Many managed services providers continue to hurt themselves with poor pricing practices and lack of price integrity, according to a new 2112 Group research report sponsored by N-able Technologies and NetEnrich. Generally speaking, MSPmentor believes the report’s conclusion is on the mark.
Similar to the “race to the bottom” pricing discussion, 2112 President and CEO Larry Walsh says “poor pricing practices” are “stripping away MSP value and violating price integrity.” True, many MSPs compete on price and spend far too much time discussing commodity-oriented fees for remote monitoring. But I do believe there’s hope for the industry and plenty of MSPs are avoiding the commodity pricing game.
Smart Moves
A few examples of success: Numerous MSPs that participate in the TruMethods coaching and peer group organization say they charge as much as $100 to $150 per user per month for all-in managed services, shifting away from per-device pricing. And some of the TruMethods members, such as masterIT, now practice per engagement pricing — basically charging a flat fee that blankets an entire office location.
Meanwhile, organizations like Service Leadership Inc. have helped MSPs to truly pinpoint their cost of services while blending product sales, project fees and managed services fees into mixed revenue streams.
Here Come the Trunk Slammers
But as more resellers try to transition into the MSP market, there are numerous examples of MSPs introducing aggressive pricing without fully analyzing monthly costs and potential profit margins. To combat that problem, N-able, NetEnrich and 2112 Group have been hosting webinars and producing research, such as the latest 2112 Group report — which is available to N-able and NetEnich partners via the vendors’ respective websites.
N-able specializes in remote monitoring and management (RMM) software for MSPs. NetEnrich promotes “closet to cloud” services to MSPs, and is best known for its NOC (network operations center) services. The companies work closely with each other and the Ingram Micro Cloud initiative, which attempts to help VARs and MSPs source cloud and managed services solutions.
Side note: Walsh, a veteran of Ziff Davis Enterprise, UBM Channel and TechTarget, also is a big Rush fan. Hence, the 2112 reference in his company name.
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Posted In: Finance | Help Desk and NOC Services | Remote Monitoring & Management Software | Research and Markets | Sales
Tags: 2112 Group | Larry Walsh | Managed Services Pricing Models | N-able Technologies | NetEnrich | Service Leadership Inc. | TechTarget | TruMethods | UBM Channel | Ziff Davis Enterprise
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I just read the report and could not agree more with Larry’s assessment of the MSP pricing and how the MSPs themselves are driving prices down. I think this problem was initially create due to a lack of training from people with real world experience in the market. Fortunately though with all of the training available out there now, such as Tru Methods, Service Leadership, CompTIA and many others we may be seeing a shift more to value based pricing.
With businesses becoming more virtual from both an infrastructure and a mobility perspective it is going to be imperative that the industry as a whole shift from talking to devices to talking about employee productivity. A per user pricing model can help with that conversation. Remembering that a business owner puts little value on their devices rather their value is in their employees.
Lane Smith
Lane,
I think some MSPs will forever hold onto device pricing because some scenarios (big data center management…) may call for that. But I like your point about business owners putting more value in their employees rather than devices. Well said.
-jp
Thanks Joe for the added analysis. TruMethods and Service Leadership do provide strong methods for establishing prices and measuring effectiveness. Setting prices is only half the battle; walking away from bad customers and revenue is the other half.
Further, I’m actually a veteran of the U.S. Army (1986-1990). I just happened to have worked at those three organizations (LOL).
– Larry “Xanadu” Walsh
Larry,
I never had the chance to ask: Favorite Rush album?
-jp
Oh, so many to choose from.
The 1976 concept album “2112″ is great. It’s based on Ayn Rand’s book “Anthem.” The album and book inspired me to become a writer.
However, in terms of completeness as the quintessential Rush album, “Permanent Waves” is probably the best.
Surprisingly, Geddy Lee’s 2000 solo album, “My Favorite Headache” is remarkable.
Larry: True confession… I didn’t know Geddy had a solo album. Now I’m hunting it down as a Christmas present for my son. Thanks for the tip.
-jp
Lane raises an excellent point regarding per-employee pricing, as business owners do think in terms of employee productivity rather than the value of a device, and these days, with the trend towards mobility and the use of remote and virtual devices, users tend to employ multiple devices in the execution of their tasks. I think owners’ awareness of the value of managed services is heightened when broken down that way…
MSPs need to value their services appropriately…I’ve heard from a couple of local colleagues who weere pretty freaked out when a large national service company began offering ‘managed services’ of a sort, including 24×7 unlimited help desk for $25/user/mo. You get what you pay for…
And, 2112 (and Ayn Rand) are masterpieces. I’m a huge fan of both..:) And Geddy’s solo album never got the airplay, nor recognition it deserved….
Jim Van
partner
Logicomm, Inc.
http://www.logicomm-inc.com
Jim, I’ve noticed quite a few big box retailers promoting those low-cost monthly fees. But I think the nationwide retailers are selling yesterday’s services — patch management, malware removal.
-jp