Doug's Desk Talks: Why Fixed-Cost IT Services Don't Work
iCorps IT Services
A fixed-cost pricing model is a "one size fits all" approach to pricing, based on the number of servers or users in a business. Theoretically, this is a fair pricing model, but since IT costs vary per industry, one party will always lose.
[Doug Bosley] Hello everyone, I'm Doug Bosley director of Business Development here at iCorps Technologies. For the past 17 years, I've been selling IT consulting and managed services. I've been selling these to companies ranging from 10 person firms all the way up to 10,000 users. These companies have ranged from unregulated distribution and manufacturing companies, to highly regulated financial services and healthcare companies.
What I've found over the years is that IT support needs vary widely. Literally on a company-by-company basis. For instance, did you know that larger companies generally spend less on IT than smaller companies as a percentage of revenue? Or that company culture and leadership have a large impact on what companies spend?
The upshot is that most companies spend between 2% and 8% of their revenue on IT support. It's for this reason that I've never embraced a fixed-price model based on the number of servers or users. While this may be compelling for some, it's really a recipe for disaster. Someone's going to lose. You'll either end up paying too much for your service or end up with poor service quality and change orders.
There are two additional items that I think you should look at when evaluating IT support programs. The first is to separate supporting your current state network from your capital projects and enhancements to your network. This will allow you to track your true support needs and your total IT spend. The second is separating end-user support needs from back-office server network support. Companies vary here widely as well, and it's important to look at this.
At iCorps, we use our 360° degree IT assessment to evaluate your environment and tailor the support program to your specific company. This approach provides a proven model and provides our clients with a predictable monthly spend.
If you're interested in learning more about our approach, please visit us online or give us a call.