By Christine Kern, contributing writer
At Channel Transitions Newark powered by Business Solutions Magazine, a panel of managed services providers (MSPs) offered some advice regarding pricing and bundling solutions.
A major challenge for MSPs is establishing appropriate pricing strategies for the services they offer. Steve Rutkovitz, CEO of Choice Technologies, explained, “One of the problems that I find in the MSP space is that if you’re doing a help desk service, you’re selling products, you’re selling services, it’s hard to get an exact number on that cost. But you’ve really got to know the numbers of what it costs you, what your burn rates are, how much your labor costs are.”
To do that, he said, “You really have to have somebody good, whether it’s in-house or a CFO-type person to help you get those numbers. Once you understand those numbers, you look at those numbers every couple of months, to make sure that they’re on track. You have to price it right, you have to monitor it.”
And above all, Rutkovitz stressed, “You’ve got to make sure that your margins are good and that they’re sustainable. You have to know when you can raise rates and how to raise your rates. There’s an art to that as well. But again, you’re always looking for that efficiency to crush your costs when you go into managed services. There’s less labor, and the better your tools and resources, the more money you’re going to make in the long term.”
Hunter Allen, CEO of Cervion Systems, said his insights regarding pricing apply very specifically to the Hardware-as-a-Service (HaaS) model. “The way we model our pricing is that we first look at what the alternative model is for the customer over three years,” he explained. “We start with an understanding of what that three-year, overall cost is if they purchase a solution, and that starts to back us into where we want to position ourselves on our pricing. We want to be more advantageous in price to the customer on that three year total cost of ownership position — with the caveat that they’re never going to take ownership of what we provide to them.” He says with HaaS, the customer has the advantage of no large, upfront expenses.
Allen advised, “Build a business that you would want to buy. I think that you would want to see recurring revenue contracts.”
Rutkovitz commented, “I think the future is bundling.” He said Choice Technologies has been working very hard at branding its services: “We have managed services bundled around Choice Technologies. Our security and compliance are bundled around Choice Technologies, and our virtual CIO services are bundled around Choice Technologies.” In managed services, or managed security, he explained, “you’re bundling a series of products. We’re bundling a bunch of solutions, but as companies leapfrog and get better and better pricing or a better technology, we’ll pop a new product to figure out the right products to put in.”
It’s all about competition. “We’re trying to pressure costs on that fixed price. But we want to get a huge value to the customer. That’s really our challenge, going forward.”