What affects the price of IT providers?

Photo by Nataliya Vaitkevich

Photo by Nataliya Vaitkevich

IT service providers come at different prices, all offering various services. “How do they determine the prices?” you ask. “Why aren’t IT provider prices standardized?”

The truth is that several variables determine costs, and each variable can affect the service quality you receive. Factors at play include:

  • Labor
  • Insurance
  • Programs and IT Tools

WEBIT has been caring for clients as an IT provider for over 25 years. In that time, we’ve gained more than our share of insight and experience with the inner workings of the IT service provider world. In this article, we want to share our observations on how IT providers determine their prices to bring benefits to their clients while ensuring the success of their business endeavors. A successful provider can offer their clients the very best protection and service.

Labor

IT has always been a competitive industry with a high demand for skilled workers. Post-COVID, attracting and retaining the best and most qualified workers requires more than just a competitive wage and benefits. Skilled workers are also looking at things like company mission and purpose as well as flexibility in their work schedules.

Payroll is often 15%-30% of the gross revenue for the average business owner. This percentage is even higher for IT providers (source). Therefore, to make a profit AND hire quality employees, IT providers must choose between setting higher service prices or hiring less-qualified (and, therefore, less expensive) employees.

The quality of employees also determines the number of employees needed. Experienced IT technicians actively seek to improve systems, anticipate complications, and work to correct them before they occur. If technicians do not analyze reported issues and strategize appropriately, this can lead to reactive problem-solving. Reactivity in an IT provider can require a larger workforce as they face many complications, dealing with each one individually instead of holistically. On another level, a significant number of clients means a larger crew is necessary to help maintain a high level of care. The more clients or issues you have, the more IT technicians are needed to keep things moving.

Service delivery also factors into labor costs. For example, are IT services traveling on-site to perform system maintenance checks and correct issues? How are they handling clients’ concerns? How many hours will need support? IT support engineers and specialists are required to meet these needs.

For instance, offering 24-hour coverage seven days a week will require additional employees and shifts. Suppose a provider does not increase its prices to compensate for the labor cost. The provider will lose money rather than incurring enough profit to keep their business running, maintain equipment, and offer their customers the best programs and quality coverage.

Insurance

Quality IT providers will always be insured to protect their client’s equipment and data. Unfortunately, in recent years, the prices of cyber insurance have skyrocketed.

The current cost for cyber insurance for Managed IT Service Providers is around $7,000 per $1 million of coverage. As such, the cost of properly insuring all aspects of an IT business can now reach the equivalent of three full-time employee salaries.

If you encounter an IT provider that is significantly less expensive than its competitor, you may want to ask if it’s insured, along with how much and what types of insurance they carry. Unfortunately, some choose to forgo this expense to offer lower rates. However, in a world where technology and cybercrime are growing exponentially, selecting a properly insured provider adds another layer of protection for your equipment and data.

Again, to afford this additional but necessary protection for their clients, Managed IT Services will intone to account for it in their pricing. However, this protects both the IT Provider and their customers from losing valuable resources, making it a sound investment.

Programs and IT Tools

Technology waits for no one, so it’s vital to stay on top of the best tools and programming to keep systems running smoothly.

Your Managed IT Service package will likely include various tools in its “service stack.” Often service stacks have the following resources:

  • Professional Service Automation (PSA)
    A PSA is a ticket system used to submit, resolve, and record client concerns. Ticket histories are used to analyze client systems in place better and create solutions. For example, if a client regularly contacts the helpdesk about email issues, an experienced provider will improve or replace the email system.
  • Remote Monitoring and Management (RMM)
    RMMs are programs used to track error messages on a device. This system does not monitor user activity; only error messages and issues are contrary to its name. This data determines if errors are unique or related.
  • Endpoint Protection
    Endpoint Protection, often called “Anti-Virus Protection” (though it’s now much more than that), consists of various programs that work in different ways to protect devices from cybercriminals.
  • Backup and Recovery
    There are many levels to backing up data and systems. Individual files are backed up physically or through the Cloud on the simplest level. Backing up entire systems is an entirely different endeavor. The time it takes to recover a file or system depends on its size; the bigger the file, the longer it takes to recover. But, of course, we don’t always like to wait. Generally, the greater the number of systems to protect, plus the shorter the recovery time desired, the more investment is required.

These industry-standard tools are not free to the IT Provider. Generally, they run on a subscription basis. Some providers do use “freeware,” and there can be challenges with this, especially from a support and security perspective.

How does this affect you?

Experienced Managed IT Services are very aware of the amount of work and resources required to secure and maintain infrastructures and systems. Even “simple” tasks like software patches can be complicated and time-consuming. Also, consider that most users will need not one but three devices maintained, supported, and protected. It’s a lot to juggle! And good providers don’t want you to do it alone. They want to take tech worries off your plate so you can focus on what you do best.

To bring the best services to their customers, IT providers must be sure that they have the best:

  • Employees to complete tasks well and partner with their customers.
  • Cyber Insurance to protect their customers.
  • Tools, processes, and resources to keep their customers’ data protected and devices running smoothly.

Quality resources are not inexpensive. IT providers with an excellent service track record may have higher service prices, but the overall return on investment and the outcomes experienced are far greater. Your data and peace of mind are worth the extra investment.