if you hire a handful of interns for a semester at a time, it’ll make sense to keep the devices, but your users will change every few months.
MSPs using both per-user and per-device pricing models may further break down their prices by tiers.
Most people want to have options, and tiering prices is a way to provide these options.
Some MSPs might use tier pricing based on availability, company size, or needs.
Here at the KR Group, we tier our prices using an algorithm that accounts for the number of users, availability, complexity, and term length.
The cost of managed IT services for a company of 50 users with a straightforward IT environment with a 5-year contract for remote-only services will be less than a company of the same size with a complex environment in a 1-year contract with regular on-site visits.
Many MSPs include remote-only IT services in their tiered pricing. However, we think it’s significant enough to warrant its own section.
While your MSP will perform the majority of its services remotely, good MSPs will include on-site visits in their contract terms.
These visits provide a chance for you and your MSP engineer to build a rapport with one another, and it accounts for the times when your engineer will need to visit your office to address an IT issue.
However, on average, 80% of IT problems can be solved remotely, and companies who don’t require frequent in-person assistance might find remote-only managed IT services to be a cost-effective option.
Your MSP engineer will still provide IT assistance for all of your needs. However, he or she will do so from his or her office and won’t make regular on-site visits.
For the situations where an on-site visit is necessary, your MSP will charge your time and resources for the visit.
The best pricing model for you
Is one pricing model best compared to the others? It depends.
At the end of the day, the pricing model that makes the most sense for your business depends on your needs.
Remote-only managed IT service might make sense if you’re looking for a cost-effective option and don’t anticipate needing frequent, on-site assistance.
Tiered pricing makes sense if you’re looking for options with your managed IT services.
Per-device pricing makes sense if you have a high turnover of employees and rely on a steady set of devices.
Meanwhile, per-user pricing makes sense if you’re looking for an easy way to track changes in your managed IT services contract.
At the end of the day, all the pricing models are a different way to calculate a price that falls within the ranges of costs for managed IT services.
You can read more about how MSPs price their IT services in our article, “How Much Do Managed IT Services Cost?” or read “The Best Managed IT Service Providers in West Michigan” to learn what services look like from different MSPs throughout the area.