Managed Services Pricing Models: Am I Just Plain Wrong?

pricing models

I first heard about the cake model during TruMethods’ Schnizzfest conference in mid-2011. TruMethods CEO Gary Pica and CTO Bob Penland told attendees they need an all-in price, roughly $100 to $150 per user per month, for every service they were selling. Wrap it all together, Pica and Penland told attendees, and stop talking about individual ingredients (patch management, remote monitoring, storage, etc.). It sounded like many of the best MSPs in the room had already adopted Pica’s advice.

So I assumed per-user or even per-location pricing would increasingly replace per-device pricing (server, desktop, laptop, etc.). Generally speaking, I still stand by that theory. As HTG Peer Groups President Alrin Sorensen told me at the IT Nation conference, the new IT services battleground is all about the end-user experience. Building on Sorensen’s statement, it therefore makes sense to me that MSPs will increasingly offer a per-user pricing model.

Mobile Device Management Considerations

But here’s my new inflection point: As the Mobile Device Management (MDM) trend accelerates, I assumed MSPs will simply build some sort of MDM fee into a per-user monthly model. My assumptions started to change, however, during a recent MSPmentor webcast, held Nov. 16 (and archived here).

Roughly 60 percent of MSPs on the webcast said they are using or exploring per-device pricing for MDM. And one of our guest speakers, Smart I.T. Services President Jerry Fetty, said he’s succeeding with a per-device pricing strategy for smartphone and tablet management while leveraging Kaseya’s emerging Mobile Device Management software. Generally speaking, Smart I.T. Services’ mobile device management fee is roughly 50 percent of the price for monthly desktop PC management.

Per User Still Wins?

As the webcast marched forward, the per-device pricing model generated more and more chatter. But overall, I still think the all-in per-user pricing model is cleaner and easier for MSPs to promote.

As CharTec President Alex Rogers has often stated, some customers may be willing to pay a big premium for managed storage, while other companies are willing to pay a big premium for managed security, and so on. The big challenge: MSPs don’t have enough time to discover the price premium each customer is willing to pay for each individual service. So generally speaking, it’s easier to calculate an all-in price for every service without offering line-item costs to customers.

Rogers’ theory: Let security-conscious customers assume the bulk of their monthly per-user fee goes to security, and let mobile-conscious customers assume the bulk of their monthly per-user fee goes to mobility, and so on. Don’t waste time selling the value of each ingredient when you can simply serve the entire cake, TruMethods would likely add.

I realize MSP pricing models will vary for years to come. So I can’t really claim that per-user pricing will ultimately beat per-device pricing, especially when it comes to large MSPs that manage thousands of corporate data center devices. But in the SMB space, I’m sticking with my gut and continue to think per-user pricing is the growing market trend.