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How Are Managed IT Services Priced?

Chief Storyteller

It's important to understand the pricing structure and what you're getting for your money. In this post, we'll discuss the options typical in the MSP marketplace and the different components that go into managed IT support pricing. I hope to help you figure out what's right for your business. Keep in mind that pricing can vary depending on the size and complexity of your network and on the support options you select, so be sure to work with a qualified provider to get an accurate estimate. Let's get started!

Defining managed IT support services

Is the problem in the definition?

The first thing to understand is that there is no industry-wide definition for a Managed Service. 

I have been in the IT industry for more than 40 years and I can tell you why there is no current definition of this service. The example demonstrates the problem.

Let's say for a moment that there are 10 different technicians being presented with a particular problem on a piece of technology. Their experience with this particular device varies, but they all have the basic skills to get to a solution. We start the timer and set them on the task to resolve and complete the repair.

Approximately 10 minutes later the first technician completes the task, the timer continues and after 180 minutes the last technician finishes. Why do these events occur like this? The answer is that everyone looks at a problem differently. But there is something else to consider in the results as well.

Was the technician that finished before anyone else that much more acquainted with the piece of technology so that he just knew what to look for? Did the technician have a better analytical process? Was the technician just lucky and happened to stumble upon the solution out of pure chance? Any of these may be the case.

To help understand what happened, we asked all of our technicians to write down their process of discovering the source of the problem (troubleshooting) and then describe the methods and sequences they used to complete the repair. Because they were all excellent scholars in their English literature classes, we can decipher their explanations very easily! 

What this exercise revealed; the net result was that they all solved the problem, but every one of them did it in an entirely different way.

Managed IT support follows the same pattern across providers in the industry space. There are some schools of thought that create similarities between providers. But, with more than 40,000 "Managed Service Providers (MSPs)" in the United States alone, a comparison of their service level agreements (if they have one) for their different contracted services would probably show about 100,000 to 200,000 SLAs.

Not one of these SLAs would be the same. MSPs are just like those technicians, they don't use exactly the same processes. So they will by necessity have different pricing structures.

Pricing in managed services

Understand the services offered within the Service Level Agreement (SLA)

When you begin the process of understanding and approaching a company for Managed IT Services /Support you need to understand what to expect when they present you with their SLA. There are two basic options to choose from when seeking Managed IT support for your Information Technology needs.

Break fix and contracted break fix

The very first thing to know is that if a company does not utilize an SLA, they are not (REPEAT, ARE NOT) a managed service provider. In the industry, these service providers are known as break-fix providers. With break-fix services, you pay for each service call or repair as a problem comes up. They also frequently provide various project-based services.

These companies can be beneficial if you have a small network with few issues and with very few (8 or fewer) computer users in your organization, but it can quickly become expensive if you have frequent problems. Sometimes these providers have work agreements to complete a project in a specified period, but again if they aren't using an SLA, they are not a Managed Service Provider.

There is a another service offering within some break fix service providers that is somewhat suspect. They use a contract that offers guaranteed hours of service for lump sum payments without an SLA to define how time is delivered to you the client.

These contracts typically offer discounted hourly rates, but the service provider defines how much time gets deducted from the agreement as the time is used up. At about the time they use up the hours, they prepare the next agreement for another batch of contracted hours and for the next bulk lump sum coming into their bank accounts.

At the risk of sounding skeptical, Yes, I am dead set against this type of service contract. It is fraught with potential abuse opportunities.

Managed services

The Managed IT Service Providers (MSPs) strive to create their version of services to support the clients that they serve. These companies are in the business to make a living, but typically they have a vision or a plan that will prevent problems they can foresee from occurring in the first place. And when unforeseeable events occur or something does break, they have a series of resolution processes that they enact.

The MSP generally knows what is happening in an IT network. They also are aware of the tools required to observe, monitor, interact, and maintain the components and devices within the network. They are also acutely aware of their intellectual capabilities within their staff at the MSP.

The MSP will write their SLAs based on their capabilities (tools and intellectual) and they will define their ideal customer based on these same capabilities.

MSPs are real businesses

I have to make this statement because some folks get the idea that a smaller MSP doesn't operate like businesses they understand. 

The skill sets required of technicians will vary depending on their experience. And like any other career, the more experience someone has typically drives up the cost to the employer. MSPs require skill sets from their technicians beyond the average computer repair guy working out of his garage. So MSPs have all the normal business expenses and then you have to add in the tools.

