Even the best resourced companies occasionally need outside assistance to manage their technology needs, and more and more companies are opting to outsource virtually all of their IT support to managed service providers. Finding an optimal pricing structure to achieve their IT goals with an outsourced partner generally comes down to four factors:
- Company Size
- Scope of Operations
- Ability to Forecast Future Requirements
IT outsourcing providers generally charge for their expertise in one of three ways: Fixed Price, Time-and-Materials, and Dedicated Team.
For projects with a limited and well-defined scope, both in scale and time, fixed price contracts are common. Companies that know ahead of time exactly what they need and when they need it delivered, can draft a contract that specifies detailed project requirements and set firm deadlines.
The advantage of going that route is that there is little chance for miscommunication. Everything is laid down in black and white and all signing parties know precisely what is expected of them, which also enhances accountability. If a deliverable isn’t delivered on time or doesn’t meet the standard agreed to, neither side can claim ignorance or point the finger elsewhere.
The risk, however, of taking on fixed price IT support is that, should an unexpected delay or event occur, the contract will not have sufficient wiggle room to adjust to the new reality. The old contract will potentially have to be renegotiated, which can be a costly and time-consuming process that doesn’t always end harmoniously. Furthermore, in the hopes of avoiding negative outcomes, the lead time and planning for fixed price contracts is extensive.
In most cases, fixed price contracts are only optimal for projects with a limited scope (e.g. just help desk support or a minor, non-recurring upgrade).
Under the time-and-materials pricing model, customers pay small amounts over time that are tied to billable hours and actual equipment and supplies purchased to accomplish their IT support. Companies often like this structure because they only pay for what they actually use.
It also has far more flexibility built in than fixed price contracts, making it more suited to longer-term projects. Even if the final project requirements are unknowable, a time-and-materials pricing scheme will be able to scale up support as needed. Everything from the size of the team being applied to the project to the overall scope can be adjusted on the fly.
Additionally, time-and-materials plans are favored by companies desiring a great amount of transparency in their finances. They can see, on a monthly or even faster basis, what money is going out to support their IT and to what end.
The downside is the lack of clarity inherent to this model. The overall project budget and schedule are undefined, which can result in ‘mission creep’ (gradual, unnoticed changes in the size or aim of a project). It also opens the door to communication issues. Whenever the project changes, diligent and frequent communication is required up and down the hierarchy of command to ensure everyone stays on the same page.
The latest development in IT outsourcing offers many of the advantages of fixed price contracts (predictability and clarity) with those of the time-and-materials model (flexibility and efficiency), but with fewer drawbacks. For mid-to-long term projects, a dedicated, outsourced IT manager, team, or entire virtual department, is the fastest way to immediately upgrade a company’s technology proficiency.
Teams are assembled to fit the customer’s unique needs and a dedicated project manager oversees their progress. Unlike time-and-materials pricing, bills are predetermined and predictable. And unlike fixed priced contracts, the team size, project scope, or other requirements can be adjusted as needed.
Another advantage of choosing a long-term, dedicated IT team from a managed service provider is that the team has time to develop familiarity with the client’s systems, which generally improves outcomes and results in more seamless operations.
The downside is that, if the client chooses a managed service provider with limited resources and has highly specialized needs, they can end up waiting for extended periods while their team is assembled. Another issue relates to project requirements. Because, unlike fixed price contracts, the exact project specifications aren’t written in stone, there can be a degree of uncertainty as to what exactly is going to be delivered.
Generally, this model best serves long-term, large-scope projects that require flexibility, such as digital transformation.
The Advantage of Full-Stack Managed Services
There was a time when the problem of dealing with numerous vendor relationships and managing a diverse array of sophisticated technologies was restricted to large enterprises. Today, all companies are tech companies.
With remote workforces, cloud-based services, collaboration and productivity suites, customer relationship management and user analytics platforms, and the various proprietary applications necessary to run their business, small firms are suddenly finding themselves juggling as many technologies as the big guys, but without an army of in-house IT staff to help.
A dedicated team can be put in place to offer temporary support, move a specific project forward, or solve one particular problem, but that is generally a reactive approach. A full-stack managed services model, by contrast, is proactive, ongoing, and far more comprehensive.
The managed service model, particularly when augmented with a dedicated IT team, is permitting SMBs to operate at a higher level of sophistication and efficiency, but at a price that fits their smaller budgets. And, they are reducing operational risks at the same time because the best IT managed service providers take steps to harden their security, monitor for threats, and promote best practices.
Moreover, the goals of an SMB and its outsourcing partner are simply better aligned in this arrangement. The older time-and-materials and break/fix models don’t incentivize preventive measures. In fact, outsources using those pricing schemes end up losing money when they solve problems before they break.
With so many technology challenges facing SMBs, and cyberthreats multiplying seemingly all the time, there has never been a more opportune moment to invest in truly full-stack managed IT services that protect your network, keep your equipment running smoothly, guide your technology decisions, and answer your toughest questions.
D2 Integrated Solutions takes a collaborative approach to IT. We are client-focused at our core, built to grow with you, and provide practical technology strategies that realize the efficiency, security, and productivity goals of your business. Connect with us today.