Managed IT Services – What is A Fair Price?
When you start looking at managed IT services, they all claim they offer a full line of services at a “fair” price. But, that begs the question, what is fair price? In terms of general business practices, a fair price often denotes a price that covers all costs while also affording a respectable profit on top. It is not about one company taking advantage of the other one. It is about one company paying a fair price for the services provided by another one. The second company is able to make a good profit without gouging the first one.
One way to consider a fair price is how you negotiate a contract for managed IT services. Some companies approach clients using the time and materials pricing strategy. The client will pay the hourly fees for consultant work as well as the costs for software and other materials. In addition, the client would pay a premium on top to cover the consulting company's overhead and profit margins. This strategy may seem fair for the client. However, some consulting companies take advantage of this situation. They may work more hours than necessary to complete a job. They may charge retail for materials when they actually paid wholesale. This may cause the client to start questioning everything the consultant does. This can lead to bad relations between the consultants and the client. It does not provide a fair price for either one of the businesses involved in the contract.
What is a better way to determine a fair price for managed IT services? A common model used in the support world is the “per user” or “per component” model. This type of contract sets a monthly price for services based on the number of users or hardware components in a clients' IT world. So, a client would pay $X per user on their network. If they hired someone new to the company, they know it will cost them $X extra each month for managed IT services. This keeps costs under control while also providing the consulting company with fair compensation.
Each company needs to work out what is a fair price to pay for IT services. The contract should work for both sides of the equation. The client should not pay too much but the consultant company needs to make a profit as well. Each contract needs to bring these two sides into balance.