Tools matter but process is king

MSPs create a vision of the services they will provide and how their customers will benefit from their service offerings. To accomplish the vision, MSPs use tools, programs, services, and techniques to build a structure and processes to perform their services. By following a structured process the MSP can become very efficient at performing their services.

Efficiency can be so high that small groups of experienced technicians can support hundreds of endpoints or users. With the right tools, an MSP can provide better customer support and network maintenance than any break-fix company. Additionally, they typically can out-perform support provided by a dedicated IT staff within larger businesses. The reason for this is they have both the right tools and the knowledge that comes from wide experience. The real benefit is the processes used by the MSP. 

Large businesses could achieve the same level of performance with their internal staff, but management teams at these organizations often look at the typically high price of the tools as an indirect operating expense that they will not consider viable because it doesn't show direct improvement in performance at their company. So on-site IT support staff are left to perform maintenance in the same way that break fix companies perform their tasks. This is both inefficient and creates a real likelihood that staff skill levels will be left to degrade over time.

Tools give the MSPs their options 

I will use a function-by-function description to describe the areas of support that are used by MSPs to provide your support. MSPs do not use the same logical structures and procedures in developing their deployment strategies. Remember? We technicians don't think alike.

The tools that can be used for any single functional group of solutions vary in capabilities and cost for the MSP. You, as a potential client, only need to understand that the MSP has costs tied up in tools that were selected to satisfy their needs. 

Most MSPs are frugal when it comes to these tools. But, frugal is relative in the MSP world and using frugal thinking is not always the best solution. Some tools that are more expensive to deploy oftentimes will provide additional solutions that remove headache issues from the MSP. Time savings, faster solution deployment, improved communications between the provider and their client, customer databases with interactive dashboards to view all systems being monitored, ..., the list of possible ways to improve customer support is unending.

The reason these tools work for a managed service company is that they can spread the cost of tools across multiple clients. And even though these tools cost more when they must purchase more seats, the cost per seat goes down with the higher volumes. 

Now let's take a look at some of the different functional groups of services that go into managed IT support pricing.

Functional groups of services available

When it comes to managed IT services, MSPs typically offer support in seven different areas: Networks and Devices, Data Management, Security, End Users, Software and Business Applications, Licensing, and Cloud Services. Here's a brief overview of each:

Networks and devices

The MSP will manage and monitor the client's network infrastructure, including routers, switches, firewalls, wireless access points, etc. They'll also often provide support for desktop computers, laptops, printers, and other physical devices.

They will keep the hardware up-to-date, monitor performance, and manage security. This part of the service usually includes firewall management to protect against intrusions.

MSPs typically use remote monitoring and management (RMM) tools to do this, which give them the ability to see all of their client's networks and devices in one place. This makes it easy to spot issues and address them quickly. 

Networks and Devices support is a critical part of any MSP's offering. Most MSPs start with these tools but sometimes they only utilize a portion of the capabilities as a starting point. The Service Level Agreement should specify what the provider will do for the included price and what will be additional costs.

Data management

The MSP will help the client create a backup solution and store their data, as well as restore it if necessary. They may also provide some level of data analysis or reporting. A large part of ransomware attacks are focused on removing your ability to access your data, and/or stealing that data outright.

Data management and backup solutions are critical for any business because data loss can be devastating. It can mean lost customers, decreased productivity, and a blow to the company's reputation or worse, business failure. 

An MSP can provide various data storage solutions, including on-premises, cloud-based, or hybrid. They may also have a file management system or help you design one to keep track of all your data and make it easy to find what you need when you need it. 

Data Management is a critical part of any MSP's offering. Most MSPs start with these tools but sometimes they only utilize a portion of the capabilities as a starting point. The SLA should specify what the provider will do for the included price and what will be additional costs.


The MSP will help the client protect their network and data from external threats such as viruses, malware, and hackers. The tools available for their use are often very sophisticated and with proper monitoring can be very effective against network-focused attacks.

Some MSPs also provide some level of user training to help prevent internal threats such as accidental data deletion or leaks. Users are a prime target of an attack, so if they can be taught to be cautious about interactions, a lot of money can be saved by the company.

Security is an important part of any MSP's service. Most MSPs have some sort of security measures in place. The Service Level Agreement should specify the following; what security services are provided, and whether there is any training available for the client. The SLA will also identify what the MSP will do in the event of adverse security events.

End Users

The MSP will assist end users in using the client's IT systems, including Help Desk support, training, and troubleshooting. The MSP should also handle the client's email system, such as set-up, configuration, security, and maintenance. 

End User support is one of the most important services an MSP can provide. It is often the first and last contact a user has with the IT systems, so it's important that they be able to help with any issues that come up. 

