Has Your MSP Pricing Become Too Expensive?

Content by: David Walter from MTS

We all know that inflation has been driving up the cost of everything, including Managed IT Services (MSP). No doubt you’ve had to approach your customers for price increases when renegotiating contracts. Businesses are facing increased costs on all fronts. The question is, can your IT company be part of the solution, or will it continue to be part of the problem? 

While you might think I’m advocating for selling on price and racing to the bottom, you’d be wrong. However, there is always room to surprise your clients with a rollback on prices, much like Walmart does from time to time. But how can you lower your costs and pass those savings on to your valued customers? 

Identifying Areas to Cut Costs 

After working in the IT industry for 20 years and being embedded in several companies, I have a few ideas on where you might find some fat to trim. 

Unused Services and Subscriptions 

At numerous technology trade shows like IT Nation, DattoCon, and PAX8 Beyond, I’ve noticed a trend: IT providers often leave vendor rooms loaded down with services. While working for one MSP, I realized that many of these services were never used. For example, expensive peer groups that charge monthly fees but are never attended, or costly sales training groups that no one participates in. 

Trade Show Expenses 

Consider the cost of attending trade shows. I’m not saying MSPs shouldn’t go to technology conferences, but how many do you attend each year? Are you paying for attendance, flights, hotels, and entertainment? What about the opportunity cost while you’re away from your business? One tech company I worked with claimed they had no money for marketing, yet they had already attended four trade shows in a short period. That’s a lot of money that could be cut to lower costs and roll back your pricing, giving your customers some relief. 

Office Space and Equipment 

Evaluate how much you’re spending on office space. Could you downsize or renegotiate your rent to lower costs? Do you need to spend money on a fancy copier machine? The last company I worked for had an expensive copier that never seemed to perform any advanced tricks and mostly did the same jobs as a cheaper printer could have done. 

Leveraging Technology to Cut Costs 

Transitioning from cost-cutting measures, another effective strategy is to leverage technology to further reduce expenses. 

Outsourcing Support 

One area to consider is outsourcing your Level 1 support and high-end tickets to an outsourced Network Operations Center (NOC). In the past, Continuum was a good partner for this, but now Kaseya is known for having an excellent NOC and a decent Tier 1 help desk. The key to using this technique to lower costs is to ensure you don’t dilute your services. As long as your outsourcing partner uses American agents and can log into your RMM and ticketing systems, you should be fine. This allows you to cut back on tech support staff without compromising service quality. 

Cloud Computing 

Another way to leverage technology is by shifting to total cloud computing. By doing so, you can eliminate on-site support from your service offerings. This will again allow you to cut back on the cost of Level 3 engineers, as cloud-based solutions often require less hands-on maintenance and can be managed remotely. 

While I don’t list every possible avenue where you could cut costs and become more efficient through technology, it’s important to start thinking about it because, as Tony Robbins says, “where your focus goes, energy flows.” 

Competitive Edge Through Cost-Cutting 

I can’t list every possible area where you can cut costs, but you should be asking yourself if your competitors are doing it. One CPA firm we met with last week told us their IT support cost was the second most expensive budget item. We were there to show them how we had lowered our costs to pass on savings to our customers. 

Our CEO negotiated very inexpensive rent, we don’t have an expensive copier, no costly conference tables, and we limit our trips to trade shows. This frugal approach inspired this article. Lowering costs to stay competitive not only gives relief to our customers but also prepares us for economic downturns. Any cost-cutting you do now could pay dividends if we hit a recession. You can protect your business from losing accounts and be poised to grow, as budget-friendly pricing might be just what savvy businesses are looking for. 

Conclusion 

In conclusion, by identifying and cutting unnecessary costs and leveraging technology, you can offer more competitive pricing to your customers. This not only helps in retaining clients but also positions your business to thrive even in challenging economic times. Take a closer look at your expenses and see where you can make adjustments to benefit both your company and your customers.