How Do Managed IT Services Providers Charge?

managed IT services

If you’re not an IT person, much about technology can seem overly complex.

You have to figure out what solutions you need and how to purchase them, and then implement them and continue paying for any subscriptions.

But when you let a managed IT services provider (MSP) handle your IT needs, much of that complexity is taken off your shoulders. However, you still have to pay for the services, which leaves an important question: How do MSPs charge?

Pricing is an important factor in deciding if you’ll sign a managed IT services contract, and how this cost is calculated varies depending on what provider you partner with.

Here at The KR Group, we find charging per user an effective way to bill our customers. However, other providers may bill differently.

As you review your choices for an MSP, here are some common rate structures you may come across:

  1. Per-user pricing
  2. Per-device pricing
  3. Per-incident pricing
  4. Tiered pricing
  5. Remote only pricing

All these models use different equations, but the end calculation is similar. Ultimately, it’s up to you to find which option makes the most sense for your business.

Per-user pricing

As the name implies, the per-user pricing model depends on the number of users at your company.

While traditionally, MSPs charged per device, as technology evolved, it isn’t easy to keep track of all the infrastructure devices plus individual tablets, smartphones, laptops, etc., that a business uses.

Introducing per-user pricing was a way to cover all of these devices by charging for the person who uses them and dividing the cost of shared devices among the users.

A benefit of pricing this way is that 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 that 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. 

Rates for adding users

Ideally, if you’re adding a user, 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 determine what devices and software your new user will require.

From there, your MSP will prepare the devices for your new user. Then, on the employee’s first day, they will be able to hit the ground running with all their tech devices already configured.

You’ll receive a bill for time and resources to add the new user, but eventually, they will be covered under your recurring fees.

Rates for removing users

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 leaves your organization, an engineer 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 you lock them out of your network is paramount to keeping your data secure.

 

Per-device

Per-device pricing is billed similarly to per-user, except instead of counting people, this model tracks the number of devices.

managed IT services onboarding

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.

Charging per device also requires meticulous work from your MSP to track every single point of technology in your IT environment. This includes your desktops, laptops, servers, phonesstorage appliances, backup devices, etc. Essentially, anything you want your MSP to support is considered a device.

Different devices are assigned different recurring rates. For example, a server, which requires more knowledge to troubleshoot and support, costs per month than a desktop, which entry-level IT engineers can typically service.

However, some companies 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.

 

Per-Incident Pricing

Alternatively, your MSP may charge you based on the number of tickets you submit in a month.

In this model, all service requests cost the same, regardless of complexity. That means it costs the same for an engineer to come and help you plug in a disconnected printer as it does to replace a malfunctioning switch.

As the customer, you’ll only pay for how much support you require, but consequently, this option is less predictable than per-user or per-device pricing.

If your MSP uses this pricing model, you’ll also want to make sure you don’t hold onto IT issues in hopes of reducing your monthly rate. You should take some preliminary steps before requesting support, but your MSP is there to help if there is an issue.  

 

Tiered pricing

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.

 

Remote only

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.

The KR Group tiers our prices using an algorithm that accounts for the number of users, desired availability, and overall complexity of your IT environment.

For example, a company with 50 users in a relatively straightforward technology stack will pay less for managed IT services than a business of the same size with a more complex environment that often requires on-site support.

 

What’s the Best Pricing Model for You?

After reading through all the different ways MSPs structure their rates, you’re likely wondering if one pricing model is better than the others. And there’s not.

Ultimately, the pricing model that makes the most sense for your business is the one that meets your needs.

When it comes to choosing how your MSP calculates your recurring cost, 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. Per-incident pricing is a good fit for organizations with few IT problems still looking for contracted IT support.

Whether your MSP looks at the number of users, devices, or incidents, ultimately, the pricing models are different ways to calculate a similar total cost.

Regardless of how your MSP comes up with your monthly rate, you still have to consider how remote-only and tiered pricing work into what you’re looking for from managed services.

For example, remote-only managed IT services might make sense if you want a cost-effective option and don’t anticipate needing frequent on-site assistance. However, tiered pricing makes sense if you’re looking for varied service levels within an MSP’s offerings.

Now that you know how your MSP might determine the price of services, let’s talk about what numbers go into those calculations.

You’ll find that information in our article, “How Much Do Managed IT Services Cost?” or schedule a free consultation with us to get a customized quote for your business.

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