Are you a small business owner looking for managed IT services in Vaughan, but aren’t sure where to begin evaluating cost and value of IT services pricing? What follows is a handy guide, and at any point in your reading, we encourage you to contact Tribus Computers today for your managed IT service needs.
IT Services Pricing: The Ultimate Guide (2018 version)
When evaluating IT services pricing, it’s important to have a base knowledge of common models, the difference between cost and value, standards and extra services, and the benefits of a local provider.
1. 10 Common IT Services Pricing Models
Here’s a look at some common IT services pricing models implemented in 2018, courtesy of ufunnel:
- Cost-Based Pricing – This model is exactly what it sounds like – calculate the cost to deliver a product or service (cost), then add a ten percent margin, for example.
- Competitive Pricing – In competitive pricing, the provider researches the pricing models and strategies of competitors to establish a price point. The range should have a high and low end, and the price of the product or service offering should fall somewhere on that spectrum so it’s competitive.
- Rate-Based Pricing – The downside to this model is you trade time for money, but the upside is you’re guaranteed to get paid for each hour of work. The caveat: Clients sometimes hesitate with hourly pricing because they fear the incentive is to work more hours to make more money as opposed to efficiency.
- Project-Based Pricing – This involves a flat fee arrangement agreed to at the launch of a project. The provider often makes an estimate of how many hours they think the project will take and then prices accordingly. The incentive here is to finish the work quickly and with high quality.
- Value-Based Pricing – This model takes into account two key questions: 1) Can the customer pay? and 2) Will the customer pay? The motivating factor here is how much your customers are willing to pay, rather than how much a product or service costs to produce or deliver.
- Tiered Pricing – This model gives the customer the option of choosing between different versions of the same product or service, and paying accordingly.
- Pay What You Want Pricing – Pay what you want pricing allows the customer to make the decision on how much the product or service is worth to them. When combined with a “suggested price,” the pay what you want pricing model can sometimes lead to more profit than a set price.
- Free Product With Paid Services – This pricing model is common for open source software where the product is available for free download, but customers pay subscription fees if they want support. Companies can also charge for installation, maintenance, training, customization, and consulting services.
- The “Freemium” model – Many companies offer a free, limited-functionality version of their product, hoping that some users will pay a premium for advanced features.
- Time-Based pricing – “A flexible pricing model made possible by advances in information technology, and employed mostly by Internet-based companies. By responding to market change or data gathered from customers – ranging from location to what they buy to how much they’ve spent on past purchases – dynamic pricing allows online businesses to adjust the prices of identical products or services to correspond to a customer’s willingness to pay.” – Source
One example of a common model is per-device pricing model, where the provider sets a flat fee for each type of device that is supported in a customer environment. A basic per-device pricing model might designate a flat fee of $69 per desktop, $299 per server, $29 per network printer and $99 per managed network, for instance.
2. The difference between cost and value
In order to increase profitability when considering IT services pricing, it’s important to know the difference between cost and value, as outlined by Info Entrepreneurs:
- Cost of your product or service is the amount you spend to produce it.
- Price is your financial reward for providing the product or service
- Value is what your customer believes the product or service is worth to them
Let’s consider the example of a burst pipe in the home. The cost for a plumber to fix it may be $5 for travel, $5 for materials, and an hour’s worth of labour at $30. The value of the service to the homeowner – who may have water leaking all over the house – is greater than the $40 cost, so the plumber may set the price higher, let’s say at $100.
Wherever possible, then, IT service providers should set prices that reflect the value they provide – not just the cost.
3. What are the standard services, and what’s extra?
A standard definition of IT services would be the basic hardware, software, networks and facilities that serve as a foundation for a company’s information technology services.
According to a report prepared for the Information Technology Standards Council (ITSC), certain aspects of IT services have been designated as being within and outside the score of standard services.
- All internal data communications networks including, Data Centre infrastructure, Local Area
Networks (LAN), and Wide Area Network (WAN).
- All data, voice, and video networks.
- Unified Communications services including, call control, telephony, instant messaging, presence,
speech recognition, unified messaging and video conferencing.
- Network infrastructure devices including, routers, switches, and firewalls.
Out of Scope:
- Broader Public Sector (BPS) and other arms-length organizations including, academic institutions,
healthcare providers, major transfer payment recipients, municipalities, and school boards
- Infrastructure devices including servers, storage, backup devices, and load balancers.
The University of Guelph’s computing and communications service, for example, CCS provides core IT services to the greater campus community which includes the following: network connectivity, a campus-wide email and calendaring system, telephony infrastructure, information security, software distribution, single sign-on technology, learning resources, and more.
4. Benefits of local service providers
There are a few clear advantages that come with a local.
Working with a locally-based company that uses only local technicians, servers, and networks is the best option for managed IT services.
When it comes to managing data, companies will often send data abroad. When you are working with secure client data, you want to ensure it is locally managed.
Working with a local company also means that if there is ever a problem that needs troubleshooting, they can not only gain remote access and fix the problem that way, but they can visit your office and troubleshoot there.
Trust Tribus Computers
If you find yourself focusing more on your business’ IT needs than your clients and the actual business itself, perhaps it’s time to talk to the professionals at Tribus Computers.
With over 20 years experience, they are a team of local experts in “end-to-end” IT services. From design, to purchase, to installation support, and even cloud services, Tribus Computers manages total IT services in the GTA.
Contact Tribus Computers today for your free quote.