Managed services are the outsourcing of the obligation for maintaining and providing for the need of a wide range of processes and functions that help improve business operations and reduce expenses. It is an alternative to the break/fix or on-demand outsourcing model in which a service provider accomplishes on-demand services and bills the customer for the work done alone.
Under this subscription model, the customer or client owns the organization or system being managed while the Managed Services Provider (MSP) is the service provider who delivers the managed services. The client and the MSP are bound by a prescribed, service-level agreement that details the performance and quality metrics of the business relationship.
At a higher level, MSP pricing is based on three factors: cost of service, the expected profit margin, and the existing market influence. The cost of services of the MSP is determined by the technology and people needed to deliver the services.
There are more than a few different pricing models in the MSP industry. One of the most crucial considerations is to ensure that an MSP is charging enough for the services delivered.
Typically, IT support such as server maintenance can cost anywhere between $100 to $395 per server per month. The more features that clients want to be handled remotely, the more they need to invest. For helpdesks, packages range between $60 to $85 per workstation per month, with higher-cost options for 24/7 user support.
MSP pricing metrics The risk factors for getting the pricing right are high. Missing the mark can bring to naught all the hard work that an MSP put in launching an offering. Here are a few basic terms and concepts to know, to understand what and how a managed service provider should be charging:
Cost of Goods Sold (COGS)
Monthly recurring revenue (MRR)
All-in seat price (AISP)
Gross margin