Managed Services Pricing Guidelines

I recently heard an attorney (whom I trust) say that lawyers determine their pricing based on a calculus of skill and geography (meaning how many attorneys are in the area and how capable they are of doing the work). One thing I do remember from law school was the total absence of instruction on how to price one's billable hours. In hind sight, this makes perfect sense since they expected all of us to be able to determine on our own what our worth was. I feel the same way about MSPs.

I was recently asked by a few MSPs whether their pricing was on par with other MSPs. I responded essentially by asking them if they were worth the rates they were charging. They naturally said they were. Most MSPs will say this. I have always had a difficult time with this notion that MSPs should treat their managed services pricing schemes just like a SKU when they were a VAR. It just doesn't work that way anymore.  This is why we have MSPs around the world who charge vastly different prices for managing the same objects in much the same manner.

When a MSP is pricing their services they have to understand a few things. So, I've developed a few guidelines that might be helpful to all of you as you determine your own managed services price points.

• Cost of delivering the service: how much overhead do you have? This will be very different depending on your geography

• Scarcity of the service in their market relative to the demand. If you are one of hundreds of MSPs in your market delivering the same services you may not be able to charge a premium. It might be time for you to specialize in another managed services offering or vertical

• Severity of the managed object. For example, regulated markets tend to produce clients who will pay more for managed services since they cannot accept a data breach or downtime

• Special circumstances that might cause the rate to increase (like access to special talent, tools, or infrastructure).

When you combine all these elements you arrive at a pricing model that makes sense for your company and your market. Whatever you do, don't be led down a path of undercutting your pricing because you ran into someone at a conference and they gave you a wild and crazy look when you told them how much you charge. Pricing is very unique and should never be commoditized.

If any of you would like to share your pricing tips feel free to do so.

Data Breach Law and MSPs

Just like we said it would, another federal data breach law is being considered by the US congress. This is not the first time this has happened but something tells me we should take it a little more seriously this time around.

First, the stakes are much higher now and the risk of not passing such legistlation is too grave to contemplate. Congress is well aware of the perils of data loss and during a time of financial crisis, such legislation could be seen as a much needed public policy advancement. But, how will such a law impact the managed services community? Let's take a look.

The law will likely focus on protecting data more than targeting specific companies. Data that is deemed sensitive and worthy of protection will be equally important whether it is being housed by a financial services firm, a hospital, or a retail store. If this happens, all businesses transacting this type of legislated data will be responsible for taking certain precautions to protect the data while it is in their care. If they compromise the data, they will most likely have to notify those affected parties. The shame factor alone will be enough to scare most companies into taking data privacy protection seriously.

MSPs are in the best position to advise and help protect their clients against such data breaches. After such a data breach law is passed, there will be a period of time where companies scramble to prepare themselves and their IT. One thing is for sure, if the bill becomes law, MSPs will be thrust squarely into the public eye. This means lots of opportunity and lots of scrutiny. In my opinion, such a law could not come at a better time.

If your firm deals at all with data privacy or protection I'd love to hear your thoughts on what this law might mean for you.

Entering the Managed Services Profession in 2009 - Some Things to Consider

As we begin the first full week of 2009 I am full aware that many of you out there are a) just now entering the managed services profession, or b) considering doing so. If you are reading this and one of these two scenarios applies to you I have some friendly words of advice.

You may be met with some potentially negative or pessimistic commentary this year. Some people might say, you're too late to the game, or there aren't enough jobs to go around to make a living in managed services. Don't listen to this kind of talk. Much of this you will hear from other MSPs (unfortunately) who don't want you coming into their profession. Some of this talk will come from people/organizations who want to sell you something to help you become a MSP. In the end, your own reasons must suffice for why you want to provide managed services; hopefully it is a good one.

Whatever your reason for being a MSP, here are a few things worth your consideration:
• End-user demand for managed services has not yet peaked. In fact, it has barely begun (when you consider how many end-user companies there are). 2009 will see a stark increase in the number of businesses wanting to outsource managed IT.
• There are a lot of companies claiming to be providers of managed services who are no where ready to be called MSPs. Don't be fooled into thinking the market is saturated when much of the market is controlled by commoditized and low grade services that are of very low importance to most clients. 
• When you consider the hundreds of thousands of IT solution providers that currently exist, all they are really doing is changing from reactive to proactive companies. If there was enough room before there will be enough room in the future. They are not trying to force themselves into a market with finite amounts of space. In other words, read Blue Ocean strategies.

When the legal community went through their boom years in the 1970s, we did not see a marked decrease in legal fees, or a decrease in the amount of clients needing legal services. What the legal industry did was create opportunities than ensured their long term survival as a profession. MSPs involved in the MSPAlliance are doing just that.

So, take heart and don't be discouraged. This is a new year and a lot of opportunity still exists for MSPs. Just make sure you are a good MSP!