Managed services providers (MSPs) must routinely and regularly examine their customer contracts and pricing strategies if they intend to maximize profitability. That message was
“I think as an industry we leave a ton of money on the table,” said Frank Picarello chief operating officer for TeamLogic IT. His advice: Spend the time to learn the prospect’s business before quoting a price.
Picarello spoke on the option of “valued-based pricing” of managed IT services. This method of pricing is determined by the customer’s perception of the value of the services it’s receiving from the MSP.
“Done right, value-based pricing is a wonderful way of increasing your margins,” he said. “But to do this, you must understand what is valuable to the customer. What are the value drivers that a client or prospect will pay you for?”
Examples of value drivers include a desire for excellent customer service; high service availability and network uptime; peace of mind (“I just want my IT to work. I don’t want issues. I just want to focus on my business.”); price; trust; and security.
Vince Tinnirello, CEO of Anchor Network Solutions Inc., said MSP take a regulatory inventory of their cost of doing business, including:
- The cost of each service you’re offering.
- The hourly cost of service delivery.
- The effort it will take to support the client.
- The profit margin you want to make on the client.
The session also included insights on writing contracts for the delivery of managed services.
“Think about what you are putting in writing and what you are putting out to your customers,” advised Steve Alexander of MSP-Ignite. “No contract can make your company, but a bad contract can break your company.”
Steven Ostrowski is CompTIA’s director of corporate communications.