Pricing Pressures?

I've had a number of people asking me about pricing pressures lately...customers telling them that they need a price reduction, flat out. Now here's the kicker... They don't want less services, just a lower price.

Our company has seen a number of clients down-sizing over the past 18 months. We've seen comapnies go from 25 employees to 6, from over 100 employees to 35, and most recently we were talking to a company who has gone from 1000 employees to 100. We don't seem to have net-fewer clients but a number of our clients are definitely smaller.

MSP are telling me, however, that even clients who haven't had to down-size are asking for a lower price. It's funny that several years ago, we went to these clients, showed them how we were going to cut their IT spending in half and now they are demanding that we cut it in half again.

I always tell people that, if they're going to bring me a problem, they also need to bring me a potential solution. Unfortunately, the most popular MSP solution in this case is reports back to their clients showing all that they've been doing.

So let's talk about this for a moment... This is something that the MSP needed to be doing all along as part of their MSP deliverable. The big danger without reporting, if you're doing a great job, is that the client starts to think they don't need you. After all, if everything is great, why do they have to pay you every month. Part of your job is to show your client, on a regular basis, that everything is great BECAUSE they pay you every month.

While we're on this topic, reports alone are not ther answer. Similar to Jerry Seinfeld telling you that no one really wants to go to your wedding. Let me be the one to tell you, your customers don't really want to see reports...but they like to know that they're there. If you've built a real MSP program and you have more than a handful of customers, you should have some sort of a vCIO (Virtual CIO) interfacing with your clients. And if you do, it should be your vCIO's job to look at those reports and notify your client of the highlights...bring attention to the things that they need to know about. Other then that, your clients just want to know that the reports exist. It'll help you justify your existence, but it wont help you with porice protection.

To justify your pricing, you essentially have to sell your program all over again. You need to show your clients how much it cost to have an internal IT department and the total cost of ownership attached to purchasing, maintaining, and training their users on the various components of IT. Then you need to show them how much you can save them by having you manage their IT by bringing to them the value and diversity of an entire IT department vs. just one or two semi-trained individuals. Finally, if you can eliminate some of their hardware, licensing and/or refresh costs by delivering some services via HaaS (hardware as a service), now you're really showing them the value of what your company does and they will understand the immense cost of trying to reproduce what you are doing for them.

That's MSP.
- R