The managed IT service pricing model is one of the most cost-effective ways to get their business the technology services it needs.
If business people think about switching to a managed IT service provider, they might wonder how their pricing works.
When looking for a managed IT provider, they’ll want to ensure they’re getting the best possible price for their budget.
This article will explore how managed IT service pricing works and how to choose a proper plan for them.
Managed IT Service Pricing Models
Managed IT service pricing models are based on various factors, including the size and complexity of the company’s IT infrastructure.
For example, one has over ten servers and an extensive network with multiple locations worldwide. In that case, their business will likely require more resources than a small business with only one computer at its office location.
As such, managed IT services can be categorized into two general categories: fixed-cost contracts and variable-cost contracts.
Fixed-cost contracts offer predictable monthly rates with no surprises. In other words, they’re easy to budget for and manage and easy for customers who want predictability over flexibility (which is why many large enterprises prefer this type).
On the other hand, variable-cost contracts allow businesses more flexibility because they vary depending on usage levels instead of being locked into fixed monthly fees regardless of what happens during any given month or year (this option may appeal more strongly to smaller companies looking for more significant opportunities for growth).
Managed IT Services Cost vs. Return
The cost of managed IT services is tricky to calculate because of many variables.
First, business people must determine what they’re paying for and why. Then, they can start calculating the return on investment (ROI) that managed IT services will provide.
The best way to determine whether managed IT services are worth it is through an analysis of costs versus benefits–specifically, ROI analysis.
It involves looking at two things: how much their current strategy costs in terms of time and money; and how much value they’ll get from implementing a new one.
If there’s no difference between those two numbers or if they’re both lower than before, then switching should be considered seriously.
How to Calculate the Cost of Managed IT Services?
The cost of managed IT services is the total cost of ownership (TCO).
TCO is the total cost of maintaining a system over its entire lifecycle. TCO includes:
- The initial capital investment includes hardware and software costs and labor required to install, configure and integrate them into their organization’s network environment.
- Ongoing operational costs include maintenance contracts with vendors who provide updates, patches, and support services for their technology infrastructure.
These ongoing operational expenses may include additional staff salaries if they hire internal personnel to handle these responsibilities instead of outsourcing them to third parties.
- Replacement costs at some point when equipment needs to be replaced due to obsolescence or failure from wear-and-tear on components due to usage over time.
It typically happens every three years but varies depending on the type(s) used within each machine/device.
IT Service Pricing Model Examples to Consider
- The flat-fee model charges business people a set monthly price, no matter how many hours their IT department spends on their business.
It is ideal if they have an established budget and expect the number and types of services to remain the same over time.
- The variable rate model charges based on usage by the hour or project type; it allows them to pay only for what they use without expending extra because the month has 31 days instead of 30.
It is good when their business may only need some of its allotted hours each month due to slowdowns or seasonal peaks in demand ─ they’ll still get value from them even though they’re not being utilized at 100%.
- The tiered structure offers three tiers based on how much support is required: essential (no call center), standard (24/7 call center), and premium (24/7 advanced technical support).
Suppose this would benefit their organization. In that case, this might be worth considering since it gives flexibility while also helping keep costs under control by ensuring adequate staffing levels are maintained throughout all shifts so there are no gaps where someone could slip through unnoticed by management due to lackadaisical monitoring processes.
What Factors Affect Managed IT Service Pricing?
1. What’s the Number of Users?
The number of users is the first factor affecting their managed IT service pricing.
The more users they have, the more complex their network and security needs will be. It means they’ll need an experienced team to handle it all.
That’s why businesses with many employees usually pay more for their managed IT services than smaller companies do.
They have more support needs and therefore require more monthly labor hours from their provider to keep everything running smoothly.
2. Are They Using a Managed Service Provider or in-house It Staff?
If they’re using a managed service provider (MSP), they can help with budgeting and forecasting.
They’ll be able to provide expertise in managing their technology more efficiently, which may translate into reduced costs over time.
In-house IT staff can also be more cost-effective with the appropriate experience and training.
For example, if someone is starting in their field ─ or if they aren’t very good at what they do
Business people might spend more money than necessary because completing projects or resolving issues takes longer than expected.
3. What’s their Company’s Budget for IT?
In most experiences, budget is the most critical factor in pricing managed IT services.
It affects a company’s ability to pay for services and determines the risk they want to take on as an MSP.
If their clients have a low budget for IT and are looking for cost-effective solutions, this may be an opportunity for them.
However, if they have more money than they know what to do with (or at least more than their current provider), there might not be room in their budget for another company, even if they desperately need help with their technology issues.
Managed IT services are excellent for small businesses that need help managing their technology but need more time or expertise to do it themselves.
They can help with everything from setting up new computers and networks to troubleshooting problems as they arise.
Suppose someone is looking into this type of service. In that case, there are many factors to consider when pricing out different providers ─ including how much experience they have working with similar businesses like theirs.