When new prospective clients contact our office, one of the most common questions they ask is, "What are your charges for IT services?" While cost is undoubtedly a vital factor, it's crucial to make an informed decision when selecting the right IT services company, rather than making price the sole determinant.
This might seem obvious, but the truth is that most business owners lack a clear understanding of the questions to pose or the criteria to consider when choosing one IT company over another. As a result, they tend to place excessive emphasis on the quoted price.
What you should aim to avoid is falling for a lowball quote from an IT company that might be in financial distress. They may cut corners to offer lower fees in a bid to win you as a client, but then they may not be able to afford hiring experienced and knowledgeable technicians, dedicated account managers, or the necessary security tools to ensure that you receive the security, stability, and service your business requires.
So, how can you determine what is "too much," and what are the indicators that a provider is underpriced?
A recent industry report from Service Leadership, a prominent financial benchmarking organization in the IT services industry, disclosed that a substantial 28% of Managed Service Providers (MSPs) or IT services companies were unprofitable, and nearly half of all MSPs had net profits of under 10%.
While everyone appreciates a "good deal," here are the reasons why choosing a cheaper option may not be the advantage you think it is when selecting an underpriced IT company:
- They typically have insufficient staff because the primary expense for any IT company lies in its technical workforce. This means that if one of their technicians leaves, they quickly become overwhelmed and unable to adequately support your account, leading to longer response times and potential lapses in critical security and backup maintenance for your network.
- The staff they employ are usually at the lower end of the pay scale, which implies that you may not have the most qualified individuals working on tasks related to data backup, network security, and the essential operations and data your business relies on.
- They are unlikely to provide a dedicated account manager and a team to manage your account because they can't afford to hire these resources.
- They often operate on the brink of going out of business, with little financial buffer. This means that you could wake up one day to discover that your IT company has closed down, leaving you to scramble for a replacement.
- They may lack "operational maturity," which signifies that their business does not have the necessary personnel and established professional processes aligned to deliver the highest quality services to end clients like you.
In general, according to Service Leadership, the average "per user" fee for managed IT services falls between $205.07 and $249.73. IT firms with below-average operational maturity charge an average of $146.08 to $157.49 per "user" (an employee using a computer or device that they are supporting).
If someone offers you a rate of $120 per user for managing your network, it may seem like a great deal. However, you should ask yourself how they are able to charge nearly 50% less than IT firms with high operational maturity. The answer is apparent – they are cutting corners, hiring cheaper labor, and omitting critical security and compliance services.
If you wish to know what kind of questions you should be posing to your IT firm (managed services provider), you can click here to download our executive guide titled "16 Critical Questions You MUST Ask Before Hiring Any IT Company." This report provides a detailed discussion of what to look for to obtain precisely what you need, without unnecessary extras, hidden fees, or inflated contracts. More importantly, it will guide you in securing the right support to minimize your risk and eliminate the frustration of dealing with an IT company that is less than competent.