The help desk should be available during normal business hours, and ideally, 24/7. They should be able to handle simple questions, such as how to log in, as well as more complex issues, such as why a certain application isn't working properly. 

The help desk staff should be trained on the client's systems and be able to quickly resolve any problems that come up. They should also be familiar with the most common issues that end users run into so that they can be resolved quickly. 

End User support is a critical part of any MSP's offering. Most MSPs utilize some type of interacting tools but sometimes they may not have the back-end monitoring tools that allow them to see activities that are creating a client issue.

In some cases, MSPs may not provide full support for email because of email client and provider issues. Because email is often a key method of business communications, an MSP should be able to assist in and correct email issues that stem from these problems. This may entail additional costs, but it will be worth the effort to get these issues resolved.

The SLA should specify what the provider will do to support your users. Just a note here: If the support agreement specifies that all support requests must come through a particular client representative, this should be regarded as a red flag. There are some reasons why this might be put in place. But, every computer user should be able to reach out for assistance.

Software and business applications

The MSP will manage the client's software applications, including updates, patches, and licensing. They may also provide support for email, productivity suites, customer relationship and management systems, and more. 

The MSP should also be able to provide support for business applications from outside vendors. This may include custom applications or ones that are not widely used. The MSP should have a good understanding of how these applications work or be able to interface with technical support for those applications.

General Business Software is a critical part of your company's productivity. It includes everything from email to accounting software. The MSP should have a good understanding of how these applications work and frequently will provide them as an additional part of their services. At the very least they should be able to provide support for them. 


MSPs may manage the client's licenses for software applications, operating systems, and other tools. They'll ensure that the client has the necessary licenses for the number of users and devices and that they're up to date. Some licensing that you are currently paying separately for may in fact be included as a part of the service offering. This could result in quite a bit of saving for you and help you with the decision to bring on a qualified MSP.

Many companies that license their software for use in a business environment have the capability of monitoring the software use out in the world. Users who are violating licensing are subject to audits and if found in violation are typically open to significant fines, licensing fee recoveries, and potential lawsuits.

If your company is expecting to use a managed service provider, you should ask for this service if it is not specified.  The cost for this service is typically low and it could save your company a lot of headaches just by having someone keeping track of the licensing.

Cloud services

An MSP may provide support for the client's use of cloud-based services, including cloud-based email, storage, backups, and more. They may also manage the client's transition to the cloud or help them to implement a hybrid solution.

Companies that have not started the transition to cloud-based services are sometimes hesitant to utilize those provisions. In more than 80% of cases, those who are hesitant are simply uninformed or hold false beliefs regarding a "Cloud" and what is happening with it. 

I will be producing more articles that will cover this topic more in-depth, so keep an eye on our Newsroom for more articles of interest.

If you are using cloud-based services already, you should ensure that the MSP you choose has good experience with the cloud and hopefully with the services you are already using. This will save you a lot of trouble. Some MSPs are still hesitant to move toward supporting cloud services and managing client resources that are in the cloud.

The Cloud is a secure place for data, and many applications. Unless there is an overwhelming reason to move away from cloud services, give hard thought to any recommendations to reduce those services.

Why you should care about the services use

These are just some of the most common services that MSPs offer. Of course, every MSP is different, and they may offer additional services not listed here. When considering an MSP, be sure to ask about all the services they provide and how they can be customized to meet your specific needs.

Most MSPs can adapt their services to prospective clients' needs so it is perfectly acceptable to ask questions about all their service offerings and how they will deliver them. You should expect some push-back if you insist on saving some money by asking for a particular service offering to be removed from your support offer.

You should be inquisitive about services. You might think that some are not necessary for your business. It is often the case that an MSP will provide a service that you didn't think you need, but will be very helpful or even necessary for the support. For example, if your business is spread out over multiple locations, an MSP with experience in network security may recommend installing a VPN which could save you money on networking costs while improving security. This is good information to discuss and understand, so continue to ask questions.

Many services have options to their implementation and the providers you are researching should be able to articulate the how’s and why's that their services bring to the table. If you need more information, ask, or keep an eye on this newsroom for more knowledge articles.

Asking the right questions

When considering an MSP, you should always ask about all of their services, how they will be delivered, and what the costs will be. Remember that an MSP will become a partner in your business and their success depends on your success. Any good MSP will be happy to answer any questions you have about their services. And, they should be very upfront about their costs. Also, be sure to ask for references from other clients that the MSP has worked with. A good MSP should have no problem providing you with a list of satisfied clients that you can contact.

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