Archives For managed services pricing

socWant to Sell More Managed Services?

Being the Low Cost Provider Never Works…

But don’t be the middle priced offering either. There’s absolutely no benefit…

Your only option is to move upstream. Kmart, Walmart, Target…they’ve all worked hard to be the low cost provider. And how is that working out? Well, Kmart is closing dozens of stores before year-end. Walmart has been sweating over Amazon, their chief competitor, for the past 12 months. Month after month, these big box companies are fighting over pennies.  Amazon’s model is the only one that makes sense. It’s membership driven, offering music, storage, and instant purchase options, and a growing level of subscription oriented, monthly recurring revenue.

But in the reseller technology business you can’t win on price. Keep lowering you per workstation price and you’ll soon have margins that are so thin, you’ll have to let your best people go.  Don’t do it. (You can find more strategies on this in my book, The House & The Cloud!).$1 HC Book Ad

Instead, start asking, “How can I upgrade to a premium level of service?” Take this one step further and ask, “Where is my niche market?”

Security Offers a Compelling Premium Service

You probably already offer firewall management. But as firewall companies like Check Point and Fortinet add advanced services such as threat emulation, sandboxing, and SIEM like technology, there’s an up-sell opportunity to provide the 7 by 24 monitoring aspect. Something your clients just cannot afford to do internally.

Don’t have your own SOC (Security Operations Center), or the team to do this overnight? You can outsource it through channel-only security providers like Foresite. For a small fee, they’ll take over the management, offering different levels of service depending on the size and need of your client.

Don’t Give it Away

Don’t give this away. It’s your added value to the MSP program – something not many service providers are offering right now.  Over time, begin adding security expertise to your team, and add some high-end security services to your offering. For instance, you might add virtual CISO services or take over the reporting and interface needed for auditors policing compliance regulations such as PCI and HIPAA.

One client I work with offers GLBA management to regional banks, leveraging new laws that require there be a compliance officer, independent of the IT department. How many small banks can afford to hire someone qualified to fill such a role? Not many. But a third-party provider is permitted and makes for a great add-on service offering.

If you’re getting beat on commodity pricing, start thinking about security services and how to add that premium level. If you just raise your prices, you’re likely to be out there with Kmart, closing down offices. If you only have one office, it might be a short ride to the end.

© 2016, David Stelzl

When I was growing up my father used to refer to our boat as a hole you throw money into.  You probably have something like a boat; something that continually eats away at the bottom line.  When it comes to selling support work, there are several holes I’ve identified.  Things to avoid if you want to produce hard-dollar profit:

1. Selling managed services with a contractual agreement to be on site.  Make sure your fee is high enough to include the cost of staff augmentation if you do this.  In most cases it is unnecessary.

2. Selling on site support or engineering (staff augmentation) with a commitment to be on site two or three days per week.  This is especially bad when the person is to be there every other day – it is nearly impossible to fill the other days.  This is break-even at best.  Another trap is selling half days.  What will they do the other half?

3. Billing a client for three hours.  You’ll never recover that 4th hour before lunch or the end of the day.

4. Support calls with no minimum charge.

5. A close second is, too small of a minimum charge.  Consider two hours…if the engineer has to drive an hour in traffic one way, the support call will be break-even at best.

6. Not understanding burden cost.  If a support engineer drives two hours (there and back) between every two hour minimum time call, the profit is zero in most cases.  Move to contracted managed support with annual contracts, spread your risk, and make sure your fees cover your cost with the required profit.

7. Converting support calls to managed contracts without a clear understanding of your cost and profit.  Once converted, good luck increasing prices!  You should be making more on managed contracts, not less.

© 2010, David Stelzl