The Advantages and Disadvantages of Different Pricing Models for MSPs
Managed Service Providers (MSPs) are becoming increasingly popular as businesses seek to outsource their IT needs to focus on their core competencies. However, MSPs face the challenge of selecting the best pricing model that suits their business model and aligns with their client’s needs. This article will discuss the advantages and disadvantages of different pricing models for MSPs.
Types of Pricing Models
Per Device Pricing
- Per Device Pricing is the most common pricing model used by MSPs. This model charges clients based on the number of devices the MSP manages, such as desktops, laptops, servers, and mobile devices. MSPs charge a fixed amount per device per month, which makes budgeting and planning more manageable for clients.
• Predictable revenue stream: MSPs can forecast revenue accurately based on the number of devices managed, which helps them plan resources and invest in infrastructure.
• Easy to understand: Clients find it easy to understand and calculate their monthly costs, as they know the number of devices managed by the MSP.
• Scalable: Per-device pricing is scalable, as MSPs can add or remove devices without affecting their revenue stream.
• Price discrepancies: The pricing model doesn’t account for the different levels of complexity and support required by different devices.
• Limited value proposition: The pricing model may not incentivize MSPs to provide additional services or proactive support to clients beyond device management.
Per User Pricing
- Per- User Pricing charges clients based on the number of users supported by the MSP, regardless of the number of devices each user has. This model attracts businesses with many remote workers or those using multiple devices.
• Simplicity: The pricing model is easy to understand, as clients pay a fixed amount per user per month.
• Predictable revenue: MSPs can forecast revenue accurately based on the number of users supported, which helps them plan resources and invest in infrastructure.
• Scalable: Per-user pricing is scalable, as MSPs can add or remove users without affecting their revenue stream.
• Inefficiencies: The pricing model doesn’t account for the number of devices each user has, which may lead to inefficiencies in billing and resource allocation.
• Price discrepancies: The pricing model doesn’t account for the different levels of complexity and support required by different users.
- Tiered Pricing charges clients based on the level of service required, which is usually divided into three or more tiers. Each tier offers a different level of service, and clients can choose the one that suits their needs and budget.
• Flexibility: Clients can choose the level of service that meets their needs and budget.
• Incentivizes MSPs: The pricing model incentivizes Managed service providers to provide better service and support to clients, as clients can easily switch to a higher tier if they are not satisfied with the current level of service.
• Better value proposition: Clients can receive additional services beyond device management, such as cybersecurity, disaster recovery, and cloud services.
• Complexity: The pricing model can be complex, as clients need to understand each tier’s different tiers and services.
• Uncertainty: Clients may be uncertain about the level of service they require, which may lead to dissatisfaction or overpaying.
- All-You-Can-Eat Pricing charges clients a fixed monthly amount for unlimited support and managed IT services, regardless of the number of devices or users managed.
Advantages:• Simplicity: The pricing model is easy to understand, as clients pay a fixed amount per month