Pricing Your Managed Services Offering: Why the Per User Model Makes Sense

May 07, 2013  By Vince Tinnirello

Many Managed Service Providers (MSPs) struggle with how to price their offering.  Should it be on a per device or a per user model basis?  In years past, it seems per device was the model of choice.  You would simply take the number of PCs and servers and multiply them by your per unit price and there was your monthly fee.  One of the disadvantages of this model is it forced you to commoditize your offering, meaning the number of PCs or servers often had to be transparent to the client.   Even if you still quoted a client one monthly fee and didn’t itemize it on your invoice, they still knew it was based on a per unit model.

Supporting Bring Your Own Device and Cloud

As we have moved forward into the era of smartphones and tablets another issue became apparent.  How do we bill for supporting these devices?  Are they just an additional per unit cost?  How do we bill for supporting a client who may be using a laptop to remote into their office machine?  As an MSP you must ask yourself, “Do we support computers or users?”  I believe we support both.  For example, what happens if a client has 25 computers but 100 users in 4 shifts that use those computers?

Another important question, and one that really drove us towards the per user model is, “What happens when on premise servers move to the cloud?”  When we first moved a client to a cloud server that previously had on premise equipment, they immediately asked, “Does our bill go down now that we don’t have a server on premise for you to manage?” The answer is no, because whether or not a client’s technology is on site or in the cloud is irrelevant; they still need someone to support it.  This can sometimes be difficult to articulate to clients who don’t understand the concept.

Calculating the Per User Model

We calculate our price per user on the back end and then quote a flat fee. We never quote a per user fee to the client.  A question I often get asked is, “What happens if they have 5 servers and 25 users? Aren’t you losing money?” Our answer is no.  We have the ability to set our per user back end pricing higher or lower depending on need.  We can make the per user price higher if their equipment is older, or if they have more servers or computers than users, etc.  In presenting value to the client, we can now tell them we don’t care how many devices they have, it’s one fixed fee.  Have a desktop, laptop, smartphone, and tablet you want us to support? No problem, and we won’t nickel and dime you on a per device basis.  When we present it this way to prospects, the light bulb turns on and they see the value.  It’s a win-win proposition and one that you can apply to your MSP practice and take into the future without fear of losing revenue due to disappearing on premise hardware.

Vince Tinnirello
President and CEO of Anchor Network Solutions. Vince founded Anchor in 2002 starting as a one man consulting practice. He handles all sales, marketing, and account management responsibilities at Anchor. Vince has over 15 years experience in the IT industry and is passionate about helping small businesses focus on running their businesses rather than worrying about IT solutions.
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