Evaluating Managed Services agreements across multiple providers is hard enough. But most Managed Services providers make the decision even more complicated than necessary by offering a myriad of packages.
While at first glance, the “bronze-silver-gold” approach to services may appear to be “flexible”, it is purely a sales tactic.
Managed Services Tiers – Part 1
One argument is that a multi-tiered service offering is great because you get to choose the options you want and won’t have to pay for services “you don’t need.”
But let’s look at this logically…
- How do you know which services you will eventually need?
- How can you make a good decision on what to leave out when you don’t know what the future holds?
- How can you attach a proper value to ‘optional’ services or how they could impact your business?
In most cases, the price will dictate and in an effort to not make a buying mistake you might be cutting off your nose to spite your face – choosing ‘bronze’ when you heard (and expect) all the goodies that come in the ‘gold’ offering.
Here is how it plays out
Things are fine for a while then you start getting a few ‘extra’ charges here and there. You don’t say anything at first but after a few months, it begins to eat at you.
What are these charges for?
Then you’re told; “Oh, THOSE services are extra on the bronze plan.” But, you think to yourself – all the other stuff is useless without the parts and pieces of the service that really address the real business issues.
What good is it paying for virus protection if you also have to pay to have removed the inevitable virus that does get through? Should you be buying an anti-virus tool, or the end-result – To Not Get Viruses and hold your Managed Services provider accountable for fixing the problem if you do.
The tiered services model leaves the bulk of your IT risks on you and, unfortunately, prevents you from holding your provider accountable for results – simply because they can always send you another bill.
A real Managed Services Provider transfers risk – it is a completely different business proposition! For a more in-depth discussion, check out my post What Does A Managed Services Provider Do.
Pricing Models Or Sales Tactics?
It is standard industry practice to use the ‘bronze’ package as a sales tactic to get a foot in the door and upsell you later. Don’t believe me?
Check out this article from VARInsight which states;
The Tiered Managed Services Model – This model presents multiple options — typically Bronze, Silver, Gold, and Platinum with each level comprising more services and faster response times than the level beneath it. For example, a Bronze plan may include basic remote monitoring of a client’s servers along with limited help desk support and a 24-hour service call response time, whereas a Platinum plan may include remote monitoring and management of all servers, computers, and networking appliances plus patch management, backup and disaster recovery, 24/7 support, and a two-hour service call response time. This business model offers a good way for an MSP to get its foot in the door with reluctant prospects and build up to more profitable packages over time. The downside is that this model can place too much decision-making responsibility on the prospect, which may not be IT savvy enough to really know which level it needs and could make its decision based on price rather than value.
Plus your provider doesn’t really want you to choose anything other than their best but if the sale is in jeopardy, they will gladly take your money.
Check out this article from Continuum which states;
It’s all about putting choice in the hands of clients with this pricing model, which provides different package tiers that correspond to defined service levels. These tiers are structured, based on cost and resources, with a specific price point that provides a profit margin for an MSP while providing necessary services to clients. However, while offering options can seem empowering to a potential client, there is a risk that indecision will stall customer acquisition, or that potential clients will flock to the cheapest option.
Or this article from Filecloud
This pricing model involves building multiple bundled services or packages with every increasingly more expensive package offering more services to the client. For example, a tier one package may include basic remote and phone support for an entry-level fee while a higher priced second tier package includes on-site visits, on top of the remote and phone support. There are numerous ways an MSP can choose to tier their services. They can differ based on the number of devices or priority of level of support. Organizations with a need for zero downtime may choose higher tiers so that they don’t have to worry about waiting for service desk help. When structuring a tiered model, it is crucial for MSPs to note that too many choices can stall or slow a clients decision; and most clients will automatically opt got the lowest-cost option.
I feel like I’m buying a watch from a street vendor in New York City here!
You shouldn’t need to be subjected to a bait-and-switch sales approach to get quality IT support!
Look – I got up on my soapbox because I’ve seen way too many businesses taken by this kind of crap and have lots more to say. Check out Managed Services Tiers – Part 2 for the second part of this article.
Have more questions about Managed Services? Check out our Managed Services Guide for more information.