A services manager for a large and growing MSP shared some valuable insights recently during a conversation about Intronis’ fixed pricing. He enthusiastically offered that, compared to the per-gigabyte plans he was used to working with, fixed pricing vastly simplified planning and positively transformed forecasting. Moreover, his company now had greater flexibility to bundle and value-price their service offerings.
“That’s excellent,” I said. “So do you tier your services now?”
Here the response was much less definitive. “Well sorta-kinda. I’d say we tend more to size up the work effort and then custom-price our services per customer.”
Aha! Customized pricing for managed services….
Productizing outside the box
We talk a lot about the virtues of converting your time-and-materials accounts to recurring service subscribers. Once you convert them, you’re actively serving clients instead of waiting for them to call. You can also liberate your IT specialists to work on more strategic or high-margin projects. Transitioning from cloud service provider to trusted IT advisor can be easy given the visibility you’ll have into the challenges your clients face, whether they involove Microsoft Windows Server 2003 migration or a new data center build-out.
What made this conversation so interesting was this MSP’s out-of-the-box approach to productizing. We tend to think of products as fixed-priced, like choices on a menu. What his company does, by contrast, is evaluate the needs of each client, assemble the products and services that meet its needs, and then price accordingly. A potentially interesting distinction – under the fixed-price approach, the client experience is a bit like choosing between cable television packages. The custom-bundle model is more consultative, sized up and laid out almost like a program of weekly treatments a physical therapist might develop after assessing the needs of a new patient.
Diagnostics and consultation
It was no surprise to learn later in our conversation that this MSP had built up a healthy clientele in the healthcare space. In other words, his consultative approach to productizing had struck a chord with a community that clearly understands the value of consultation and that relies on consultation for their own success.
Whether or not the MSP adopted this productizing model intentionally to target the healthcare sector the case did remind me of several truisms for business success:
- There are many ways to productize and many business models to choose from. Moreover, an MSP might try several different business models before hitting upon one that works.
- A business model’s success depends both on how well it serves the MSP and how well it serves the MSP’s clients.
- No matter the business model or the productizing approach, there’s no substitute for understanding the needs of your clients. In today’s competitive managed services market, it can’t hurt to lean on your valued clients for insights into how best to run your MSP business.
As an IT services provider, your product can be as simple or as sophisticated as you want it to be. The ultimate test of a productization scheme, of course, lies in the traction it gains you with your prospective clients.